BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                        SB 376|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |


          Bill No:  SB 376
          Author:   Lara (D), et al.
          Amended:  8/18/15  
          Vote:     21  

           SENATE EDUCATION COMMITTEE:  7-2, 4/22/15
           AYES:  Liu, Block, Hancock, Leyva, Mendoza, Monning, Pan
           NOES:  Runner, Vidak

           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NOES:  Bates, Nielsen

           SENATE FLOOR:  24-14, 6/2/15
           AYES:  Beall, Block, Cannella, De León, Galgiani, Hall,  
            Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara,  
            Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan,  
            Pavley, Roth, Wieckowski
           NOES:  Anderson, Bates, Berryhill, Fuller, Gaines, Glazer,  
            Huff, Moorlach, Morrell, Nguyen, Nielsen, Runner, Stone, Vidak
           NO VOTE RECORDED:  Allen, Wolk

           SENATE FLOOR:  24-15, 9/11/15
           AYES:  Beall, Block, Cannella, De León, Galgiani, Hall,  
            Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara,  
            Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan,  
            Pavley, Roth, Wieckowski
           NOES:  Anderson, Bates, Berryhill, Fuller, Gaines, Glazer,  
            Huff, Moorlach, Morrell, Nguyen, Nielsen, Runner, Stone,  
            Vidak, Wolk
           NO VOTE RECORDED:  Allen

           ASSEMBLY FLOOR:  51-27, 9/10/15 - See last page for vote

           SUBJECT:   Public contracts:  University of California


                                                                     SB 376  
                                                                    Page  2

          SOURCE:    Author
          DIGEST:   This bill modifies the requirements for qualifying as  
          a lowest responsible bidder or best value awardee for contracts  
          for specified services at the University of California (UC) by  
          (1) requiring a bidder to certify in writing, for specified  
          types of service contracts, that its employees are compensated  
          at a level that does not materially undercut the average  
          per-employee total compensation for UC employees who perform  
          comparable work, as specified, and (2) making the $100,000  
          threshold for competitive bidding applicable to any renewal or  
          extension of an existing contract for goods, materials and  
          services to be performed if it involves an expenditure of  
          $100,000 or more annually.  


          Existing law:

          1)Outlines the requirements and procedures for competitive  
            bidding at the University of California.  Existing law  
            outlines requirements and procedures, specifically for the  
            acquisition of materials, goods and services.  (Public  
            Contract Code § 10500, et. seq.)

          2)Requires the UC to let any contract involving an expenditure  
            of $100,000 or more annually for goods and materials, or for  
            services to be performed (other than personal or professional  
            services) to the lowest responsible bidder.  (PCC § 10507.7)

          3)Authorizes the UC, when it determines that it can expect  
            long-term savings, as specified, to select the lowest  
            responsible bidder on the basis of the best value to the  
            university. (PCC §10507.8) 

          4)Declares the intent of the Legislature to facilitate the  
            participation of small businesses, particularly small  
            disadvantaged or minority business enterprises, women business  
            enterprises and disabled veteran business enterprises in  
            business contracting with the UC.  (PCC § 10500.5)


                                                                     SB 376  
                                                                    Page  3

          This bill modifies the requirements for qualifying as a lowest  
          responsible bidder or best value awardee for contracts for  
          materials, goods, and services at the UC.  Specifically, it:

          1)Requires a bidder to certify in writing to the UC that the bid  
            includes a total employee compensation package, including  
            fringe benefits, that is valued at a basis that does not  
            materially undercut the average per-employee value of total  
            compensation for employees at the UC who perform comparable  
            work at the relevant campus, medical center, or laboratory,  
            where the proposed work will be performed. In addition, it:

             a)   Applies these requirements specifically to contracts for  
               building maintenance, cleaning, or custodial services, call  
               center services, clerical services, dining and food  
               services, gardening, grounds keeping and plant nursery  
               services, laborer services, mailroom services, parking,  
               shuttle bus, truck driving, or transportation services,  
               security services, storekeeper services, patient care  
               technical employee services, patient billing services,  
               medical transcribing services, patient escort services, or  
               nursing assistant services.

             b)   Exempts the application of these requirements to  
               employees who are mentally or physically handicapped, or  
               both, who have been issued a license for employment for  
               employment at less than minimum wage by the Industrial  
               Welfare Commission. 

             c)   Exempts public works projects conducted by public  
               agencies from these requirements.

             d)   Requires the UC to:

               i)     Include in its request for proposals a calculation  
                 which considers the criteria outlined in 1) above.

               ii)    Use all known cost escalators in the calculation to  
                 project the future rate of growth of average per-employee  
                 total compensation costs. 

          2)Makes the $100,000 threshold for competitive bidding of  


                                                                     SB 376  
                                                                    Page  4

            contracts for goods, materials and services to be performed  
            applicable to any renewal or extension of an existing contract  
            if it involves an expenditure of $100,000 or more annually.  

          3)Makes findings and declarations that the UC has squandered  
            public resources via contracting out to for-profit private  
            contractors that charge significant administrative overhead. 


          1)Need for the bill.  According to the author, this bill seeks  
            to address the growing challenge to California of the use of  
            contingent workers to replace employees and the consequential  
            effect it has on wages and worker protections.  This bill  
            requires the UC, when evaluating bids for contract work for  
            specified services, to evaluate the total employee  
            compensation package and ensure that it does not undercut  
            wages and benefits of existing university employees.   
            According to the author, the UC serves as an anchor  
            institution in the markets in which it operates, and as a  
            public institution, and the third-largest California employer,  
            should adopt and promote policies that respect its employees  
            and protect workers' rights. 

          2)Related Study.   According to a 2012 study by the UC Berkeley  
            Labor Center, Temporary Workers in California are Twice as  
            Likely as Non-Temps to Live in Poverty: Problems with  
            Temporary and Subcontracted Work in California, almost  
            one-quarter of a million people worked in the temporary help  
            services industry in California in 2010.  These workers were  
            slightly younger, more likely to be female, less likely to be  
            white non-Hispanic, and less likely to have a high school  
            diploma or GED than the average non-temp worker.  These  
            workers were also more susceptible to workplace illness and  
            injury, earned less than their non-temp counterparts, and were  
            less likely to get benefits.  The report notes that lowered  
            wages mean that these workers rely more on the state safety  
            net than their direct-hire counterparts and that these  
            employment arrangements undermine worker protections by  
            allowing employers to avoid certain provisions of worker  
            protection and making it difficult to enforce other  
            protections. The report also notes that these employment  


                                                                     SB 376  
                                                                    Page  5

            relationships create downward pressure on wages. 

          3)Related Contract Provisions.  According to the UC, Article 5  
            of its contract with employees represented by American  
            Federation of State, County and Municipal Employees (AFSCME)  
            addresses the issue of contracting out.  These provisions  
            specifically prohibit the UC from contracting out services  
            solely on the basis that savings will result from lower  
            contractor pay rates and benefits for services customarily  
            performed by bargaining unit employees.  The UC is permitted  
            to contract out for special services and equipment unavailable  
            internally, to obtain special expertise or efficiencies better  
            provided through an outside contractor, for short-term  
            temporary staffing needs, financial necessity, and for remote  
            facilities.  The bargaining contract also provides that when  
            the UC contracts for services customarily provided by AFSCME  
            unit employees, it must provide a copy of any request for  
            proposals within 10 business days of issuance, requires the UC  
            to provide all relevant non-confidential written information  
            used in the making of the contracting out decision, requires  
            accommodation of any meeting request by AFSCME, and  
            establishes a complaint process through the Office of the  
            President, Office of Labor Relations.  The Office of the  
            President is required to make the final determination whether  
            conditions were met and the decision is not grievable or  
            arbitrable. The contract also requires that, for bargaining  
            unit employees laid off or released because of a contract, the  
            UC make available another bargaining unit position for which  
            the employee is qualified at the same location.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No

          According to the Assembly Appropriations Committee, the UC  
          estimates $36 million in costs related to providing parity in  
          benefits and $12 million to $24 million to provide wage parity.   
          Fund sources for this purpose would include the State General  
          Fund, federal funds, auxiliary funds, and enterprise funds, such  
          as from the medical centers. This impact should diminish over  
          time due to implementation of UC's Fair Wage/Fair Work plan,  
          which will be applied to new contracts and as existing contracts  
          are renewed/extended.  


                                                                     SB 376  
                                                                    Page  6

          SUPPORT:  (Verified  11/9/15)

          None received

          OPPOSITION:   (Verified11/9/15)

          None received


               I am returning Senate Bill 376 without my signature.

               Senate Bill 376 seeks to bring wage and benefit parity to  
               the University of California's contracted workers in  
               specific job categories, such as custodial, clerical and  
               food services, and other services associated with the  
               University's medical enterprises. The bill touches several  
               issues - from contracting out service industry work that  
               could be performed by employees, to the pay and working  
               conditions of contracted workers, to the need for more  
               vigorous oversight of contract employers.

               Without a doubt, these are all serious matters to consider,  
               and they reflect the difficulty in balancing things we  
               commonly value, such as increasing the wages of low-income  
               workers and keeping operational costs down. It's worth  
               noting that the University of California recently responded  
               to criticisms of its wage and contracting practices with a  
               plan to incrementally increase its minimum wage for both  
               employees and contract workers, and a pledge to better  
               oversee contracts generally.

               The effort to provide increased compensation to those who  
               work for UC - either directly or on a contract basis - is  
               well-intentioned, but I'm not prepared to embrace the  
               provisions of this bill.


                                                                     SB 376  
                                                                    Page  7

               I would caution the University, however, to provide a  
               transparent accounting of its contracts and clearly  
               demonstrate how the interests of all its lower paid workers  
               are being protected.

          ASSEMBLY FLOOR:  51-27, 9/10/15
          AYES:  Alejo, Bonilla, Bonta, Brown, Burke, Calderon, Campos,  
            Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Dodd, Eggman,  
            Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,  
            Gomez, Gonzalez, Gray, Roger Hernández, Holden, Irwin,  
            Jones-Sawyer, Levine, Linder, Lopez, Low, McCarty, Medina,  
            Mullin, Nazarian, O'Donnell, Perea, Quirk, Rendon,  
            Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark  
            Stone, Thurmond, Ting, Weber, Williams, Wood, Atkins
          NOES:  Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,  
            Chávez, Dahle, Beth Gaines, Gallagher, Gordon, Grove, Hadley,  
            Harper, Jones, Kim, Lackey, Maienschein, Mathis, Mayes,  
            Melendez, Obernolte, Olsen, Patterson, Wagner, Waldron, Wilk
          NO VOTE RECORDED:  Bloom, Daly

          Prepared by:Kathleen Chavira / ED. / (916) 651-4105
          11/13/15 16:03:41

                                   ****  END  ****