BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Isadore Hall, III
Chair
2015 - 2016 Regular
Bill No: SB 630 Hearing Date: 4/28/2015
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|Author: |Hancock |
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|Version: |4/21/2015 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant:|Arthur Terzakis |
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SUBJECT: Public contracts: bidders: cost overruns
DIGEST: This bill requires a contractor bidding on a state
public works construction project to include with the bid a
report of all cost overruns on public works projects or purchase
contracts previously awarded by the state to that bidder or
contractor.
ANALYSIS:
Existing law:
1)Establishes rules governing the awarding of contracts by state
agencies, including general requirements for competitive
bidding on contracts for construction projects, goods,
services, and information technology.
2)Designates the Department of General Services (DGS) as the
lead purchasing and procurement agency for the State of
California and sets forth the various responsibilities of DGS
and other state agencies in overseeing and implementing state
contracting procedures and policies.
3)The State Contract Act regulates contracting between state
agencies and private contractors, and outlines requirements
for bidding and awarding of contracts for projects.
4)Contains a body of law, within the Public Contract Code,
SB 630 (Hancock) Page 2 of ?
relating to contracts let by a public entity for the
performance of public works of improvement, including
provisions for the payment of progress payments and the
disbursing and withholding of retention proceeds.
This bill adds a new provision to the Public Contract Code that
requires a bidder or contractor bidding on a state public works
contract to include with the bid a report of all cost overruns
on public works projects or purchase contracts previously
awarded by the state to that bidder or contractor.
Background
Purpose of SB 630: According to the author's office, this
measure is simply intended to require state agencies and
departments to ask bidders and contractors, as part of the
bidding process, to submit information about cost overruns on
previous public works projects or purchase contracts that were
awarded to that bidder or contractor. The author's office
believes SB 630 will help reduce future cost overruns and
discourage low-ball bids by contractors.
The author references an information technology project
contract, managed by Deloitte Consulting, which ballooned from
an original bid cost of $33 million in 2003 to $310 million by
2010 and was eventually abandoned. Other recent cost overruns
include a $250 million overrun by SAP Public Services for
overhauling the state's payroll system in 2013; San Francisco
Bay Bridge construction costs rising to over $6 billion; and,
more than triple the projected costs for the BrEze computer
system for the Department of Consumer Affairs, rising from $28
million to $96 million.
Prior/Related Legislation
AB 2471 (Frazier), 2013-14 Session. Among other things, would
have required public entities, when additional work is needed,
to issue change orders promptly, and generally not later than 60
days after the extra work is performed as long as the contractor
submitted reasonable documentation to support the request for a
change order. (Held in Senate Appropriations Committee)
SB 293 (Padilla), Chapter 700, Statutes of 2011. Among other
things, prohibited a public entity from retaining more than 5%
of a contract price until final completion and acceptance of a
SB 630 (Hancock) Page 3 of ?
project, but allowed retention of higher amounts when a project
is deemed "substantially complex."
FISCAL EFFECT: Appropriation: No Fiscal
Com.: Yes Local: No
SUPPORT:
None received
OPPOSITION:
Air Conditioning Sheet Metal Association
Air-Conditioning & Refrigeration Contractors Association
American Subcontractors Association California, Inc.
Associate General Contractors
California Chapters of the National Electrical Contractors
Association
California Legislative Conference of the Plumbing, Heating and
Piping Industry
Construction Employers' Association
Finishing Contractors Association of Southern California
United Contractors
ARGUMENTS IN OPPOSITION: Opponents note that the controversy
surrounding information technology projects and the cost
overruns associated with those projects have been well
documented and that gathering additional information on those
types of businesses that contract with the state makes perfect
sense. However, opponents emphasize that "the construction
industry functions in a completely different manner with respect
to cost overruns." Specifically, opponents point out that
public works construction projects are performed in coordination
and synchronization with many different parties, all of which
could have an impact on the final cost of the project. This
includes the owner, the engineer, the contractor,
subcontractors, material suppliers and the labor force.
Opponents contend that this bill "fails to distinguish between
cost overruns caused by other parties such as change orders
requested by project owners, flawed architectural or engineering
plans, building code compliance, subcontractor failure, and
labor strikes." Furthermore, opponents believe that under SB
SB 630 (Hancock) Page 4 of ?
630, "contractors would effectively be tarnished due to the
actions of any number of other parties."