BILL ANALYSIS Ó
SB 693
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Date of Hearing: June 22, 2016
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
SB
693 (Hueso) - As Proposed to be Amended June 22, 2016
SENATE VOTE: (vote not relevant)
SUBJECT: Public contracts: skilled and trained workforce
SUMMARY: Consolidates "skilled and trained workforce"
requirements of various provisions of existing law related to
alternative construction delivery methods, and makes other
changes. Specifically, this bill:
1)Authorizes a public entity to require a bidder, contractor or
other entity to use a "skilled and trained workforce" to
complete a contract or project regardless of whether the
public entity is required to do so by a statute or regulation.
2)Deletes various provisions of exiting law and instead
establishes a new comprehensive section of the Public Contract
Code applicable whenever a public entity is required by
statute or regulation to obtain an enforceable commitment that
a bidder, contractor, or other entity will use a "skilled and
trained workforce" to complete a contract or project, with the
following provisions:
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a) Defines a "skilled and trained workforce" to mean a
workforce that meets all of the following conditions:
i) All the workers performing work in an apprenticeable
occupation in the building and construction trades are
either skilled journeypersons or apprentices registered
in a state-approved apprenticeship program.
ii) For work performed on or after January 1, 2017, at
least 30 percent of the skilled journeypersons are
graduates of an apprenticeship program, as specified.
iii) For work performed on or after January 1, 2018, at
least 40 percent of the skilled journeypersons are
graduates of an apprenticeship program, as specified.
iv) For work performed on or after January 1, 2019, at
least 50 percent of the skilled journeypersons are
graduates of an apprenticeship program, as specified.
v) For work performed on or after January 1, 2020, at
least 60 percent of the skilled journeypersons are
graduates of an apprenticeship program, as specified.
b) Defines "graduate of an apprenticeship program" to mean
either of the following:
i) The individual has been issued a certificate of
completion under the authority of the California
Apprenticeship Council for completing an approved
apprenticeship program.
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ii) The individual completed an apprenticeship program
located outside California and approved for federal
purposes, as specified.
c) Provides that the apprenticeship graduation requirements
are satisfied if, in a particular calendar month, either of
the following is true:
i) At least the required of skilled journeypersons
employed by the contractor or subcontractor meet the
graduation percentage requirement.
ii) For the hours of work performed by skilled
journeypersons employed by the contractor or
subcontractor, the percentage of hours performed by
skilled journeypersons who met the graduation requirement
is at least equal to the required graduation percentage.
d) Provides that the contractor or subcontractor need not
meet the apprenticeship graduation requirements if, during
the calendar month the contractor or subcontractor employs
skilled journeypersons to perform fewer than 10 hours of
work on the contract or project.
e) Provides that a subcontractor need not meet the
apprenticeship graduation requirements if both of the
following are true:
i) The subcontractor was not listed as a subcontractor
or a substitute for a listed subcontractor.
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ii) The subcontract does not exceed one-half of one
percent of the price of the prime contract.
f) Provides that when a contractor, bidder, or other entity
is required to provide an enforceable commitment that a
skilled and trained workforce will be used, the commitment
shall be made in an enforceable agreement that provides
specified provisions, including a monthly report
demonstrating compliance with these requirements, which
shall be a public record.
g) Provides that if the entity fails to provide the monthly
report, the public agency or other awarding body shall
withhold further payment until a complete report is
provided.
h) Provides that if a monthly report does not demonstrate
compliance with these requirements, the public agency or
other awarding body shall withhold further payments until
the entity provides a plan to achieve substantial
compliance prior to completion of the contract or project.
i) Provides that these requirements shall not apply if any
of the following is true:
i) The entity has entered into a project labor
agreement that will bind all contractors and
subcontractors performing work on the project or contract
to use a skilled and trained workforce and the entity
agrees to be bound by that project labor agreement.
ii) The project or contract is being performed under the
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extension or renewal of a project labor agreement that
was entered into by the entity prior to January 1, 2017.
iii) The entity has entered into a project labor
agreement that will bind the entity and all its
subcontractors at every tier to use a skilled and trained
workforce.
3)Amends provisions of existing law related to construction and
related work performed by contract at specified stationary
sources (petroleum refineries and petrochemical manufacturing
facilities) to do the following:
a) Specify that those provisions to not preclude the use of
an alternative workweek schedule adopted pursuant to
existing law.
b) Incorporate the same definition of "graduate of an
apprenticeship program" described above.
c) Make other technical changes.
4)Provides that the amendments made by this bill shall not apply
to contracts that were advertised for bid or awarded before
January 1, 2017.
5)Provides that for contracts advertised for bid or awarded
before January 1, 2017, for which an entity or contractor
provided an enforceable commitment regarding the use of a
skilled and trained workforce, the entity may grant a request
by the entity or contractor to instead comply with the
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requirements of this bill.
6)Makes related legislative findings and declarations.
FISCAL EFFECT: Unknown
COMMENTS: This bill is sponsored by the State Building and
Construction Trades Council, who states that it is intended to
unify the state statutes regarding a "skilled and trained
workforce" for public construction contracts using certain
alternative delivery methods. They contend that this bill will
consolidate the statutes, ease compliance and implementation
issues, such as establishing streamlined reporting requirements
and clarifications to enforcement provisions. They argue that
consolidation of the statutes will provide uniformity and will
ensure the statute can be appropriately amended in the future
should there be any changes needed.
Brief Background on Design-Build, Lease/Leaseback and "Best
Value" Construction Delivery Methods
State law generally requires public agencies to invite bids for
construction projects and then award contracts to the lowest
responsible bidder. This design-bid-build method is the
traditional approach to public works construction.
Design-Build
Under the design-build (DB) method, a single contract covers the
design and construction of a project with a single company or
consortium that acts as both the project designer and builder.
The DB entity arranges all architectural, engineering, and
construction services, and is responsible for delivering the
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project at a guaranteed price and schedule based upon
performance criteria set by the public agency. The DB method
can be set by the public agency. The DB method can be faster
and, therefore, cheaper, than the design-bid-build method, but
it requires a higher level of management sophistication since
design and construction may occur simultaneously.
Lease/Leaseback
Under current law, school districts are required to
competitively bid any public works contract over $15,000 and
award the contract to the lowest responsible bidder.
Lease-leaseback is a process whereby a governing board of a
school district may, without advertising for bid, rent district
property for a minimum of $1 a year, to any person, firm or
corporation. The person, firm or corporation constructs the
school building and rents the facility back to the school
district. At the end of the lease, the district resumes title
to the building and site. In practice, some school districts
have used state and local bond funds to make construction
payments during construction. The lease is terminated when the
building is constructed.
In a lease-to-own agreement, the governing board of a school
district, through a bidding process, may enter into a contract
with a person, firm, or corporation with the lowest bid, under
which that entity that receives the contract will construct the
building on a designated site and lease the property to the
school district. The school district gets the title at the end
of the lease. While this method helps expedite the construction
of a project, it allows school districts to bypass the bidding
process.
"Best Value"
As discussed above, the design-bid-build method is the
traditional, and most widely-used, approach to public works
construction. However, during the past two decades, the
Legislature has gradually expanded local governments' authority
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to procure construction projects using various alternatives to
the design-bid-build project delivery method. These alternative
methods include:
Design-build contracting, which allows local officials
to procure both design and construction services from a
single company before the development of complete plans and
specifications; and,
Construction manager at-risk contracting, which allows
local officials to retain a construction manager, who
provides pre-construction services during the design
period, becomes the general contractor during the
construction process, and is responsible for delivering the
project within an agreed upon price, thereby assuming the
risk for cost-overruns.
These alternative procurement methods allow local governments to
evaluate bids on a best-value basis. Best value contracting has
generally been recognized as a viable alternative for
construction projects. Traditionally, construction projects
have been bid out and awarded based upon a lowest-cost approach.
Best value, a competitive contracting process, allows projects
to be awarded to the contractor offering the best combination of
price AND qualifications, instead of just the lowest bid. In
addition to submitting bids for project cost, prospective
design-build teams also submit technical proposals. The
technical proposals are evaluated based on objective criteria,
and scores are compiled. The scores are then used to weigh or
adjust the submitted bid price. The contract is awarded to the
design-build team with the best value.
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Best value contracting is also allowed on a limited basis for
goods and services, and for procuring technology,
telecommunications and related equipment.
Recent Legislation Regarding "Skilled and Trained Workforce"
Beginning in 2014, the Legislature passed and the Governor
signed various bills requiring a "skilled and trained workforce"
on these design-build, lease/leaseback, and best-value
construction projects. These bills generally require
contractors and subcontractors on such projects to employ a
"skilled and trained workforce" defined as journeypersons who
have graduated from state-approved apprenticeship programs.
In 2014, SB 785 (Wolk) enacted uniform provisions for the
Department of General Services, the California Department of
Corrections and Rehabilitation, local agencies, cities and
counties using the design-build method. Subsequent legislation
added similar requirements to lease-leaseback (AB 566 from
2015), school construction design-build (AB 1358 from 2015) and
the best value project delivery method (AB 1185 and SB 762 both
from 2015).
Four of these bills require the percentage of a "skilled and
trained workforce" to be 20 percent in 2016, 30 percent in 2017,
40 percent in 2018, 50 percent in 2019, and 60% in 2020. AB 566
contained slightly different percentages - 30 percent in 2016,
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40 percent in 2017, 50 percent in 2018, and 60 percent in 2019.
This bill would delete the specific "skilled and trained
workforce" requirements in these respective statutes and instead
enact one comprehensive and consistent section of the law that
will apply to each of these alternative delivery methods.
Changes Proposed to SB 54 (Hancock) of 2013
SB 54 (Hancock) of 2013 enacted specified provisions related to
construction and related work performed by contract at specified
stationary sources. Specifically, SB 54 requires an owner or
operator of specified stationary sources (petroleum refineries
and petrochemical manufacturing facilities), when contracting
for the performance of construction, maintenance and related
work, to require that its contractors and any subcontractors use
a "skilled and trained workforce" to perform all onsite work
within an apprenticeable occupation in the building and
construction trades.
This bill proposes to make a number of changes to those
provisions of existing law. First, this bill specifies that
those provisions to not preclude the use of an alternative
workweek schedule adopted pursuant to existing law. Second,
this bill incorporates the same definition of "graduate of an
apprenticeship program" described above to the requirements of
SB 54. Finally, this bill makes other technical changes to the
provisions enacted by SB 54.
Arguments in Support
The sponsor of this bill, the State Building and Construction
Trades Council, argues that since the design-build and
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best-value alternative delivery methods are tools, which at
times may be more efficient than other construction methods,
they require a higher level of management sophistication and
quality construction to ensure the general public's investment
in public works is maximized and protected. The skilled and
trained workforce requirements ensure the use of the most highly
trained workforce available in order to deliver a project on
time, on or under budget and to hire local workers that have
graduated from regional apprenticeship programs on these
projects.
The sponsor argues that this bill does not expand the
authorization for alternative delivery methods it simply
consolidates and provides uniformity to the skilled and trained
workforce statutes and some clarification to assist local and
state agencies with implementation. Furthermore, the bill
includes a transition provision to provide that changes made by
this Act do not apply to contracts advertised for bid or awarded
prior to January 1, 2017.
The sponsor argues that this bill will improve the
implementation of statutes already adopted by the Legislature
that provide efficiency, quality and a better construction
product for taxpayers by requiring that a highly skilled and
qualified workforce, most likely made of California residents,
will deliver these projects.
Similarly, the Coalition for Adequate School Housing (CASH)
supports this bill, stating that it will clarify the
relationship between project labor agreements and the skilled
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workforce requirements for design-build, best-value, and
lease-leaseback school facility projects. The bill also makes
these provisions consistent for all three of the project
methods. They argue that these changes will assist school
districts with clarification to appropriately implement these
school construction methods.
REGISTERED SUPPORT / OPPOSITION:
Support
Air Conditioning Sheet Metal Association
Air-conditioning & Refrigeration Contractors Association
California Chapters of the National Electrical Contractors
Association
California Legislative Conference of the Plumbing, Heating and
Piping Industry
California State Association of Electrical Workers
California State Pipe Trades Council
Coalition for Adequate School Housing
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Finishing Contractors Association of Southern California
International Union of Elevator Constructors
Northern California Allied Trades
State Building and Construction Trades Council (sponsor)
United Contractors
Wall and Ceiling Alliance
Western States Council of Sheet Metal Workers
Oppose
Pro-Craft Construction Inc.
Analysis Prepared by:Ben Ebbink / L. & E. / (916)
319-2091
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