BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 762| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: SB 762 Author: Wolk (D) Amended: 5/12/15 Vote: 21 SENATE GOVERNANCE & FIN. COMMITTEE: 5-0, 4/22/15 AYES: Hertzberg, Beall, Hernandez, Lara, Pavley NO VOTE RECORDED: Nguyen, Moorlach SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8 SUBJECT: Counties: competitive bidding: best value: pilot program SOURCE: Author DIGEST: This bill allows counties award construction contracts through a "best value" procurement process. ANALYSIS: Existing law, the Local Agency Public Construction Act, requires local officials to invite bids for construction projects and then award contracts to the lowest responsible bidder. This bill: 1) Establishes a pilot program to allow counties, until January 1, 2020, to use a "best value" procurement process to award SB 762 Page 2 construction contracts in excess of $1 million. 2) Requires a county using the pilot program to award a contract for a construction project to the lowest responsible bidder or else reject all bids. 3) Allows a county to select the lowest responsible bidder on the basis of the best value to a county. To ensure that selections are conducted fairly and impartially, a county that wants to select a bidder using the best value method must adopt and publish mandatory procedures and criteria that conform to this bill's requirements. 4) Defines "best value" as a procurement process whereby the lowest responsible bidder may be selected on the basis of objective criteria with the resulting selection representing the best combination of price and qualifications. 5) Defines "qualifications" as comprising the following five criteria: a) "Demonstrated management competency," which this bill defines as the experience, competency, capability, and capacity of the proposed management staffing to complete projects of similar size, scope, or complexity. b) "Financial condition," which this bill defines as the financial resources needed to perform the contract, including the capacity to obtain all required payment bonds, performance bonds, and liability insurance. c) "Labor compliance," which this bill defines as the ability to comply with, and past performance with, contract and statutory requirements for the payment of wages and qualifications of the workforce. Criteria used to evaluate a bidder's labor compliance must include the bidder's ability to comply with the apprenticeship SB 762 Page 3 requirements of the California Apprenticeship Council and the Department of Industrial Relations, its past conformance with those requirements, and its past conformance with requirements to pay prevailing wages on public works projects. d) "Relevant experience," which this bill defines as experience of the bidder to complete projects of similar size, scope, or complexity. e) "Safety record," which this bill defines as the prior history concerning the safe performance of construction contracts. The criteria used to evaluate a bidder's safety record must include, at a minimum, its experience modification rate for the most recent three-year period, and its average total recordable injury or illness rate and average lost work rate for the most recent three-year period. 6) Requires a county to evaluate financial condition, relevant experience, demonstrated management competency, labor compliance, and safety record, using, to the extent possible, quantifiable measurements. 7) Specifies that the bidding documents may require the county to evaluate some or all of the preceding qualifications as they pertain to subcontractors proposed to be used by the bidder for designated portions of the work. 8) Requires that a county using best value contracting must establish a procedure to prequalify bidders pursuant to a specified statute, prepare a solicitation for bids, and give public notice of the solicitation pursuant to a specific statute. 9) Prohibits a county from selecting a lowest responsible bidder on the basis of the best value to a county unless, after evaluating at a public meeting the alternative of awarding SB 762 Page 4 the contract on the basis of the lowest bid price, the county makes a written finding that awarding the contract on the basis of best value, for the specific project under consideration, will accomplish one or more of the following objectives: a) Reducing project costs, b) Expediting the completion of the project, or c) Providing features not achievable through awarding the contract on the basis of the lowest bid price. 10)Allows a county to identify specific types of subcontractors that are required to be included in the bids and requires a county to comply with the Subletting and Subcontracting Fair Practices Act with regard to construction subcontractors identified in the bid. 11)Each solicitation for bids must: a) Invite prequalified bidders to submit sealed bids in a specified manner. b) Include a section identifying and describing the following: i) Criteria that a county will consider in evaluating bids. ii) The methodology and rating or weighting system that the county will use in evaluating bids. iii) The relative importance or weight assigned to the SB 762 Page 5 criteria identified in the request for bids. 12)Requires bidders to verify under oath the information that is required as part of the bid solicitation process. 13)Specifies that information submitted by a bidder is not open to public inspection to the extent that information is exempt from disclosure under the California Public Records Act. 14)Requires that an evaluation committee appointed by a county selecting a best value contractor must evaluate bidders' qualifications based solely upon the criteria specified in the solicitation documents. The evaluation committee must assign a qualifications score to each bid. 15)Requires a county to establish written policies and procedures, consistent with applicable law, to ensure that members of an evaluation committee are free from conflicts of interest, if the county has not already established applicable written policies and procedures. 16)Requires that the final evaluation of a best value contractor must be done in a manner that prevents cost or price information from being revealed to the committee evaluating the qualifications of the bidders prior to completion and announcement of that committee's decision. 17)Prohibits a county from awarding a contract for a construction project under this bill's provisions if a solicitation for bids for that construction project results in fewer than three responsive bids being submitted for the county to evaluate. 18)Requires that the bidder whose bid is determined by a county, in writing, to be the best value to a county must be awarded the contract. SB 762 Page 6 19)Requires a county to determine the best value contractor by dividing each bidder's price by its qualifications score. The lowest resulting cost per quality point represents the best value bid. 20)Requires a county to issue a written decision of its contract award. 21)Requires that, after issuing a contract award, a county must: a) Publicly announce its award identifying the best value contractor to which the award is made, the project, the project price, and the selected best value contractor's score based on the evaluation criteria listed in the request for bids. b) Make the notice of award public and include the score of the selected best value contractor in relation to all other responsive bidders and their respective prices. Include, in the contract file, documentation sufficient to support the decision to award. 22)If a successful bidder for a project refuses or fails to execute a tendered contract, allows a board of supervisors that deems it to be in the best interest of the county to award the contract to the second lowest responsible bidder. If the second lowest responsible bidder fails or refuses to execute the contract, this bill allows the board of supervisors to likewise award the contract to the third lowest responsible bidder. 23)Requires that the board of supervisors of a county that uses the best value contracting process authorized by this bill must submit a report to the appropriate policy committees of the Legislature and the Joint Legislative Budget Committee. The report must comply with statutory requirements for SB 762 Page 7 submitting reports to the Legislature and must include specified information about projects awarded using best value procedures. 24)Clarifies that, except for the best-value process it authorizes, it is not intended to change any guideline, criteria, procedure, or requirement for a county to let a contract to the lowest responsible bidder or else reject all bids. Background Over the last two decades, legislators have gradually expanded local governments' authority 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 (SB 785, Wolk, Chapter 931, Statutes of 2014); and "Construction manager at risk" contracting, which allows local officials to retain a construction manager, who provides pre-construction services during the design period, later 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 (SB 328, Knight, Chapter 517, Statutes of 2013). During the bidding phase, these alternative procurement methods allow a local government to evaluate bids on a best-value basis, incorporating technical factors, such as qualifications, in addition to price. For example, the statutes authorizing design-build contracting allow a contract to be awarded based on consideration of objective criteria that include features, functions, lifecycle costs, experience, and past performance. State law allows the University of California (UC), as a pilot project until January 1, 2017, to award construction contracts on a best-value basis, rather than awarding contracts based on the lowest-priced bid (SB 835, Wolk, Chapter 636, Statutes of 2011). SB 762 Page 8 Some county officials want the Legislature to grant them the authority to award construction contracts on a best-value basis, similar to the pilot program authorized for UC. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes SUPPORT: (Verified5/12/15) Solano County OPPOSITION: (Verified5/13/15) Southern California Contractors Association Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119 5/13/15 16:45:35 **** END ****