BILL ANALYSIS Ó
SB 762
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Date of Hearing: July 15, 2015
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Brian Maienschein, Chair
SB
762 (Wolk) - As Amended July 7, 2015
SENATE VOTE: 24-12
SUBJECT: Competitive bidding: best value: pilot program:
design-build.
SUMMARY: Allows counties to award construction contracts valued
above $1 million on the basis of best value, until January 1,
2020. Specifically, this bill:
1)Provides for a pilot program for counties for construction
projects in excess of $1 million.
2)Requires the board of supervisors (BOS) of any county to let
any contract for a construction project pursuant to this bill
to the lowest responsible bidder or else reject all bids.
3)Allows the lowest responsible bidder to be selected on the
basis of the best value to a county. In order to implement
this method of selection, the BOS shall adopt and publish
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procedures and required criteria that ensure that all
selections are conducted in a fair and impartial manner.
These procedures shall conform to 5) through 10), below, and
shall be mandatory for counties who choose to participate in
the pilot program.
4)Allows, if the BOS deems it to be in the best interest of the
county, the BOS, on the refusal or failure of the successful
bidder for a project to execute a tendered contract, to award
it to the second lowest responsible bidder. If the second
lowest responsible bidder fails or refuses to execute the
contract, the BOS may likewise award it to the third lowest
responsible bidder.
5)Requires a county to proceed in accordance with the following
when awarding best value contracts under this bill:
a) A county shall not select 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
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: reducing project costs, expediting the
completion of the project, or providing features not
achievable through awarding the contract on the basis of
the lowest bid price;
b) A county shall prepare a solicitation for bids and give
notice pursuant to provisions of the Local Agency Public
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Construction Act (LAPCA) that govern counties' bid
advertisement procedures. A county may identify specific
types of subcontractors that are required to be included in
the bids. A county shall comply with the Subletting and
Subcontracting Fair Practices Act (Subcontracting Act )
with regard to construction subcontractors identified in
the bid;
c) A county shall establish a procedure to prequalify
bidders pursuant to provisions of the LAPCA governing
prequalification procedures. The information required
pursuant to this provision shall be verified under oath by
the bidder in the manner in which civil pleadings in civil
actions are verified. Information submitted by the bidder
as part of the evaluation process shall not be open to
public inspection to the extent that information is exempt
from disclosure under the California Public Records Act;
d) Each solicitation for bids shall do all of the
following:
i) Invite prequalified bidders to submit sealed bids in
the manner prescribed by this bill;
ii) Include a section identifying and describing the
following:
(1) Criteria that a county will consider in
evaluating bids;
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(2) The methodology and rating or weighting system
that will be used by a county in evaluating bids; and,
(3) The relative importance or weight assigned to
the criteria identified in the request for bids; and,
e) Final evaluation of the best value contractor shall 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.
6)Prohibits a best value entity from being prequalified or
shortlisted, unless the entity provides an enforceable
commitment to the local agency that the entity and its
subcontractors at every tier will use a skilled and trained
workforce to perform all work on the project or contract that
falls within an apprenticeable occupation in the building and
construction trades.
7)Allows an entity's commitment that a skilled and trained
workforce will be used to perform the project or contract to
be established by any of the following:
a) The entity's agreement with the county that the entity
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and its subcontractors at every tier will comply with the
requirements of 6), above, and that the entity will provide
the county with evidence, on a monthly basis while the
project or contract is being performed, that the entity and
its subcontractors are complying with the requirements
of 6), above;
b) If the county has entered into a project labor agreement
(PLA) that will bind all contractors and subcontractors
performing work on the project or contract, and that
includes the requirements of 6), above, the entity's
agreement that it will become a party to that PLA; or,
c) Evidence that the entity has entered into a PLA that
includes the requirements of 6), above, and that will bind
the entity and all its subcontractors at every tier
performing the project or contract.
8)Requires selection of the best value contractor to be made as
follows:
a) An evaluation committee appointed by the county shall
evaluate the qualifications of the bidders based solely
upon the criteria set forth in the solicitation documents,
and shall assign a qualifications score to each bid. A
county shall 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;
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b) A county shall not award a contract for a construction
project pursuant to this bill if a solicitation for bids
for that construction project results in the submission of
fewer than three responsive bids to the county for
evaluation;
c) The award of the contract shall be made to the bidder
whose bid is determined by a county, in writing, to be the
best value to a county. To determine the best value
contractor, the county shall divide each bidder's price by
its qualifications score. The lowest resulting cost per
quality point will represent the best value bid;
d) A county shall issue a written decision of its contract
award; and,
e) Upon issuance of a contract award, a county shall
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. The notice of award shall be made public
and include the score of the selected best value contractor
in relation to all other responsive bidders and their
respective prices. The contract file shall include
documentation sufficient to support the decision to award.
9)Prohibits, if a county elects to award a project pursuant to
this bill, retention proceeds from exceeding 5% if a
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performance and payment bond, issued by an admitted surety
insurer, is required in the solicitation of bids, as
specified.
10) Provides for
allowable retention proceeds that contractors and
subcontractors may withhold, as specified.
11) Requires,
before January 1, 2020, the BOS of a participating county to
submit a report to the appropriate policy committees of the
Legislature and the Joint Legislative Budget Committee. The
report shall include, but is not limited to, the following
information:
a) A description of the projects awarded using the best
value procedures;
b) The contract award amounts;
c) The best value contractors awarded the projects;
d) A description of any written protests concerning any
aspect of the solicitation, bid, or award of the best value
contracts, including the resolution of the protests;
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e) A description of the prequalification process;
f) The criteria used to evaluate the bids, including the
weighting of the criteria and an assessment of the
effectiveness of the methodology; and,
g) If a project awarded under this bill has been completed,
an assessment of the project performance, to include a
summary of any delays or cost increases.
12) Requires the
report described in 11), above, to be submitted in compliance
with existing law governing the procedures for submitting
required or requested reports to the Legislature.
13) Provides that,
except as otherwise provided in this bill, this bill is not
intended to change in any manner any guideline, criteria,
procedure, or requirement of a county to let any contract for
a project to the lowest responsible bidder or else reject all
bids.
14) Provides the
following definitions:
a) "Best value" means a procurement process whereby the
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lowest responsible bidder may be selected on the basis of
objective criteria with the resulting selection
representing the best combination of price and
qualifications;
b) "Best value contract" means a contract entered into
pursuant to this article;
c) "Best value contractor" means a properly licensed
person, firm, or corporation that submits a bid for, or is
awarded, a best value contract;
d) "Demonstrated management competency" means the
experience, competency, capability, and capacity of the
proposed management staffing to complete projects of
similar size, scope, or complexity;
e) "Financial condition" means the financial resources
needed to perform the contract.
The criteria used to evaluate a bidder's financial condition
shall include, at a minimum, capacity to obtain all
required payment bonds, performance bonds, and liability
insurance;
f) "Labor compliance" means the ability to comply with, and
past performance with, contract and statutory requirements
for the payment of wages and qualifications of the
workforce. The criteria used to evaluate a bidder's labor
compliance shall include, as a minimum, the bidder's
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ability to comply with the apprenticeship 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;
g) "Qualifications" means the financial condition, relevant
experience, demonstrated management competency, labor
compliance, and safety record of the bidder, and, if
required by the bidding documents, 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. A county shall evaluate financial condition,
relevant experience, demonstrated management competency,
labor compliance, and safety record, using, to the extent
possible, quantifiable measurements;
h) "Relevant experience" means the experience of the bidder
with projects of similar size, scope, or complexity;
i) "Safety record" means the prior history concerning the
safe performance of construction contracts. The criteria
used to evaluate a bidder's safety record shall 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;
j) "Apprenticeable occupation" means an occupation for
which the Chief of the Division
of Apprenticeship Standards had approved an apprenticeship
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program pursuant to existing law, as specified, prior to
January 1, 2014;
aa) "Skilled and trained workforce" means a workforce that
meets all of the following conditions:
i) All the workers are either skilled journeypersons or
apprentices registered in an apprenticeship program, as
specified;
ii) As of January 1, 2016, at least 20% of the skilled
journeypersons employed to perform work on the contract
or project by the entity and each of its subcontractors
at every tier are graduates of an apprenticeship program,
as specified;
iii) As of January 1, 2017, at least 30% of the skilled
journeypersons employed to perform work on the contract
or project by the entity and each of its subcontractors
at every tier are graduates of an apprenticeship program,
as specified;
iv) As of January 1, 2018, at least 40% of the skilled
journeypersons employed to perform work on the contract
or project by the entity and each of its subcontractors
at every tier are graduates of an apprenticeship program,
as specified;
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v) As of January 1, 2019, at least 50% of the skilled
journeypersons employed to perform work on the contract
or project by the entity and each of its subcontractors
at every tier are graduates of an apprenticeship program,
as specified;
vi) As of January 1, 2020, at least 60% of the skilled
journeypersons employed to perform work on the contract
or project by the entity and each of its subcontractors
at every tier are graduates of an apprenticeship program,
as specified;
vii) For an apprenticeable occupation in which no
apprenticeship program had been approved by the chief
prior to January 1, 1995, up to one-half of the
graduation percentage requirements specified above may be
satisfied by skilled journeypersons who commenced working
in the apprenticeable occupation prior to the chief's
approval of an apprenticeship program for that occupation
in the county in which the project is located.
bb) "Skilled journeyperson" means a worker who either:
i) Graduated from an apprenticeship program for the
applicable occupation, as specified; or,
ii) Has at least as many hours of on-the-job experience
in the applicable occupation as would be required to
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graduate from an apprenticeship program for the
applicable occupation, as specified.
15) Provides that
no reimbursement is required by this act, pursuant to Section
6 of Article XIII B of the
California Constitution, because the only costs that may be
incurred by a local agency or school district will be incurred
because this act creates a new crime or infraction, eliminates
a crime or infraction, or changes the penalty for a crime or
infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within
the meaning of Section 6 of Article XIII B of the
California Constitution.
16)Contains a repeal date of January 1, 2020.
EXISTING LAW:
1)Establishes, pursuant to the LAPCA within the Public Contract
Code, the procedures counties are required to use when
soliciting and evaluating bids or proposals for the
construction of a public work or improvement, which generally
require contracts to be awarded to the lowest responsible
bidder after a competitive bidding process.
2)Allows local agencies limited use of best value contracting
when the design-build or the construction manager at risk
methods are used, but not for traditional design-bid-build
contracting.
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3)Allows various government entities to use best value when
purchasing goods or services, generally under specified dollar
thresholds.
4)Allows, until January 1, 2017, the University of California
(UC) to award contracts based on best value procedures.
FISCAL EFFECT: According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS:
1)Bill Summary. This bill establishes a pilot program until
January 1, 2020, that allows counties to award construction
contracts costing more than $1 million on a best value basis.
Counties would have to satisfy a number of requirements in
order to use this authority, including:
a) Adopting and publishing procedures and required criteria
that ensure all selections are conducted in a fair and
impartial manner;
b) Evaluating at a public meeting the alternative of
awarding the contract on the basis of the lowest bid price;
c) Making a written finding that awarding a contract on the
basis of best value will reduce project costs, expedite
project completion, and/or provide features not achievable
via the low-bid method;
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d) Preparing bid solicitations and providing notice as
required by the LAPC Act, and complying with the
Subcontracting Act regarding subcontractors identified in a
bid;
e) Establishing prequalification procedures in accordance
with the LAPC Act;
f) Including in bid solicitations the criteria and rating
system a county will consider in evaluating bids;
g) Appointing an evaluation committee, which must evaluate
bidders solely upon the criteria in the bid solicitations
and assign a qualifications score to each bid;
h) Determining best value by dividing each bidder's price
by its qualifications score, with the lowest cost per
quality point representing the best value bid;
i) Publicly announcing bid awards, including the score of
the selected contractor in relation to all other bidders;
and,
j) Submitting a report to the Legislature, including
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information about the county's use of this bill's
authority.
This bill is sponsored by the Solano County Board of
Supervisors.
2)Author's Statement. According to the author, "Counties are
currently permitted to award construction contracts using the
'best value' method of selection for the design-build project
delivery method and for the construction management at risk
project delivery method. However, counties are prohibited
from awarding construction contracts based on Best Value for
projects contracted through the traditional (design-bid-build)
method of project delivery. Awarding public works contracts
solely based on lowest responsible bid can result in firms
underbidding the cost of work to receive the contract award,
which can set up a contentious relationship between the county
and general contractor.
"SB 762 will allow counties to consider other objective
criteria such as relevant experience, demonstrated management
competency, financial condition, labor compliance, safety
record of the bidder, and other relevant factors for the
general contractors (and if applicable, the subcontractors),
in addition to cost during the contract award process."
3)Background. The LAPCA requires local officials to invite bids
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for construction projects and then award contracts to the
lowest responsible bidder. This 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 to procure construction projects using various
alternatives to the design-bid-build project delivery method.
These alternative methods include:
a) 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,
b) 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
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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.
Best value contracting is also allowed on a limited basis for
goods and services, and for procuring technology,
telecommunications and related equipment.
4)Best Value Pilot at the UC. SB 667 (Migden), Chapter 367,
Statutes of 2006, established a pilot program for the UC.
Initially authorized for five years, SB 667 allowed the UC San
Francisco to award contracts based on the best value for the
university. Under this process, UC prequalifies bidders, then
evaluates the bid based on answers to a separate best value
questionnaire and assigns a qualification score. UC then
divides each bidder's price by its qualification score. The
lowest resulting cost per quality point represents the best
value bid.
In a report to the Legislature in January 2010, the UC
reported that 23 contracts totaling $158.3 million were issued
under the best value pilot program. Of the 23 contracts, 12
contracts were low bid contracts. According to the report,
the "University Representatives for all these projects [four
completed and two almost completed projects] have been
unanimous in their praise of this process that has already
demonstrated numerous advantages such as decreased bid
protests and communication problems, decreased the need for
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multiple inspections and re-work, decreased disputes, change
order requests, claims and litigation and increased incentives
for contractors to perform their work safety and to adhere to
high labor and quality standards." UC concludes that the best
value pilot program fosters better quality work, less labor
and safety problems, better qualified persons/contractors,
better on-time completion, and better on-budget performance.
In 2011, SB 835 (Wolk), Chapter 636, Statutes of 2011,
expanded the authority to all UC campuses and extended the
sunset from January 1, 2012 to January 1, 2017.
5)Related Legislation. AB 1185 (Ridley-Thomas) authorizes a
pilot program for the Los Angeles Unified School District to
use best value procurement for projects over $1 million and
requires the Legislative Analyst's Office to report on the use
of the best value procurement method by school districts. AB
1185 is pending in the Senate Appropriations Committee.
6)Previous Legislation. AB 1971 (Bocanegra) of 2014 was
substantially similar to AB 1185. AB 1971 was held on the
Senate Floor.
SB 835 (Wolk), Chapter 636, Statutes of 2011, extended the
sunset of the best value pilot program for the UC to January
1, 2017, and expanded the program to all UC campuses.
SB 667 (Migden), Chapter 367, Statutes of 2006, established
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the best value pilot program for the UC San Francisco campus
for five years.
7)Technical Amendments. The Committee may wish to consider
adopting the following technical amendments:
a) On page 5, in line 29, strike out "chief" and insert
"Chief of the Division of Apprenticeship Standards;
b) On page 6, in line 36, strike out "chief" and insert
"Chief of the Division of Apprenticeship Standards;
c) On page 6, in line 38, strike out "subparagraph (B)" and
insert "subparagraphs (A) through (E)";
d) On page 7, in line 5, strike out "chief" and insert
"Chief of the Division of Apprenticeship Standards;
e) On page 7, in line 12, strike out "chief" and insert
"Chief of the Division of Apprenticeship Standards;
f) On page 8, in line 25, strike out "subdivision" and
insert "section";
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g) On page 8, in line 28, strike out "subdivision" and
insert "section";
h) On page 8, in line 32, strike out "subdivision" and
insert "section";
i) On page 9, in line 30, strike out "district" and insert
"county";
j) On page 9, in line 38, strike out "district" and insert
"county"; and,
aa) On page 10, in line 5, strike out "district" and insert
"county"
8)Arguments in Support. The Solano County Board of Supervisors,
sponsor of this measure, writes, "A 'best value' construction
contract is one that allows counties to select the lowest
responsible bidder on the basis of a number of measurable,
verifiable criteria. These criteria include management
competency, financial condition, labor compliance,
qualifications, experience, and safety record. Factoring in
these criteria will allow counties that participate in the
pilot program to choose contractors that provide the best
combination of price and quality."
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9)Arguments in Opposition. The Southern California Contractors
Association, in opposition, argues, "This (bill) will lead to
protests from the second and third 'best value' contractors,
leading to project delays and additional costs to the public
agency... Additionally, the subjective criteria created by the
county could lead to fraud in the awarding process. By making
the awarding criteria subjective, public agencies could craft
the solicitation of bids in such a way that it benefits one
contractor. This equates to the public agency selecting,
possibly by popularity, the contractor based on their
preference rather than on the lowest responsible bid."
The Associated Builders and Contractors of California, also in
opposition, note, "?ABC California continues to believe there
should be an extended phase-in period to ensure enough skilled
journey level workers will be available to meet the new
skilled workforce mandate in SB 762?ABC requests the first
year of SB 762's skilled workforce requirements be amended to
take effect no sooner than January 1, 2018, and each of the
tiered implementation dates following be pushed back by one
year."
REGISTERED SUPPORT / OPPOSITION:
Support
Solano County Board of Supervisors [SPONSOR]
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California State Association of Counties
Los Angeles County Board of Supervisors
San Bernardino County
Opposition
Associated Builders and Contractors of California (unless
amended)
Southern California Contractors Association
Analysis Prepared by:Angela Mapp / L. GOV. / (916)
319-3958