BILL ANALYSIS Ó SB 762 Page 1 Date of Hearing: August 19, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair SB 762 (Wolk) - As Amended August 17, 2015 ----------------------------------------------------------------- |Policy |Local Government |Vote:|6 - 3 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- Urgency: No State Mandated Local Program: YesReimbursable: No SUMMARY: This bill authorizes counties to use "best value" criteria to award construction contracts valued above $1 million, until January 1, 2020. In order to use best value, the bill requires SB 762 Page 2 a county to evaluate at a public meeting the alternative of awarding the contract on the basis of lowest bid price, and make a finding that using best value will accomplish one or more of the following: reduce project costs, expedite project completion, or provide features not available by awarding based on lowest bid price. The bill prescribes the methodology for preparing solicitations for bids, prequalifying bidders, evaluating bidder qualifications, and selection of the best value contractor. The bill requires any county using best value procurement to report specified information on its experience using best value to the Legislature by January 1, 2020. FISCAL EFFECT: Negligible state costs. COMMENTS: 1)Purpose. The author states, "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." This bill authorizes counties to award contracts in excess of $1 million to the lowest responsible bidder selected on the basis of objective criteria representing the best value to the SB 762 Page 3 county including both price and bidder qualifications. 2)Background. Existing law requires public entities to comply with certain procedures in soliciting and evaluating bids and awarding contracts for the construction of public works. The traditional approach to public contracting is referred to as the design-bid-build method, which requires local officials to invite bids for construction projects, based on a completed set of engineering plans, then award the construction bid to the lowest bidder. In recent years, the Legislature has authorized local agencies to also use the "design-build" and "construction manager at risk" procurement methods, as specified. During the bidding phase, these alternative procurement methods allow a local government to evaluate bids on a best-value basis, which allows a contract to be awarded based on consideration of objective criteria that include features, functions, lifecycle costs, experience, and past performance, in addition to price. Existing law, until January 1, 2017, authorizes a pilot program at the University of California (UC) to award construction contracts on a "best value" basis. The authorization was initially established as a five year pilot program for UC San Francisco in 2006. In a January 2010 report to the Legislature, UC concluded that the best value pilot program fostered better quality work, less labor and safety problems, better qualified persons/contractors, better on-time completion, and better on-budget performance. As a result, the authority was expanded to all UC campuses in 2011 and the sunset extended to January 1, 2017. 3)Related Legislation. AB 1185 (Ridley-Thomas) authorizes a SB 762 Page 4 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. 4)Previous Legislation. a) AB 1971 (Bocanegra) of 2014 was substantially similar to AB 1185. AB 1971 was held on the Senate Floor. b) 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. c) SB 667 (Migden), Chapter 367, Statutes of 2006, established the best value pilot program for the UC San Francisco campus for five years. 1)Arguments in Support. Counties state that a "best value" construction contract allows them to select the lowest responsible bidder by factoring in relevant criteria that allow for the best combination of price and quality. 2)Arguments in Opposition. Contractors worry that the best value process invites abuse in the awarding process, possibly allowing a public agency to select a contractor based on their SB 762 Page 5 preference rather than the lowest responsible bid. Analysis Prepared by:Jennifer Swenson / APPR. / (916) 319-2081