BILL ANALYSIS                                                                                                                                                                                                    Ó



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          SENATE THIRD READING


          SB  
          762 (Wolk)


          As Amended  August 31, 2015


          Majority vote


          SENATE VOTE:  24-12


           -------------------------------------------------------------------- 
          |Committee       |Votes|Ayes                   |Noes                 |
          |                |     |                       |                     |
          |                |     |                       |                     |
          |                |     |                       |                     |
          |----------------+-----+-----------------------+---------------------|
          |Local           |6-3  |Gonzalez, Alejo, Chiu, |Maienschein, Linder, |
          |Government      |     |Cooley, Low, Mullin    |Waldron              |
          |                |     |                       |                     |
          |----------------+-----+-----------------------+---------------------|
          |Appropriations  |13-4 |Gomez, Bloom, Bonta,   |Bigelow, Chang,      |
          |                |     |Calderon, Daly,        |Jones, Wagner        |
          |                |     |Eggman, Gallagher,     |                     |
          |                |     |Eduardo Garcia,        |                     |
          |                |     |Holden, Quirk, Rendon, |                     |
          |                |     |Weber, Wood            |                     |
          |                |     |                       |                     |
          |                |     |                       |                     |
           -------------------------------------------------------------------- 


          SUMMARY:  Allows eight counties to award construction contracts  
          valued above $1 million on the basis of best value, until  








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          January 1, 2020.  Specifically, this bill:  


          1)Provides for a pilot program for construction projects in  
            excess of $1 million for the Counties of Alameda, Los Angeles,  
            Placer, Riverside, San Bernardino, San Diego, Solano, and  
            Yuba.


          2)Requires the board of supervisors (BOS) of a county to let any  
            contract for a construction project pursuant to this bill to  
            the bidder representing the best value or else reject all  
            bids.


          3)Allows the bidder to be selected on the basis of the best  
            value to the county.  In order to implement this method of  
            selection, the BOS shall adopt and publish 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 a county that chooses to participate in the pilot program.


          4)Allows, if the BOS of a county 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 bidder with the second lowest  
            best value score, as specified.  If the second bidder fails or  
            refuses to execute the contract, the BOS may likewise award it  
            to the bidder with the third lowest best value score, as  
            specified.


          5)Requires a county to proceed in accordance with the following  
            when awarding best value contracts under this bill:


             a)   The county shall not select a bidder on the basis of the  








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               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)   The county shall prepare a solicitation for bids and  
               give notice pursuant to provisions of the Local Agency  
               Public 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)   The 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;








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               ii)    Include a section identifying and describing the  
                 following:


                  (1)       Criteria that the county will consider in  
                    evaluating bids;


                  (2)       The methodology and rating or weighting system  
                    that will be used by the 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 contractor from being prequalified or  
            shortlisted, unless the contractor provides an enforceable  
            commitment to the county that the contractor 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 a contractor'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:









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             a)   The contractor's agreement with the county that the  
               contractor and its subcontractors at every tier will comply  
               with the requirements of 6) above, and that the contractor  
               will provide the county with evidence, on a monthly basis  
               while the project or contract is being performed, that the  
               contractor 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 contractor's  
               agreement that it will become a party to that PLA; or,


             c)   Evidence that the contractor has entered into a PLA that  
               includes the requirements of 6) above, and that will bind  
               the contractor 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;


             b)   A county shall not award a contract for a construction  








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               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 the county, as specified.  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  
            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  








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            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;


             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  








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            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  
               selected bidder may be selected on the basis of objective  
               criteria for evaluating the qualifications of bidders with  
               the resulting selection representing the best combination  
               of price and qualifications;


             b)   "Best value contract" means a competitively bid 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)   "County" means any of the following counties: Alameda,  
               Los Angeles, Placer, Riverside, San Bernardino, San Diego,  
               Solano, and Yuba.


             e)   "Demonstrated management competency" means the  
               experience, competency, capability, and capacity of the  
               proposed management staffing to complete projects of  
               similar size, scope, or complexity;








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             f)   "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;


             g)   "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  
               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;


             h)   "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;


             i)   "Relevant experience" means the experience, competency,  
               capability, and capacity to complete projects of similar  
               size, scope, or complexity;


             j)   "Safety record" means the prior history concerning the  








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               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;


             aa)  "Apprenticeable occupation" means an occupation for  
               which the Chief of the Division of Apprenticeship Standards  
               had approved an apprenticeship program pursuant to existing  
               law, as specified, prior to January 1, 2014;


             bb)  "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  








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                 or project by the entity and each of its subcontractors  
                 at every tier are graduates of an apprenticeship program,  
                 as specified;


               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.


             cc)  "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  
                 graduate from an apprenticeship program for the  








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                 applicable occupation, as specified.


          15)Finds and declares that a special law is necessary and that a  
            general law cannot be made applicable within the meaning of  
            California Constitution Article IV, Section 16 because of the  
            need to establish a pilot project for the Counties of Alameda,  
            Los Angeles, Placer, Riverside, San Bernardino, San Diego,  
            Solano, and Yuba to determine the potential benefits and  
            consequences of using best value procurement to facilitate  
            infrastructure improvements and ease fiscal impacts.


          16)Provides that no reimbursement is required by this act,  
            pursuant to California Constitution Article XIII B, Section 6,  
            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 Government Code Section 17556, or changes the  
            definition of a crime within the meaning of California  
            Constitution Article XIII B, Section 6.


          17)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  








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            when the design-build or the construction manager at-risk  
            methods are used, but not for traditional design-bid-build  
            contracting.


          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 Assembly Appropriations  
          Committee, negligible state costs.


          COMMENTS:  


          1)Bill Summary.  This bill establishes a pilot program until  
            January 1, 2020, that allows the Counties of Alameda, Los  
            Angeles, Placer, Riverside, San Bernardino, San Diego, Solano,  
            and Yuba to award construction contracts costing more than $1  
            million on a best value basis.  Participating 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;










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             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;


             d)   Preparing bid solicitations and providing notice as  
               required by the LAPCA, and complying with the  
               Subcontracting Act regarding subcontractors identified in a  
               bid;


             e)   Establishing prequalification procedures in accordance  
               with the LAPCA;


             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  
               information about the county's use of this bill's  
               authority.









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            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 selected 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  
            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:










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             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  
            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.   








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            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  
            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) of the current  
            legislative session, 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 on  
            the Senate Floor.









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          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, established the best value pilot program for the UC  
            San Francisco campus for five years.  


          7)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."


          8)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."









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            The Associated Builders and Contractors of California (ABC),  
            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."




          Analysis Prepared by:                                             
                          Angela Mapp / L. GOV. / (916) 319-3958  FN:  
          0001747