BILL ANALYSIS                                                                                                                                                                                                    




          SENATE COMMITTEE ON EDUCATION
                              Senator Carol Liu, Chair
                                2015 - 2016  Regular 

          Bill No:             SB 959             
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          |Author:    |Lara                                                 |
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          |Version:   |February 8, 2016                         Hearing     |
          |           |Date:     March 30, 2016                             |
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          |Urgency:   |No                     |Fiscal:     |Yes             |
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          |Consultant:|Kathleen Chavira                                     |
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          Subject:  University of California:  contracts:  bidding


            SUMMARY
          
          This bill modifies the requirements for qualifying as a lowest  
          responsible bidder or best value awardee for contracts for  
          specified types of service contracts at the University of  
          California (UC) by requiring a bidder to certify in writing that  
          its employees are compensated at a level that does not undercut,  
          by more than 5 percent, the average per-employee value of total  
          compensation for UC employees who perform comparable work, as  
          specified, and beginning January 1, 2018, makes these provisions  
          applicable to any renewal or extension of an existing contract  
          for goods, materials and services involving an expenditure of  
          $100,000 or more annually.  

            BACKGROUND
          
          Existing law outlines the requirements and procedures for  
          competitive bidding at the University of California.  Existing  
          law outlines requirements and procedures, specifically for the  
          acquisition of materials, goods and services. 
          (Public Contract Code  10500, et seq.)

          Existing law requires the UC to let any contract involving an  









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          expenditure of $100,000 or more annually for goods and  
          materials, or for services to be performed (other than personal  
          or professional services) to the lowest responsible bidder.   
          (PCC  10507.7)

          Existing law authorizes the UC, when it determines that it can  
          expect long-term savings, as specified, to select the lowest  
          responsible bidder on the basis of the best value to the  
          university.  (PCC 10507.8) 

          Existing law declares the intent of the Legislature to  
          facilitate the participation of small businesses, particularly  
          small disadvantaged or minority business enterprises, women  
          business enterprises and disabled veteran business enterprises  
          in business contracting with the UC.  (PCC  10500.5)






            ANALYSIS
          
          This bill modifies the requirements for qualifying as a lowest  
          responsible bidder or best value awardee for contracts for  
          materials, goods, and services at the University of California  
          (UC).  Specifically, it:

          1)   Establishes a number of new requirements for bidders.   
               Specifically it:

                    a)             Requires a bidder to certify in writing  
                    to the UC that the bid includes a total employee  
                    compensation package, including fringe benefits, that  
                    is valued at a per-employee basis that does not  
                    undercut, by more than 5 percent, the average  
                    per-employee value of total compensation for employees  
                    at the UC who perform comparable work at the relevant  
                    campus, medical center, or laboratory, where the  
                    proposed work will be performed. In addition, it:

                           i)                  Applies these requirements  
                         specifically to contracts for building  








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                         maintenance, cleaning, or custodial services,  
                         call center services, dining and food services,  
                         gardening, grounds keeping and plant nursery  
                         services, laborer services, mailroom services,  
                         parking, shuttle bus, truck driving, or  
                         transportation services, security services,  
                         storekeeper services, patient care technical  
                         employee services, patient billing services,  
                         medical transcribing services, patient escort  
                         services, or nursing assistant services.

                           ii)     Exempts the application of these  
                         requirements to employees who are mentally or  
                         physically handicapped, or both, who have been  
                         issued a license for employment at less than  
                         minimum wage by the Industrial Welfare  
                         Commission. 

                           iii)    Exempts public works projects conducted  
                         by public agencies from these requirements.

                    b)             Requires the UC to:

                           i)                  Include in its request for  
                         proposals a calculation which considers the  
                         criteria outlined in 1) above.

                           ii)     Use all known cost escalators in the  
                         calculation to project the future rate of growth  
                         of average per-employee total compensation costs.
           
                    c)             Requires a bidder to certify in writing  
                    that the bidder has not been found liable for  
                    violation of compensation, work hours, or working  
                    conditions related provisions of the Penal Code, or  
                    Labor Code, as specified, or any Wage Order Issued by  
                    the Industrial Welfare Commission for specified  
                    amounts, within the prior ten years. 


                    d)             Establishes the notification of the  
                    University of California (UC) by the contractor of a  
                    finding of liability for violation of compensation,  








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                    work hours, or working conditions related provisions  
                    of the Penal Code, or Labor Code, as specified, or any  
                    Wage Order issued by the Industrial Welfare Commission  
                    for specified amounts within the prior ten years as  
                    grounds for termination of the contract. 

               e)        Requires the bidder to provide the following to  
               the UC:

                           i)                  Spreadsheets showing all  
                         applicable compensation and benefits, as  
                         specified, for each position and employee  
                         supplied to the University and the anticipated  
                         hours to be worked on a daily and weekly basis.  

                           ii)     An organization chart showing the  
                         bidder's supervisory structure.

                           iii)    Any and all employee handbooks  
                         applicable to the contracted employees.

                           iv)     Projections of gross and net revenues  
                         and itemized expenses for each of the first three  
                         years of the proposed contract.

                    f)             Requires a successful bidder , once  
                    commencing work for the UC, to: 

                           i)                  Notify the UC of any  
                         changes to the information provided within 30  
                         days of the change, as specified. 

                           ii)     Provide UC copies of notices provided  
                         to employees in compliance with existing labor  
                         code provisions outlining the obligations of the  
                         employer prior to the employees beginning UC  
                         campus work.

                           iii)    By the 15th day of each month, provide  
                         UC with a monthly certified payroll report, as  
                         specified.

                           iv)     Annually provide, by October 1, data  








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                         showing compliance with wages, hours, and working  
                         conditions requirements of the Labor Code for  
                         each job classification working at any university  
                         location. 

                           v)                  Annually provide, by  
                         October 1, an audited statement prepared and  
                         signed by a Certified Public Accountant showing  
                         work performed and gross and net revenues and  
                         itemized expenses.

                    g)             Declares the records provided by the  
                    bidder/contractor to be subject to public records act  
                    laws, as specified and authorizes the UC to redact any  
                    confidential information, as specified, and to delay  
                    response until after a bid process is complete, if  
                    applicable. 


          2)   Beginning January 1, 2018, makes the $100,000 threshold for  
               competitive bidding of contracts for goods, materials and  
               services to be performed applicable to any renewal or  
               extension of an existing contract if it involves an  
               expenditure of $100,000 or more annually.  

          3)   Makes findings and declarations that the UC has squandered  
               public resources via contracting out to for-profit private  
               contractors that charge significant administrative  
               overhead. 
          
          STAFF COMMENTS
          
          1)   Need for the bill.  According to the author, this bill  
               seeks to address the growing challenge to California of the  
               use of contingent workers to replace employees and the  
               consequential effect it has on wages and worker  
               protections.  This bill would require the UC, when  
               evaluating bids for contract work, to evaluate the total  
               employee compensation package and ensure that it does not  
               undercut wages and benefits of existing university  
               employees.  According to the author, the UC serves as an  
               anchor institution in the market in which it operates, and  
               as a public institution, and the third-largest California  








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               employer, should adopt and promote policies that respect  
               its employees and protect workers' rights. 

          2)   Related Study.   According to a 2012 study by the UC  
               Berkeley Labor Center, Temporary Workers in California are  
               Twice as Likely as Non-Temps to Live in Poverty: Problems  
               with Temporary and Subcontracted Work in California, almost  
               one-quarter of a million people worked in the temporary  
               help services industry in California in 2010.  These  
               workers were slightly younger, more likely to be female,  
               less likely to be white non-Hispanic, and less likely to  
               have a high school diploma or GED than the average non-temp  
               worker.  These workers were also more susceptible to  
               workplace illness and injury, earned less than their  
               non-temp counterparts, and were less likely to get  
               benefits.  The report notes that lowered wages mean that  
               these workers rely more on the state safety net than their  
               direct-hire counterparts and that these employment  
               arrangements undermine worker protections by allowing  
               employers to avoid certain provisions of worker protection  
               and making it difficult to enforce other protections. The  
               report also notes that these employment relationships  
               create downward pressure on wages. 

          3)   UC's Fair Wage/Fair Work plan.  In July 2015, the UC  
               adopted a Fair Wage/Fair Work Plan.  Under the Plan, the UC  
               has established a minimum level of pay for employees to  
               ensure that all UC workers are provided a fair wage with a  
               goal of reaching a minimum wage of $15 per hour on October  
               1, 2017.  In addition, the UC reports that it is  
               implementing annual compensation audits and interim audits,  
               paid for by the contractor, to monitor wage and working  
               conditions as well as compliance with federal, state, and  
               UC workplace laws and policies for contracted employees  
               working pursuant to contracts entered into or renewed after  
               October 2015.  The UC will also establish a phone hotline  
               and central online system to report complaints directly to  
               the Office of the President.  


          In light of the activities already planned as part of the  
          University of California's (UC) Fair Wage/Fair Work Plan, is  
          this bill necessary?








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          4)   Consequences?  This bill would increase the complexity of  
               the bidding process for both the UC and potential bidders.  
               It would likely result in an increase in UC's costs for  
               procuring services and could potentially limit the pool of  
               qualified bidders.  The Committee may wish to consider:

               What would be the impact on smaller businesses  
               (particularly those which are disadvantaged or minority  
               business enterprises, women business enterprises and  
               disabled veteran business enterprises) wishing to contract  
               with the UC?

               How would these provisions affect the efforts of the  
               University to respond to recent directives that the UC  
               minimize its administrative costs and operate more  
               efficiently in order to more cost effectively meet the  
               state's teaching and research needs?

          5)   Prior Legislation.  This bill is substantively similar to  
               SB 376 (Lara, 2015) which was heard and passed by this  
               Committee in April 2015, by a vote of 7-2. SB 376 was  
               subsequently vetoed by the Governor, whose message read, in  
               pertinent part:

                    "It's worth noting that the University of California  
               recently 
                    responded to criticisms of its wage and contracting  
               practices 
                    with a plan to incrementally increase its minimum wage  
                    for both employees and contract workers, and a pledge  
                    to better oversee 
                    contracts generally.

                    The effort to provide increased compensation to those  
               who work 
                    for UC - either directly or on a contract basis - is  
               well-intentioned, 
                    but I'm not prepared to embrace the provisions of this  
               bill.

                    I would caution the University, however, to provide a  
               transparent 








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                    accounting of its contracts and clearly demonstrate  
               how the 
                    interests of all its lower paid workers are being  
               protected."
               
               It is unclear whether the new provisions of this bill  
               respond to the Governor's message. 

            SUPPORT
          
          American Federation of State County and Municipal Employees
          California Federation of Teachers
          California Labor Federation
          California Teamsters Public Affairs Council




            OPPOSITION
           
           California Chamber of Commerce
          University of California

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