BILL ANALYSIS                                                                                                                                                                                                    






           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                        SB 959|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 


                                   THIRD READING 


          Bill No:  SB 959
          Author:   Lara (D) 
          Amended:  5/31/16          
          Vote:     21 

           SENATE EDUCATION COMMITTEE:  7-2, 3/30/16
           AYES:  Liu, Block, Hancock, Leyva, Mendoza, Monning, Pan
           NOES:  Huff, Vidak

           SENATE APPROPRIATIONS COMMITTEE:  5-2, 5/27/16
           AYES:  Lara, Beall, Hill, McGuire, Mendoza
           NOES:  Bates, Nielsen

           SUBJECT:   University of California:  contracts:  bidding


          SOURCE:    Author

          DIGEST:   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 five 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.  


          ANALYSIS:  









                                                                     SB 959  
                                                                    Page  2



          Existing law:


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


          2)Requires the UC to let any contract involving an 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)


          3)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) 


          4)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)


          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 UC.  Specifically, this  
          bill:


          1)Establishes a number of new requirements for bidders.   
            Specifically, this bill:


             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 five percent,  
               the average per-employee value of total compensation for  







                                                                     SB 959  
                                                                    Page  3


               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 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  







                                                                     SB 959  
                                                                    Page  4


               Issued by the Industrial Welfare Commission for specified  
               amounts, within the prior five years. 


             d)   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.  


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


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


             e)   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.


             f)   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)Makes, beginning January 1, 2018, the $100,000 threshold for  
            competitive bidding of contracts for goods, materials and  







                                                                     SB 959  
                                                                    Page  5


            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. 


          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  
            requires 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  
            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  







                                                                     SB 959  
                                                                    Page  6


            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?


          4)Consequences?  This bill increases 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 Legislature 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?







                                                                     SB 959  
                                                                    Page  7




          Prior Legislation


          This bill is substantively similar to SB 376 (Lara, 2015) which  
          was heard and passed by the Senate Education 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 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. 




          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


          According to the Senate Appropriations Committee, the UC  
          estimates that this bill would increase contract costs at each  
          campus and medical center totaling in the high tens of millions  
          due to requirements that would likely drive increased salary and  







                                                                     SB 959  
                                                                    Page  8


          benefit costs for bidders.  Actual costs are unknown and would  
          depend upon a number of factors, among them being, vendor  
          employee compensation data as well as similar detailed data  
          pertaining to UC employees to determine the difference in total  
          compensation for UC employees for similar work.  The UC also  
          estimates significant administrative costs to comply with this  
          bill's requirements for activities that could fluctuate from  
          year to year, but could be in the mid to high hundreds of  
          thousands initially.  




          SUPPORT:   (Verified  5/27/16)


          American Federation of State, County and Municipal Employees,  
          Local 3299


          OPPOSITION:   (Verified  5/27/16)


          None received



          Prepared by:Kathleen Chavira / ED. / (916) 651-4105
          5/31/16 21:31:39


                                   ****  END  ****