BILL ANALYSIS Ó ----------------------------------------------------------------- |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 ****