BILL ANALYSIS Ó
SB 959
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Date of Hearing: June 21, 2016
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Jose Medina, Chair
SB
959 (Lara) - As Amended May 31, 2016
[Note: This bill is doubled referred to the Assembly
Accountability and Administrative Review Committee and will be
heard as it relates to issues under its jurisdiction.]
SENATE VOTE: 24-14
SUBJECT: University of California: contracts: bidding.
SUMMARY: 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. Specifically, this
bill:
1)Makes findings and declarations that the UC has squandered
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public resources via contracting out to for-profit private
contractors that charge significant administrative overhead.
2)Establishes a number of new requirements for bidders,
including:
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
employees at the UC who perform comparable work at the
relevant campus, medical center, or laboratory, where the
proposed work will be performed;
b) 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;
c) 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;
and,
d) Exempts public works projects conducted by public
agencies from these requirements.
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3)Requires the UC to:
a) Include in its request for proposals a calculation which
considers the criteria as specified in number 1) above;
and,
b) Use all known cost escalators in the calculation to
project the future rate of growth of average per-employee
total compensation costs.
4)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 five years.
5)Requires the bidder to provide the following to the UC:
a) Spreadsheets showing all applicable compensation and
benefits, as specified, for each position and employee
supplied to the University;
b) An organization chart showing the bidder's supervisory
structure; and,
c) Any applicable collective bargaining agreements and all
employee handbooks applicable to the contracted employees.
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6)Requires a successful bidder, once commencing work for the UC,
to:
a) Notify the UC of any changes to the information provided
within 30 days of the change, as specified; and,
b) 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.
7)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.
8)Makes, beginning January 1, 2018, 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.
EXISTING LAW:
1)Outlines the requirements and procedures for competitive
bidding at the UC; and, outlines requirements and procedures,
specifically for the acquisition of materials, goods, and
services (Public Contract Code (PCC) Section 10500, et seq.).
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2)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 Section 10500.5).
3)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 Section
10507.7).
4)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 Section 10507.8).
FISCAL EFFECT: According to the Senate Appropriations
Committee, the UC estimates that this bill would increase
contract costs at each campus and medical center resulting in
costs in the high tens of millions due to its requirements that
would likely drive increased salary and benefit costs for
bidders to demonstrate that employees are compensated at a level
not less than five percent of those employed by the UC who
perform comparable work. Costs that would have more of a direct
state cost pressure would likely be impacts to campus contracts,
which comprise slightly more than half of this cost estimate
(about $47 million). However, these costs are likely to be
comprised of a variety of fund sources outside of UC's core
budget. 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.
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Additionally, the UC also estimates significant administrative
costs that are unknown, to comply with the bill's requirements
for activities that could fluctuate from year to year, but could
be in the hundreds of thousands.
COMMENTS: Purpose of this measure. According to the author,
"Between 2009 and 2014, job growth in contingent or contract
employment has grown at more than nine times the rate of
traditional employment, according to the Bureau of Labor
Statistics. This trend has been especially evident at the
University of California-the state's third largest
employer-where, despite dramatic growth in both students and
facilities, the number of directly employed service workers has
actually declined during this period."
The author contends that this measure will ensure that the UC
"evaluates the total employee compensation package of bids for
contract work to ensure that employment that is contracted out
to contingent workers does not undercut the value of existing
university employees."
Background. According to a 2012 UC Berkeley Labor Center
report, entitled, "Temporary Workers in California are Twice as
Likely as Non-Temps to Live in Poverty: Problems with Temporary
and Subcontracted Work in California," in California almost
one-quarter of a million people worked in the temporary help
services industry in 2010. The report finds that temporary and
subcontracted workers on a whole, are more likely to be female,
less likely to be white non-Hispanic, and less likely to have a
high school diploma or equivalency certificate than the average
non-temporary employee.
Additionally, the report finds that temporary and subcontracted
employees are twice as likely as non-temporary employees to live
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in poverty, receive food stamps, and be on Medicaid. The report
finds that temporary and subcontracted employees earned roughly
18 percent less than equivalent non-temporary employees of the
same age, gender, and ability.
The report also finds that temporary and subcontracted employees
were also more susceptible to workplace illness and injury, and
were less likely to get benefits. The report notes that lowered
wages mean that temporary and subcontracted employees 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; making it difficult to enforce other protections.
Lastly, the report finds that these employment relationships
create downward pressure on wages.
Joint Legislative Audit Committee (JLAC) actions. During the
May 25, 2016 JLAC hearing, the Committee approved an audit
request by Senator Ricardo Lara to, among others, have the
California State Auditor conduct an audit of UC contracting
policies and processes and comparisons of compensation and
benefits of UC employees versus contract employees.
The State Auditor estimates that said audit will require
approximately 3,240 hours of audit work. Upon completion of the
audit, a report will be issued that presumably will have policy
recommendations.
Committee consideration. Knowing that an audit will be
conducted as it pertains directly to the subject and contents of
this measure, the Committee may wish to determine if it is
prudent for this measure to be acted upon prior to the release
of the audit findings.
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Arguments in support. The American Federation of State, County
and Municipal Employees, AFL-CIO, contends that, "If enacted,
this bill would help to stem the troubling and growing trend of
depressed wages and labor abuse among contracted out workers, by
requiring California's third-largest employer, the University of
California, to hold contract labor firms accountable around
compensation and treatment of workers."
Arguments in opposition. The UC contends that the UC's contract
partners will be greatly impacted by this measure due to the
prescriptive reporting requirements. Additionally, the UC
states, "SB 959 significantly undermines the University's
ability to achieve administrative cost savings that could be
directed to the University's core missions of teaching,
research, and public service."
Related legislation. SB 376 (Lara), of 2015, which was vetoed
by the Governor, is very similar in nature to this measure.
REGISTERED SUPPORT / OPPOSITION:
Support
American Federation of State, County and Municipal Employees,
AFL-CIO
California Labor Federation
California Teamsters Public Affairs Council
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Opposition
Association of California Cities - Orange County
California Chamber of Commerce
Chambers of Commerce Alliance, Ventura and Santa Barbara
Counties
Orange County Business Council
University of California
USCB, America, Inc.
Analysis Prepared by:Jeanice Warden / HIGHER ED. / (916)
319-3960