BILL ANALYSIS                                                                                                                                                                                                    



                                                                     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