BILL ANALYSIS                                                                                                                                                                                                    

                                                                     SB 959

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          Date of Hearing:   June 29, 2016


                               Cristina Garcia, Chair

          959 (Lara) - As Amended May 31, 2016

          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).  Specifically, this bill:  

          1)Establishes a number of new requirements for bidders,  

             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;


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             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  

             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;  

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

          2)Requires the UC to:  

             a)   Include in its request for proposals a calculation which  
               considers the criteria as specified in number 1) above;  

             b)   Use all known cost escalators in the calculation to  
               project the future rate of growth of average per-employee  
               total compensation costs.

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


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             a)   Spreadsheets showing all applicable compensation and  
               benefits, as specified, for each position and employee  
               supplied to the UC; 

             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.

          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 a successful bidder, once commencing work for the UC,  

             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.

          6)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  


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            complete, if applicable.

          7)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.

          8)Makes findings and declarations that the UC has squandered  
            public resources via contracting out to for-profit private  
            contractors that charge significant administrative overhead.

          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.).

          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  


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          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.  

          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:  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  


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          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."

          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," found that, in California, almost one-quarter of a  
          million people worked in the temporary help services industry in  
          2010.  The report notes 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  
          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  


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          create downward pressure on wages. 

          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."
          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  

          PRIOR LEGISLATION:  SB 376 (Lara), of 2015, which was vetoed by  
          the Governor, is very similar in nature to this measure.

          COMMITTEE CONCERNS:  The author may wish to consider  
          consolidating the significant list of compensation items that a  
          bidder must provide in spreadsheet form to the UC along with a  
          bid.  A possible solution might be reducing the compensation  
          categories to simply salary and wages, pensions, and benefits.




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          American Federation of State, County and Municipal Employees,  

          California Federation of Teachers

          California Labor Federation

          California Teamsters Public Affairs Council


          California Chamber of Commerce

          Los Angeles Area Chamber of Commerce

          Sacramento Metropolitan Chamber of Commerce

          San Gabriel Valley Economic Partnership

          Orange County Business Council

          University of California

          USCB, America, Inc.


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          Analysis Prepared by:William Herms / A. & A.R. / (916)