BILL ANALYSIS                                                                                                                                                                                                    Ó

                                                                     SB 959

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          959 (Lara)

          As Amended  August 15, 2016

          Majority vote

          SENATE VOTE:  24-14

          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |Higher          |10-3 |Medina, Bloom, Irwin, |Baker, Chávez,      |
          |Education       |     |                      |Olsen               |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |Jones-Sawyer, Levine, |                    |
          |                |     |Linder, Low,          |                    |
          |                |     |Santiago, Weber,      |                    |
          |                |     |Williams              |                    |
          |                |     |                      |                    |
          |Accountability  |6-2  |Cristina Garcia,      |Lackey, Beth Gaines |
          |                |     |Burke, Frazier,       |                    |
          |                |     |Irwin, Medina,        |                    |
          |                |     |Rodriguez             |                    |
          |                |     |                      |                    |
          |Appropriations  |14-5 |Gonzalez, Bloom,      |Bigelow, Gallagher, |


                                                                     SB 959

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          |                |     |Bonilla, Bonta,       |Jones, Obernolte,   |
          |                |     |Calderon, Daly,       |Wagner              |
          |                |     |Eggman, Eduardo       |                    |
          |                |     |Garcia, Holden,       |                    |
          |                |     |Quirk, Santiago,      |                    |
          |                |     |Weber, Wood, McCarty  |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |

          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 5%, 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  

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

          2)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 5%, the average  
               per-employee value of total compensation for employees at  


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               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  

             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.

          3)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.


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          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)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.

          6)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.).

          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).


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          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  

          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 Assembly Appropriations  
          Committee, UC estimates that its total annual spending on  
          service contracts of the types that would be subject to the  
          provisions of this bill is $345 million, with just over one half  
          of this amount representing contracts at UC's 10 campuses and  
          the remainder representing contracts at UC's five medical  
          centers.  Of this total, an estimated 60% ($207 million)  
          constitutes labor costs.  Assuming a 30% increase in costs  
          related to providing parity in benefits and a 12.5% increase in  
          costs related to wage parity, total annual costs would be $88  
          million.  These costs will come from a variety of UC fund  
          sources, including the State General Fund, federal funds,  
          auxiliary funds, and enterprise funds, such as funds from the  
          medical centers.

          In addition to increased contract costs, UC will incur  
          administrative costs of several hundred thousand dollars to  
          calculate average per-employee compensation for every type of  
          contract and to factor in all known cost escalators to project  
          future per-employee costs.  There will be additional  
          administrative costs, likely in the millions of dollars over  
          time, associated with revising contract bid specifications,  
          maintaining information provided by prospective and successful  
          bidders for potential Public Records Act requests, and  


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          performing additional bidding due to the bill's restrictions on  
          contract renewals or extensions 

          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  
          in poverty, receive food stamps, and be on Medicaid.  The report  
          finds that temporary and subcontracted employees earned roughly  
          18% less than equivalent non-temporary employees of the same  


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          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  

          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  


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          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 bill.

          Analysis Prepared by:                                             
                          Jeanice Warden / HIGHER ED. / (916) 319-3960   
          FN: 0004033