BILL ANALYSIS Ó
SB 959
Page 1
SENATE THIRD READING
SB
959 (Lara)
As Amended August 15, 2016
Majority vote
SENATE VOTE: 24-14
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|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 | |
| | | | |
| | | | |
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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
bill:
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,
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 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
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.
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.
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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
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 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
recommendations.
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