BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 959|
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VETO
Bill No: SB 959
Author: Lara (D), et al.
Amended: 8/15/16
Vote: 21
SENATE EDUCATION COMMITTEE: 7-2, 3/30/16
AYES: Liu, Block, Hancock, Leyva, Mendoza, Monning, Pan
NOES: Huff, Vidak
SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16
AYES: Lara, Beall, Hill, McGuire, Mendoza
NOES: Bates, Nielsen
SENATE FLOOR: 24-14, 6/1/16
AYES: Beall, Block, Cannella, De León, Galgiani, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara,
Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan,
Pavley, Roth, Wieckowski
NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Glazer,
Huff, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak, Wolk
NO VOTE RECORDED: Allen, Runner
SENATE FLOOR: 25-14, 8/30/16
AYES: Allen, Beall, Block, Cannella, De León, Galgiani, Hall,
Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara,
Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan,
Pavley, Roth, Wieckowski
NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Glazer,
Huff, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak, Wolk
ASSEMBLY FLOOR: 52-25, 8/18/16 - See last page for vote
SUBJECT: University of California: contracts: bidding
SB 959
Page 2
SOURCE: Author
DIGEST: This bill 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.
ANALYSIS:
Existing law:
1)Outlines the requirements and procedures for competitive
bidding at the UC. Existing law outlines requirements and
procedures, specifically for the acquisition of materials,
goods and services. (Public Contract Code § 10500, et seq.)
2)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 § 10507.7)
3)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 §10507.8)
4)Declares the intent of the Legislature to facilitate the
participation of small businesses, particularly small
disadvantaged or minority business enterprises, women business
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enterprises and disabled veteran business enterprises in
business contracting with the UC. (PCC § 10500.5)
This bill modifies the requirements for qualifying as a lowest
responsible bidder or best value awardee for contracts for
materials, goods, and services at the UC. Specifically, this
bill:
1)Establishes a number of new requirements for bidders.
Specifically, this bill:
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. In addition, it:
i) 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.
ii) 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.
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iii) Exempts public works projects conducted by public
agencies from these requirements.
b) Requires the UC to:
i) Include in its request for proposals a calculation
which considers the criteria outlined in 1) above.
ii) Use all known cost escalators in the calculation to
project the future rate of growth of average per-employee
total compensation costs.
c) 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.
d) 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.
2)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.
3)Makes findings and declarations that the UC has squandered
public resources via contracting out to for-profit private
contractors that charge significant administrative overhead.
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Comments
1)Need for the bill. According to the author, this bill seeks
to address the growing challenge to California of the use of
contingent workers to replace employees and the consequential
effect it has on wages and worker protections. This bill
requires the UC, when evaluating bids for contract work, to
evaluate the total employee compensation package and ensure
that it does not undercut wages and benefits of existing
university employees. According to the author, the UC serves
as an anchor institution in the market in which it operates,
and as a public institution, and the third-largest California
employer, should adopt and promote policies that respect its
employees and protect workers' rights.
2)Related study. According to a 2012 study by the UC Berkeley
Labor Center, Temporary Workers in California are Twice as
Likely as Non-Temps to Live in Poverty: Problems with
Temporary and Subcontracted Work in California, almost
one-quarter of a million people worked in the temporary help
services industry in California in 2010. These workers were
slightly younger, more likely to be female, less likely to be
white non-Hispanic, and less likely to have a high school
diploma or GED than the average non-temp worker. These
workers were also more susceptible to workplace illness and
injury, earned less than their non-temp counterparts, and were
less likely to get benefits. The report notes that lowered
wages mean that these workers 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 and making it difficult to enforce other
protections. The report also notes that these employment
relationships create downward pressure on wages.
3)UC's Fair Wage/Fair Work Plan. In July 2015, the UC adopted a
Fair Wage/Fair Work Plan. Under the Plan, the UC has
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established a minimum level of pay for employees to ensure
that all UC workers are provided a fair wage with a goal of
reaching a minimum wage of $15 per hour on October 1, 2017.
In addition, the UC reports that it is implementing annual
compensation audits and interim audits, paid for by the
contractor, to monitor wage and working conditions as well as
compliance with federal, state, and UC workplace laws and
policies for contracted employees working pursuant to
contracts entered into or renewed after October 2015. The UC
will also establish a phone hotline and central online system
to report complaints directly to the Office of the President.
In light of the activities already planned as part of the UC's
Fair Wage/Fair Work Plan, is this bill necessary?
4)Consequences? This bill increases the complexity of the
bidding process for both the UC and potential bidders. It
would likely result in an increase in UC's costs for procuring
services and could potentially limit the pool of qualified
bidders. The Legislature may wish to consider:
What would be the impact on smaller businesses
(particularly those which are disadvantaged or minority
business enterprises, women business enterprises and
disabled veteran business enterprises) wishing to contract
with the UC?
How would these provisions affect the efforts of the
University to respond to recent directives that the UC
minimize its administrative costs and operate more
efficiently in order to more cost effectively meet the
state's teaching and research needs?
Prior Legislation
SB 959
Page 7
This bill is substantively similar to SB 376 (Lara, 2015) which
was heard and passed by the Senate Education Committee in April
2015, by a vote of 7-2. SB 376 was subsequently vetoed by the
Governor, whose message read, in pertinent part:
It's worth noting that the University of California recently
responded to criticisms of its wage and contracting practices
with a plan to incrementally increase its minimum wage for
both employees and contract workers, and a pledge to better
oversee contracts generally.
The effort to provide increased compensation to those who work
for UC - either directly or on a contract basis - is
well-intentioned, but I'm not prepared to embrace the
provisions of this bill.
I would caution the University, however, to provide a
transparent accounting of its contracts and clearly
demonstrate how the interests of all its lower paid workers
are being protected.
It is unclear whether the new provisions of this bill respond to
the Governor's message.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
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
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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
performing additional bidding due to the bill's restrictions on
contract renewals or extensions.
SUPPORT: (Verified10/12/16)
American Federation of State, County and Municipal Employees,
Local 3299
California Federation of Teachers
California Labor Federation
California Teamsters Public Affairs Council
University of California Student Association
OPPOSITION: (Verified10/12/16)
Association of California Cities - Orange County
California Chamber of Commerce
Los Angeles Area Chamber of Commerce
Sacramento Metropolitan Chamber of Commerce
San Gabriel Valley Economic Partnership
SB 959
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Orange County Business Council
University of California
USCB, America, Inc.
GOVERNOR'S VETO MESSAGE:
I am returning Senate Bill 959 without my signature.
This bill seeks to bring wage and benefit parity to the
University of California's contracted workers in specific job
categories, such as custodial, clerical and food services,
and other services associated with the University's medical
enterprises.
Earlier this year, the author requested and the Legislature
approved a specific state audit of UC contracting practices
and contracted employees. As has been the case with prior
audits, this process will likely yield some number of
recommendations for change, and it would be prudent to await
the recommendations from the State Auditor before embarking
on the path prescribed by this bill.
While this audit is pending, I would strongly caution the
University to keep its spending in check, specifically as it
relates to the compensation of its highest wage earners-many
of whom already make hundreds of thousands of dollars more in
salary and benefits than the average UC employee or its
contracted workers in the aforementioned job categories.
Continuing to enrich the highest paid workers-and they are
workers for the public good-will only undermine UC's
essential argument that it can't afford parity policies such
as the one contemplated in this bill.
ASSEMBLY FLOOR: 52-25, 8/18/16
AYES: Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown,
Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper,
Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia,
Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,
SB 959
Page 10
Holden, Irwin, Jones-Sawyer, Levine, Linder, Lopez, Low,
McCarty, Medina, Mullin, O'Donnell, Quirk, Ridley-Thomas,
Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting,
Waldron, Weber, Williams, Wood, Rendon
NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang,
Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper,
Jones, Lackey, Maienschein, Mathis, Mayes, Melendez,
Obernolte, Olsen, Patterson, Steinorth, Wagner, Wilk
NO VOTE RECORDED: Roger Hernández, Kim, Nazarian
Prepared by:Lenin DelCastillo / ED. / (916) 651-4105
10/18/16 12:24:39
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