BILL ANALYSIS
Bill No: AB
635
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
AB 635 Author: De La Torre
As Amended: August 5, 2010
Hearing Date: August 10, 2010
Consultant: Art Terzakis
SUBJECT
Public Contracts: roof projects
DESCRIPTION
AB 635 is an urgency measure that adds a new article to the
Public Contract Code to promote competition and enhance
bidding practices for the replacement or repair of roofing
projects for public schools, community colleges, state
universities, or any facility owned or operated by the
state. Specifically, this measure:
1. Stipulates that in order to promote competition,
specifications for any roofing project for any public
school, community college, state university or state
facility shall: (1) name a minimum of three separate
manufacturers that share no financial, partnership, or
subsidiary relationships, or interests, or shared product
lines, or (2) require performance standards that at least
three manufacturers have indicated, in advance of the
bidding period, the ability to comply with.
2. Makes it explicit that specifications requiring
proprietary products or a proprietary warranty may not be
included in specifications for a roof project if these
items would cost more than 10% more than for similar
projects utilizing open competitive bidding without a
requirement for proprietary products or a proprietary
warranty.
AB 635 (De La Torre) continued
Page 2
3. Provides that if a substitution is offered in a bid for
a roof project, the governing body (e.g., school
district, community college district, state university,
or state agency) shall require decisions on whether the
proposed substitution is "equal," to be made by an
independent architect, engineer, or roofing consultant
based on industry standards for performance
characteristics and any necessary generic industry
testing standards.
4. Provides that for any roofing project, a material,
product, thing, or service shall be considered "equal" if
it meets all the following requirements: (a) it's at
least equal in quality, durability, design, and
appearance but not necessarily of an identical color; (b)
it will perform the intended function at least equally
well; and, (c) it conforms substantially, even with
deviations, to the detailed requirements contained in the
specifications.
5. Provides the governing body must ensure and verify in
writing that an architect, engineer, or roofing
consultant develops the plans and specifications for a
roof project to ensure the project is designed to conform
to state codes and structural integrity and conformity
with existing law.
6. Requires financial disclosure on each roofing project
for state buildings and public schools of any financial
relationship between any manufacturers, contractors,
architects, engineers or consultants involved in the
project. This disclosure must be filed with the
governing body initiating the roofing project. Also
provides that any person who knowingly provides false
information and fails to disclose a financial
relationship shall be liable to the governing body for
any reasonable costs and also subject to a civil penalty,
as specified, in addition to any other available
remedies.
7. Provides a toll-free phone line, as specified, for
contractors and others to report bid rigging and to file
a complaint or request an investigation regarding
improper bidding and requires the governing body to
publish on its Internet Web site the specifications for a
roof project from the day those specifications are issued
until six months after the bid is accepted and awarded.
AB 635 (De La Torre) continued
Page 3
8. Specifies that the State Allocation Board, the Office
of Public School Construction and the Department of
General Services may provide educational programs,
information, or on-line material to school and state
government administrators to ensure they are adequately
informed regarding the statutory requirements for a fair
and transparent bidding process.
EXISTING LAW
Under existing law, the Department of General Services
(DGS) generally governs state procurement activities,
including acquisition of materials, supplies, and services.
Under existing law (the State Contract Act) and various
provisions in the Local Agency Public Construction Act,
state and local agencies awarding contracts are required to
award the contract to the lowest responsible bidder.
Existing law prohibits a state agency or political
subdivision of the state letting a bid from requiring
public works specifications that require specific brand
materials (sole-sourcing) or that limits bidding to one
material, product, or service, unless an "or equal" clause
is applied, allowing bidders to provide equal materials,
products, or services as a substitute. Existing law also
requires that the bid specifications provide a time period
prior to, after, or prior to and after, the award of a
contract for the contractor to submit data substantiating
that items are equal when requesting permission to use
substitutes. If no time period is specified, data may be
submitted any time within 35 days after the award of a
contract. (Public Contract Code Sec. 3400.)
Existing law provides for the State Allocation Board
(Board) which is responsible for determining the allocation
of state resources (proceeds from General Obligation Bond
Issues and other designated State funds) used for the new
construction and modernization of local public school
facilities. The Board is the policy level body for the
programs administered by the Office of Public School
Construction (OPSC).
The OPSC facilitates the processing of school applications
and makes funding available to qualifying school districts.
The OPSC is also charged with the responsibility of
AB 635 (De La Torre) continued
Page 4
verifying that all applicant school districts meet specific
criteria based on the type of funding which is being
requested. It is also incumbent on the OPSC staff to
prepare regulations, policies and procedures which carry
out the mandates of the Board, and to work with school
districts to assist them throughout the application
process. The OPSC is responsible for ensuring that funds
are disbursed properly and in accordance with the decisions
made by the Board.
BACKGROUND
Purpose of AB 635: According to the author's office, this
measure is the result of a lengthy investigation by the
Assembly Committee on Accountability and Administrative
Review (Committee) and a June 30, 2010 hearing that
uncovered evidence of consistent overcharging on school
roofing projects in amounts commonly between 30 and 100%.
The author's office notes that despite Public Contract Code
provisions that require competitive bidding in
publicly-funded construction, the Committee found
widespread efforts to limit competition in school roofing
projects throughout the state. The author's office points
out that in both large and small school districts,
community college districts and state universities,
proprietary specifications are used in bidding documents to
force contractors to use a specific roofing manufacturer's
products, even though there are more than a dozen roofing
manufacturers selling similar products in California.
The author's office contends that bidding documents
examined by the Committee for school re-roofing projects
throughout the state all limited roofing products to a
specific manufacturer and created significant hurdles for
any contractor attempting to substitute an alternative
product that could be similar in quality but at less cost.
The author's office emphasizes that roofing industry
officials, contractors and school district officials
interviewed by the Committee all suggested this limited
competition occurs routinely in numerous school districts,
community college districts and universities, and leads to
non-competitive bidding and higher prices.
School roofing projects are typically awarded to a
contractor with the lowest bid through a procurement
process set up by the purchaser. The author's office
AB 635 (De La Torre) continued
Page 5
points out that while the bidding processes that the
Committee reviewed indicated that multiple contractors bid
on these jobs, the contractors were often limited to the
products they could use by the specifications put forth by
the school district. Some contractors also could not bid
on certain jobs because they were not approved by the
manufacturer singled out for the project in the
specifications. It was found that such a process often
leads to inflated project costs amounting to 25 percent or
more. Industry officials who testified at the June 30th
hearing indicated that at least three roofing manufacturers
have specific business models aimed at subverting the
competitive bidding process. It was reported that sales
representatives from these roofing manufacturers provide
free consultations for the district officials, design
consultants or architects who do the construction planning
and procurement for schools. Additionally, the Committee
found that the manufacturers' representatives routinely
provided bidding documents with specifications favoring
their company. It was disclosed that school district
officials use these documents because they often lack
in-house roofing expertise.
According to the author's office, this measure is intended
to provide additional tools and requirements to deter such
activity without taking the decision-making authority away
from state entities or school districts regarding what
products to use. Specifically, this measure would require
active financial disclosure on each roofing project
(replacement or repair) for state buildings or public
schools of any financial relationships between any
manufacturer, contractor, architects, engineers or
consultants involved in the project. Additionally, AB 635
would require an independent licensed architect, engineer,
or certified roofing consultant to make decisions on
whether a proposed "or equal" product meets bid
specifications.
Arguments in Opposition: Writing in opposition, The
Garland Company, Inc., believes that this measure "will
ultimately increase the construction costs for California
schools and result in the installation of inferior roofing
products."
PRIOR LEGISLATION
AB 635 (De La Torre) continued
Page 6
AB 1086 (Miller), Chapter 132, Statutes of 2009. Codified
the intent of Public Contract Code Section 3400 to
encourage contractors and manufacturers to develop and
implement new and ingenious materials, products, and
services that function as well, in all essential respects,
as materials, products, and services that are required by a
contract, but at a lower cost to taxpayers.
SB 110 (Margett) Chapter 233, Statutes of 2003. Authorized
a bid specification of a certain product if the awarding
authority makes a finding that a particular material or
service is designated by a brand or trade name in order to
obtain a necessary item that is only available from one
source or to respond to a local or state declared
emergency.
AB 2666 (Mountjoy) 2001-02 Session. Identical to SB 110
(Margett) of 2003. (Held in Senate G.O. Committee at
author's request)
AB 1442 (Pescetti) Chapter 267, Statutes of 2001. Revised
certain provisions of the Public Contract Code so that the
restrictions on the manner of drafting bid specifications
would not apply if an awarding authority makes a finding
that a particular material or service is designated by a
brand name, either to make a field test or to match a
material or service in use on a particular public
improvement.
AB 2156 (Pescetti) Chapter 690, Statutes of 2000.
Required, with respect to state contracts, that if no time
period is specified, data substantiating a request for a
substitution of "an equal" item may be submitted by the
bidder 35 days after award of the contract.
SUPPORT: None on file as of August 6, 2010.
OPPOSE: The Garland Company, Inc.
FISCAL COMMITTEE: Senate Appropriations Committee
************
AB 635 (De La Torre) continued
Page 7