BILL ANALYSIS
AB 701
Page 1
Date of Hearing: April 1, 2009
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
AB 701 (Fong) - As Amended: March 24, 2009
SUBJECT : School Districts: contracts: formal bids: notices
SUMMARY : Adds an additional requirement to the contracting
process that a school district must follow, by requiring a
district to post a notice calling for contract bids on the
district's Internet web site or through an electronic portal.
EXISTING LAW :
1)Requires the governing board of a school district letting a
contract for the purchase of goods or services above $50,000
in value to publish a notice calling for contract bids, at
least once a week for two weeks prior to the due date for such
bids, in a newspaper of general circulation in the district,
or if there is no such newspaper, then in some newspaper of
general circulation in the county.
2)Authorizes such notice calling for contract bids to also be
posted on the district's Internet web site or through an
electronic portal.
3)Requires such notice calling for contract bids to state the
work to be done or materials or supplies to be furnished, as
well as the time, place, and Internet web site where
information will be posted at the bid opening.
4)Authorizes a school district to accept a bid submitted either
electronically or on paper.
FISCAL EFFECT : Requires districts to provide a higher level of
service and thus creates state-mandated local costs that the
state would be required to reimburse.
COMMENTS : The author makes a clear statement summarizing the
public benefits that this bill intends to generate when he
states that, "Open competition promotes tax savings and reduces
the chances of favoritism." Full and fairly distributed
information lies at the heart of the competitive market model;
that market approach and the competition for school district
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contracts that will work to drive costs down for school
districts, and to eliminate the nepotism and cronyism that
historically plagued public contracts. To a large extent,
fostering competition, so as to reduce government contract costs
and thus benefit the state, is the goal of the contracting
procedures that the state requires of public entities.
The intent of this bill is to increase the potential pool of
aware bidders by requiring school districts to electronically
post bid notices for contracts exceeding $50,000 in value.
Contract bid notices are effectively announcements that the
school district will be accepting bids for a specific contract.
The new requirement proposed in this bill is in addition to the
current requirement that any contract bid notice be published in
a newspaper of general circulation; current law authorizes the
posting of electronic bid notices, but does not require it.
What are current district practices with respect to posting bid
notices? In the absence of firm data on district contract
practices, committee staff asked the question of education
advocates that represent school districts. The common elements
in the answers given were that districts:
1)Have a clear interest in posting their bid notices as widely
as possible in order to generate more competition for those
contracts,
2)Will use whatever means are available for distributing their
bid notices, including the use of a district "bidders list" (a
list of former bidders and firms wishing to bid in the
future), bidders lists made readily available to districts by
county and state governmental agencies, newspapers and other
print media, and district Internet web sites.
3)Post their bid notices on their own web sites; and in some
cases, push the bid notice via e-mail to vendors on the
bidders list or use other active electronic approaches.
4)Many districts do not feel that the required newspaper
notification results in a significant number of bids.
Will this bill result in wider electronic distribution of bid
notices? Since districts appear to both be using electronic
means to distribute bid notices and to feel that electronic
distribution serves their interests, it is unclear that a
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movement from the current authorization to the proposed mandate
would substantially increase the volume of bid notices posted on
the Internet. In other words, since electronic distribution
works, districts are already using it.
Is there an issue with Internet access created by this bill?
There does not appear to be an issue concerning school district
access to the Internet. According to the California Department
of Education, all but 31 of the state's 1,040 school districts
and county offices of education maintain their own Internet web
site; the remaining 31 are primarily very small districts.
Since very small school districts may not be letting many
contracts in excess $50,000, this may mean that nearly every
school district impacted by this proposal would have access to
an Internet web site upon which to post contract bid notices.
In most proposals related to electronic distribution of
information (e.g., school districts providing notices to parents
and guardians), however, the Legislature has indicated concern
regarding equal access to that information for all of the
intended recipients, rather than the providers; in the example
that would mean that the Legislature would question whether all
parents and guardians would have access to the Internet or to
electronic mail. In this bill the recipients of the contract
bid notices would be vendors with an interest in knowing about
opportunities to bid on school district contracts. Where there
still might be considerable questions about Internet access for
individual households, especially those with low incomes, there
should be less concern about businesses with an interest in
bidding on government contracts being able to access the
Internet or to otherwise receive an electronically transmitted
contract bid notice. In today's business environment, where
marketing, accounting, billing, correspondence, and submission
of bids is largely done electronically, it would be difficult
for a firm to function without the basic technology necessary to
access the Internet or receive electronic mail. In fact,
current law allows school districts to determine how they wish
to receive bids on contracts by allowing districts to receive
bids on paper or electronically; it is possible that some school
districts currently only accept electronic bids, and thus
effectively require vendors to have the technology that would be
required to receive electronic bid notices as well.
Does this bill have a fiscal impact on school districts or the
state? The primary concern that this proposal generates is that
the change from current law that allows Internet posting of bid
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notices to the proposed Internet posting requirement would
clearly create a state mandated local program; this is confirmed
by the fact that the Legislative Counsel Bureau has keyed the
bill to indicate that it does create a state mandated local
program. The change from being given an option to
electronically post bid notices to being required to post those
notices creates a requirement for a higher level of service or a
mandate on the local districts; since this mandate stems from
statutory change and not from requirements created by public
initiative or federal law, the local district costs of meeting
this mandate would be reimbursable by the state. Though the
author suggests that the administrative costs, and thus the
reimbursements, created by this change would be minor, that is
not clear. For example, if an average district uses a mid-level
information technology staff person to create and post these
notices, that staffer might earn $70,000 per year with a benefit
rate of something on the order of 33% (reasonable assumptions
for the position and for a school district). If that staff
person spends slightly over 20 hours per year on this work
(certainly a low estimate given the contract load in many large
and medium size districts), the cost to that average district
would approach $1,000 per year; in turn applying these costs to
over 1,000 school districts could easily push the annual cost of
reimbursements to one million dollars ($1,000,000) or beyond.
Should the Committee consider changing the current newspaper
noticing requirement on both fiscal and policy grounds? Though
the bill has been amended into its current version, the bill as
introduced eliminated the current newspaper noticing requirement
and instead added the Internet posting requirement. According
to the Legislative Counsel Bureau, that version of the bill did
not constitute a state mandated local program. This is
consistent with the Commission on State Mandates which states in
its Guide to the State Mandate Process that, "Proposed
parameters and guidelines [the document that the Commission uses
to guide the determination of the amount to be reimbursed to
school districts] must allow for an offset of any other
reimbursement received from federal or state government or other
non-local sources, including offsetting savings in the same
program as a result of the same statute(s) or executive order(s)
found to contain a mandate." In other words, the savings from
the elimination of the requirement to publish bid notices in a
newspaper would, in any calculation of the state's obligation to
reimburse local districts for this mandate, offset the
additional costs of posting the bid notices electronically.
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The Assembly Education Committee analysis of SB 1464 (Karnette),
the 2004 legislation that authorized posting of the contract
notice on the district's Internet web site or through an
electronic portal, said, "Allowing posting of bids on Web sites,
in addition to existing notice requirements in newspapers,
provides school districts and bidders the opportunity to become
comfortable with electronic bidding procedures using the latest
technology to advertise, open and post contractor proposals."
So the Legislature in 2004 foresaw the move to what was then
emerging, and is now current, technology by allowing and
inviting the electronic posting of bid notices.
The author has also raised a number of issues that are
problematic with respect to districts actions in posting bid
notices in newspapers, by stating, "Currently, school districts
can place public notice of bids in small, often overlooked
papers and fulfill their requirement for public notice.
Sometimes this can be done on purpose or other times there are
few apparent options."
The existence of these problems, especially when combined with
the general feeling of many school districts that newspaper
notifications do not result in a significant number of contract
bids, may suggest that a change in statute, from requiring that
bid notices be published in a newspaper of general circulation
to an authorization that those notices may be so published, may
not result in a loss in the number of bids submitted for school
district contracts. It should be noted, since wide distribution
of bid notices is in the best interests of each district, that
the authorization to publish notices in the newspaper would
allow districts, that have evidence that such notices generate
additional bids, to make the local decision to continue to so
publish those notices. At the same time school districts in
situations described by the author could choose to rely more on
Internet posting or other authorized means of noticing.
Should there be any requirement for noticing contract bids, or
should there be complete local choice on how to notify vendors
of contracting opportunities? As noted above, full and fairly
distributed information is what allows competition for contracts
to lower contract costs to school districts, ultimately lower
costs to the state, improve the quality of the bid proposals,
and continue to prevent a return to the nepotism and cronyism
that historically plagued public contracting processes.
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Ensuring that districts continue to widely distribute contract
bid notices is most easily done by requiring that distribution
to take place using whatever mechanism provides the widest
distribution at the lowest possible cost to the district.
Committee staff recommends statute allowing districts to publish
bid notices in any print or electronic publication, combined
with requiring districts to post the bid notice on its Internet
web site or other electronic site to be the best means of
accomplishing these goals.
Are there any technical problems that the bill has raised? A
technical statutory issue, that can be easily corrected, also
appears to create a problem with this bill. The author states
that, "School districts could utilize the California Uniform
Construction Cost Accounting Commission list of construction
trade journals, which is listed in Commission's Cost Accounting
Policies and Procedures Manual . This bill allows a school
district to mail, email or fax the notice to the construction
trade publications at no cost to the district." However, there
is no requirement or explicit authorization, regarding posting
bid notices in trade journals, created by this bill; there
appears to be no requirement or explicit authorization for this
activity by school districts in current law. Publication in a
trade or professional journal could, however, be authorized with
respect to a school district meeting state requirements on local
governments for placing a bid notice such that woman and
minority owned businesses would be aware of the notice or
meeting other general contracting requirements. Beyond this,
current law is ambiguous with respect to a school district's
authority to place a notice anywhere other than a newspaper of
general circulation or the district's Internet web site or an
electronic portal. Generally, under the Education Code school
districts have the authority to take action as long as it
furthers its educational purpose, is consistent with
requirements in the law, and is not prohibited by law. However,
school district contracting procedures are governed by the
Public Contracts Code, which does not share the permissive
nature of the Education Code; thus the lack of explicit
authority to post a notice anywhere other than a newspaper of
general circulation, the district's Internet web site, or an
electronic portal may mean that districts do not have the
authority to do so. This position, regarding the lack of
permissiveness, is supported by the authority granted in Public
Contracts Code that allows school districts to post the contract
notice on its Internet web site; the 2004 action of the
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Legislature to provide this authority suggests that the
Legislature felt that it was required to explicitly grant the
authority for this manner of noticing. Clearly any prohibition
on school districts from more widely publishing a contract
notice would not be in the best interests of public policy.
Committee staff recommends that this issue be clarified in
Committee amendments by authorizing a district to publish the
contract notice in any publication or electronic media,
including newspapers, trade journals, and Internet web sites.
Committee amendments: If this Committee chooses to pass this
bill, then Committee staff recommends the following amendments
to further the author's stated intent to "save school districts
money", while at the same time "ensuring the widest possible
pool of bidders."
1)Add the authority for school districts to publish or post
contract bid notices (for contracts in excess of $50,000) in
any newspaper, trade journal, Internet web site, or any other
print publication or electronic portal, and delete the
requirement that a school district publish a notice calling
for such contract bids, at least once a week for two weeks
prior to the due date for such bids, in a newspaper of general
circulation in the district, or if there is no such newspaper,
then in some newspaper of general circulation in the county.
2)Require a district that does not possess or maintain its own
web site to post such notices on a web site that it chooses,
and provide notice of that web site at least once a week for
two weeks following the district's choice of a web site, in a
newspaper of general circulation in the district, or if there
is no such newspaper, then in some newspaper of general
circulation in the county.
Previous legislation: AB 490 (Parra), vetoed in 2005, would have
required the notice calling for bids to be mailed to all
construction trade journals for the county or counties in the
attendance area of the district at least 30 calendar days before
the date of opening the bids, if the school district would
incur no publishing costs. SB 1464 (Karnette), Chapter 739,
Statutes of 2004, authorizes school districts to also publish
this notice for bids on the district's Web site or through an
electronic portal, and authorize these districts to accept bids
that were submitted either electronically or on paper. AB 2614
(Levine), vetoed in 2004, would have required the notice to
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include the Internet web site or place where bids will be
housed, posted and opened, and would have allowed a school
district to satisfy the notice requirement by publishing this
information once a week for 2 weeks on the school district's Web
site or through an electronic portal; also would have required
all bids to be opened at the same time and place, and to the
extent possible, on the date designated on the public notice.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees,
AFL-CIO
California Legislative Conference of the Plumbing, Heating and
Piping Industry
National Electrical Contractors Association (California chapter)
State Building and Construction Trades Council (Sponsor)
Opposition
None on file
Analysis Prepared by : Gerald Shelton / ED. / (916) 319-2087