BILL ANALYSIS
AB 1086
Page 1
Date of Hearing: May 12, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
AB 1086 (Miller) - As Amended: May 4, 2009
SUBJECT : Public contracts: bids.
SUMMARY : Requires state and local government bid documents to
specify a time after award of a contract for the contractor to
submit a request to substitute materials, products, or services
on a public works project.
EXISTING LAW :
1)Prohibits a state agency, political subdivision, municipal
corporation, district, or public officer responsible for
letting a public works contract from drafting bid
specifications that limits the bidding to any one concern or
product, unless the specification is followed by the words "or
equal."
2)Requires that these bid specifications provide a period of
time prior to or after, or prior to and after, the award of
the contract to allow the contractor to submit data that
demonstrates that a product or services to be provided under
the contract is equal to the services or product identified in
the bid specification.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal.
COMMENTS :
Purpose of the bill . According to the author's office, "AB 1086
strengthens and reaffirms legislative intent behind Public
Contract Code Section 4300 known as the 'or-equal statute,' by
inserting legislative findings which clarify the intent of the
code section to encourage product and service development at a
decreased cost to taxpayers."
Background . Current law prohibits an entity letting a bid from
requiring public works bid specifications that require specific
brand materials 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
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substitute. The bid specifications must also provide a time
period prior to, after, or prior to and after, the award of a
contract, for a 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.
Prohibiting state or local governments from requiring
contractors to substantiate the appropriateness of an equal item
before the award of a contract hinders the governments' ability
to assess the contract's cost-benefits and whether substitute
items are feasible. This bill subsequently impacts an entity's
decision to award a contract and may inadvertently reduce public
transparency and cost savings. If contractors are allowed to
verify substitutions only after being awarded a contract at a
set dollar amount, they will receive the cost savings from
substituting contract items instead of passing those savings
onto taxpayers. The other potential effect is that a state or
local entity will be forced to negotiate with a contractor over
whether substitutions are appropriate after a contract is
awarded, which may be more time consuming and burdensome than
the full disclosure of information prior to awarding a contract.
An analogy of the effect of this bill would be the hire of an
employee prior to the determination or negotiation of services
that employee would provide.
In addition, the Federal Reinvestment and Recovery Act provides
a significant amount of funding for public works projects with
accountability and transparency measures that would be affected
by this bill, should it become law. These projects may require
specific materials to conform to federal safety standards that
may not, or be difficult to, substitute.
Support . According to the Engineering Contractors' Association,
"To help ensure that the 'or-equal clause' achieved its goals
for the public, the law was amended in 2001 to allow a
contractor up to 35 days after the award of the contract to
submit his documentation to the entity justifying that the
material or method was equal to or greater than that which was
specified in the Request For Proposal (RFP). In the end,
taxpayers have benefited tremendously by the reduced costs of
the construction of the public project due to Public Contract
Code (PCC) Section 3400.
"Unfortunately, while PCC Section 3400 has served the public
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well for many years, there is at least one local agency that
requires the receipt of 'or equal' submittals before bid day,
and provides that the only way to get approval is by the
issuance of an addendum to the bid package before bid day; thus
allowing every competitor the opportunity to take advantage of
the contractor's/manufacturer's ingenuity that allows it to
lower its bid!"
Oppose . According to the League of California Cities, "As a
local public agency, a city must accept the lowest responsible
bidder in public contracting agreements. Current law provides
important protections for public agencies given these
circumstances, but under AB 1086, cities would be required to
first award a contract and then negotiate with a contractor over
the acceptability of substitute critical components. In this
scenario, both the public agency and California taxpayer lose by
either having to accept a lower quality component, or pay an
additional expense for what should have been supplied in the
first place. Further, the negotiations to determine the
acceptability of 'equal' products after the award of contract
can be costly and will most assuredly delay project completion.
"The provisions of AB 1086 are especially troublesome given that
a public agency seeks to not only meet the criteria for the
given project, but also provide the best performance value for
the taxpayer's money by using the least expensive components
that can be viable for the lifespan of the project's intended
use. Under AB 1086, the bid could include components that will
fall short of these expectations and in turn cost cities, and
tax payers, much more in the long run."
According to the Special Districts Association, "Current law
forbids RFPs from requiring the use of a specific brand or trade
name unless the term 'or equal' is used. Contractors may
provide data that the 'or equal' product is as good as regular
products or methods before, before or after, or after awarding
of the bid. The May 4, 2009 amendments restrict the time frame
to apply to only after the awarding of the bid. This will
reduce transparency because it happens after the bid has been
awarded and may inadvertently lock local governments into using
a product or method that may turn out to costly."
Prior Legislation . AB 1442 (Pescetti), Chapter 267, Statutes of
2001, broadened the provisions of law governing a contractor's
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ability to submit information justifying the substitution of
products deemed to be equal to products specified in bids for
contracts with public agencies.
This bill specifically required a period of time prior to or
after, or prior to and after, the award of the contract for
contractors to submit data substantiating a request for a
substitution of ''an equal'' item.
AB 2084 (Miller), Chapter 857, Statutes of 1998, modified
numerous provisions relating to the laws governing public works
contracts. This bill specifically required a period of time
prior to the award of the contract for contractors to submit
data substantiating a request for a substitution of ''an equal''
item.
REGISTERED SUPPORT / OPPOSITION :
Support
Engineering Contractors' Association (sponsor)
California Fence Contractors' Association
Marin Builders' Association,
Flasher/Barricade Association
California Chapter of the American Fence Contractors'
Association
Opposition
California Association of Sanitation Agencies (CASA)
California Special Districts Association
League of California Cities
Analysis Prepared by : Joanna Gin / B. & P. / (916) 319-3301