BILL ANALYSIS
Bill No: AB
1086
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2009-2010 Regular Session
Staff Analysis
AB 1086 Author: Miller
As Amended: May 18, 2009
Hearing Date: June 23, 2009
Consultant: Chris Lindstrom
SUBJECT
Public contracts: bids.
DESCRIPTION
Makes findings and declarations that it is legislative
intent 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.
EXISTING LAW
Existing law 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."
Existing law 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.
AB 1086 (Miller) continued
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BACKGROUND
Purpose of the bill. According to the author's office,
"Public Contract Code 3400 is known as the 'or-equal
statute.' Its purpose is to give taxpayers the benefit of
contractor/manufacturer ingenuity that reduces the cost of
construction while providing the same functionality of the
product or construction method specified by the public
agency who is bidding-out the work. It does so by
encouraging ingenious contractors/manufacturers to bid jobs
at a lower price, in anticipation of getting their
ingenious or-equal product or method approved by a public
entity.
"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. In the
end, taxpayers have benefited tremendously by the reduced
costs of the construction of the public project due to
Public Contract Code Section 3400.
"Unfortunately, while Public Contract Code Section 3400 has
served the public 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."
"Ingenuity that leads to a lower bid is NOT an UNFAIR
advantage - it is a classic FAIR advantage. It is an
advantage that benefits society at-large by encouraging
ingenuity. It is an advantage that benefits taxpayers by
leading to lower prices for the same functionality. It is
exactly the kind of "good public policy" that we want
bidders to use to lower bids."
"AB 1086 strengthens and reaffirms legislative intent
behind Public Contract Code Section 3400 - the 'or-equal
statute,' by inserting legislative findings to clarify the
intent of the code section to encourage product and service
AB 1086 (Miller) continued
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development at a decreased cost to taxpayers."
Background. Current law provides the conditions under
which a public agency can issue 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.
Under current law, a state agency, political subdivision,
municipal corporation, district, or public officer
responsible for letting a public works contract is
prohibited from drafting bid in a manner that limits the
bidding, directly or indirectly, to any one specific
concern, or calling for a designated material, product,
thing, or service by specific brand or trade name unless
the specification is followed by the words "or equal" so
that bidders may furnish any equal material, product,
thing, or service.
Current law provides that contract specifications shall
provide a period of time after the award of the contract
for submission of data substantiating a request for a
substitution of "an equal" item. If no time period is
specified in the contract, data may be submitted any time
within 35 days after the award of the contract.
Arguments in support. Proponents argue that, "AB 1086 is a
much needed measure to clarify one of the threshold tenets
of the competitive bidding process. Providing an entity
with methods such as value engineering or products that
provide the same exact function at a lesser price go to the
foundation of the Public Contract Code. The entire purpose
of the competitive bid process is to provide the best value
to the taxpayer.
"The "or equal" statute guarantees that benefit. The
statute authorizes substitutions for products that have
better than or equal functions as the product required in
the bid specification. This ensures the bidding process is
open and competitive. The statute has the added benefit of
protecting taxpayers against sole source products and
services. Sole source contracting is highly susceptible to
fraud, favoritism, and cronyism."
AB 1086 (Miller) continued
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PRIOR/RELATED LEGISLATION
SB 110 (Margett), Chapter 233, Statutes of 2003 . Specifies
the conditions under which a public agency can issue 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 1442 (Pescetti), Chapter 267, Statutes of 2001 .
Broadened the provisions of law governing a contractor's
ability to submit information justifying the substitution
of products deemed to be equal to products specified in
bids for contracts with public agencies. 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.
SUPPORT : As of June 19, 2009:
Associated General Contractors
California Chapter of the American Fence Contractors'
Association
California Fence Contractors' Association
California State Council of Laborers
Engineering & Utility Contractors Association
Engineering Contractors' Association (sponsor)
Flasher/Barricade Association
Marin Builders' Association
Southern California Contractors Association
OPPOSE : None on file as of June 19, 2009.
DUAL REFERRAL : Senate Judiciary Committee
FISCAL COMMITTEE : No.
AB 1086 (Miller) continued
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