BILL ANALYSIS
SENATE JUDICIARY COMMITTEE
Senator Ellen M. Corbett, Chair
2009-2010 Regular Session
AB 1086
Assemblymember Miller
As Amended May 18, 2009
Hearing Date: July 7, 2009
Public Contract Code
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SUBJECT
Public Contracts: Bids
DESCRIPTION
This bill would make a legislative finding and declaration
stating that the intent of Section 3400 of the Public Contracts
Code is 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.
BACKGROUND
Section 3400 of the Public Contracts Code was enacted in 1983.
It forbids sole-sourcing of public works contracts, and requires
bid solicitations that contain specifications to add the phrase
"or equal" to the materials, products, or services specified, in
order to encourage competitive bidding among contractors.
Effective in 2002, the section was amended to extend its
application to local agencies, and language was added to require
that specifications provide a time period after the award (in
addition to the option of a time period prior to the award,
which was already the law at the time) for the contractor to
submit substantiation that the items to be used in the awarded
contract are "equal" to the specifications by the agency.
Currently, if the specification does not specify the time for
this substantiation of the "or-equal" materials, products, or
services, the contractor has up to 35 days after the award of
the contract to provide that substantiation.
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CHANGES TO EXISTING LAW
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. (Pub. Contract Code Sec. 3400.)
This bill would codify the intent of 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.
COMMENT
1. Need for the bill
The sponsor of AB 1086, the Engineering Contractors Association
states:
Public Contract Code Section 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 their documentation to the entity justifying
that the material or method was equal to or greater than
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that which was specified in the RFP. In the end,
taxpayers have benefited tremendously by the reduced costs
of the construction of public projects due to Code Section
3400.
2. Reaching back to declare legislative intent
According to the author, currently the provisions of Public
Contract Code Section 3400 have been ignored or violated by some
local government agencies. AB 1086, the author and the sponsor
say, provides language to clarify the legislative intent behind
Public Contract Code Section 3400, so as to help potential
lawsuits, and provide guidance to the courts, should such a case
arise.
This bill would take the unusual course of reaching back, 26
years later, to declare the intent of the statute. In any
litigation involving this statute, the court would look to the
intent of the Legislature at the time the statute and subsequent
amendments were enacted to determine its intent. Practically,
therefore, this intent language would affect only a claim of a
violation of the statute that occurs after the effective date of
this bill, which is January 1, 2010.
The language of the bill spells out the intent of Section 3400
to encourage bidders (contractors, manufacturers) to develop and
implement new and ingenious materials, products, and services
that function as well, in all essential respects, as those
required in a contract, but at a lower cost to the taxpayers.
It is undisputed that a lower bid that provides materials,
products, or services that equal or exceed that which is
contracted for is a good deal for the buyer of material,
products or services. It is the purpose, and end result, of
competitive bidding, which current Public Contract Code Section
3400 addresses.
Proponents argue that "while Public Contract Code Section 3400
has served the public well for many years, there is an
inconsistency in the administration of this code section. AB
1086 clarifies the importance of current law by clarifying the
importance of the 'or-equal' statute. This will assist all
agencies in the application of Section 3400." (Associated
General Contractors (AGC) California Chapter letter dated June
19, 2009.)
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Another supporter, the Southern California Contractors
Association states that "AB 1086 is a desperately needed measure
to clarify one of the founding tenets of the competitive bidding
process. Providing an entity with ingenious 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 competitively bid
process is to provide the best value for the taxpayer."
3. No changes to Section 3400
Except for the legislative finding and declaration of intent, AB
1086 makes no other changes to Public Contract Code Section
3400.
Earlier versions of the bill would have prohibited an agency
from requiring contractors to substantiate the appropriateness
of an "or equal" item before the award of a contract,
purportedly a practice prevalent in some local agencies. There
was opposition then from the League of California Cities and
Special Districts Association that argued that shifting the
substantiation of an or-equal bid to after the contract award
would benefit the pockets of the contractors, not the taxpayers.
The sponsors and the author believe that even just with the
intent language in AB 1086, encouraging and promoting innovation
and ingenuity resulting in reduced costs to the taxpayer, the
playing field will be leveled where some local agencies have
unfairly sole-sourced some contracts to favored manufacturers in
violation of Public Contract Code Section 3400, under the guise
of the "or-equal" provision.
Support : Southern California Contractors Association (SCCA);
California State Council of Laborers
Opposition : None Known
HISTORY
Source : Engineering Contractors Association; California Fence
Contractors' Association; Marin Builders' Association;
Flasher/Barricade Association; California Chapter of the
American Fence Contractors' Association (Sponsors)
Related Pending Legislation : None Known
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Prior Legislation : AB 1442 (Pescetti, Ch.267, Stats. 2001) See
Background.
Prior Vote :
Assembly Business and Professions Committee (Ayes 11, Noes 0)
Assembly Floor (Ayes 79, Noes 0)
Senate Governmental Organization Committee (Ayes 12, Noes 0)
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