BILL ANALYSIS
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THIRD READING
Bill No: AB 1853
Author: Huffman (D), et al
Amended: 5/28/10 in Assembly
Vote: 21
SENATE GOVERNMENTAL ORG. COMMITTEE : 7-1, 6/29/10
AYES: Wright, Calderon, Florez, Negrete McLeod, Padilla,
Price, Yee
NOES: Harman
NO VOTE RECORDED: Denham, Oropeza, Wyland
ASSEMBLY FLOOR : 47-25, 6/2/10 - See last page for vote
SUBJECT : Public contracts: bid preferences: employee
health care
expenditures
SOURCE : State Building & Construction Trades Council of
California
DIGEST : This bill requires state agencies to provide a
two percent bid preference on public works contracts if the
bidder and subcontractors provide health care coverage to
employees.
ANALYSIS : Under 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 governs the solicitation, review and award of
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state contracts and establishes various programs and
preferences in public contract law designed to serve a
broad public purpose, such as preference for small
businesses, disabled veteran business enterprises (DVBE)
and recycled products. Existing law designates the
Department of General Services (DGS) to administer the
Small Business Procurement and Contract Act, including, but
not limited to, small business, microbusinesses and DVBE
certification processes.
The Small Business Procurement and Contract Act requires
the Director of DGS and the heads of other state agencies
that enter into contracts for the provision of goods,
services, and information technology and for the
construction of state facilities to establish goals for the
participation of small businesses in these contracts, to
provide for small business preference in the award of these
contracts, to give special consideration and special
assistance to small businesses, and, whenever possible, to
make awards to small businesses, as specified.
Existing law requires state agencies to give
"California-based" small businesses, as defined, a five
percent bid preference in contracts for construction, the
procurement of goods, or the delivery of services.
Existing law requires all employees who work on public
works projects with a budget of $1,000 or more to be paid
the general prevailing wage as determined by the Department
of Industrial Relations (DIR).
Under existing law, contracts awarded by state entities for
professional bond services, construction, and acquisition
of materials, supplies, and services are required to have
annual statewide participation goals of not less than 15
percent for minority-owned firms, five percent for
women-owned firms, and three percent for disabled
veteran-owned business enterprises. Contractors must
achieve these minimum participation goals or demonstrate
that they have made a "good faith effort" to achieve
participation. (These statutes have essentially been
rendered inoperative as a result of a United States Ninth
Circuit Court of Appeals decision - Monterey Mechanical v.
State of California .) Unaffected by that court order are
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contracting preferences for disabled veterans.
This bill:
1. Requires a state agency to provide a two percent bid
preference to the lowest responsible bidder if, during
the 12-month period immediately preceding submission of
the bid, the bidder, or subcontractor, provided
"credible health care coverage" to employees.
2. Provides that a bidder, or a subcontractor, that
employed individuals in California for more than three
months but fewer than 12 months immediately preceding
submission of the bid qualifies for the bid preference
if, during that timeframe, the bidder or subcontractor,
provided credible health care coverage.
3. Requires a winning bidder, or subcontractor, to provide
credible health care for each employee for at least one
year following a bid acceptance; failure to do so will
result in payment to the state agency of an amount equal
to twice the cost that the bidder, or subcontractor,
would have incurred for health care, if it had complied
with this provision. Also, makes it explicit that a
bidder shall not be liable for a subcontractor's failure
to comply with this provision.
4. Allows a bidder to claim an employee health care
expenditure bid preference by submitting separate
statements from the bidder and subcontractors certifying
qualification, and requires DGS to work with DIR to
develop a form for this purpose. Also, establishes
penalties of a minimum amount of $2,500 and a maximum
amount of $25,000 against contractors who falsify
information in the certification.
5. Provides that, if a winning bidder is denied the
employee health care expenditure bid preference because
of the subcontractor's failure to do so, the bidder is
allowed 14 days to find an acceptable substitute
subcontractor.
6. Defines "credible health care coverage" to mean any
group policy, contract, or program that is written or
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administered by a disability insurer, health care
service plan, fraternal benefits society, self-insured
employer plan, or any other entity, in this state or
elsewhere, and that arranges or provides medical,
hospital, and surgical coverage not designated to
supplement other private or governmental plans.
7. Stipulates that this bill shall become operative on
January 1, 2012, and shall not apply to any contract
advertised for bid on or after January 1, 2017
(five-year sunset).
Background
Purpose of this bill . The Legislature has recently
explored a variety of policy proposals to extend or
increase health coverage to workers who are either
under-covered or uninsured. A primary reason for these
initiatives is the decline of employer-provided health
insurance, as well as the increase in state-based
healthcare costs due to the increase of individuals
requiring state subsidized healthcare. Although many
employees working on public works jobs covered by
prevailing wage determinations will be well compensated,
their ability to purchase health plans for their families
can be outstripped by the increase in the costs of health
insurance premiums, particularly when purchasing these
plans as individuals.
A study by the University of California, Berkeley Center of
Labor Research and Education found that, between 2000 and
2004, there were average annual increases of 11 percent in
insurance premiums. This study found that for every
premium increase of 10 percent, 910,000 adults and 442,000
children would lose employer-based coverage - increasing
the number of uninsured individuals by 817,000 and the
number of people on publicly subsidized health plans by
380,000.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
ARGUMENTS IN SUPPORT : This bill, sponsored by the State
Building and Construction Trades Council of California, is
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intended to provide an incentive for bidders on state
contracts who provide health care benefits for their
employees. The sponsor notes that "working families with
incomes of more than $50,000 a year now make up more than a
third of the uninsured population" in California. Given
the increased burden placed on public health care programs,
by maintaining employer-based health care, this bill is
intended to reduce the number of families who become
dependent on these programs.
ARGUMENTS IN OPPOSITION : Opponents recognize that too
many workers in the construction industry remain uninsured
however they note that recent enactment of federal health
care reform should help eliminate the problem.
Opponents contend that this bill creates an unfair
advantage for certain contractors and subcontractors in the
bidding process, increase costs to government, and
disadvantage those employers who cannot afford to provide
health care coverage. Opponents also contend that they are
already making a significant contribution to employee
healthcare due to the fact that all contractors on public
works projects are required to pay "prevailing wage" which
includes a portion of the wage rate as health and welfare.
Opponents also express concern with the fact that the bid
preference contained in this bill could inadvertently harm
the competitiveness of small contractors in California by
giving a new "uncapped" bid preference to large contractors
who already have the lion's share of public works
contracts. Opponents argue that "large construction
contractors, who for the most part already provide employee
health coverage, could, under this measure, submit higher
bids for projects knowing they would automatically capture
the 2% preference without incurring any additional
expenses."
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Bass, Beall, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Carter, Chesbro,
Coto, Davis, De La Torre, De Leon, Eng, Evans, Feuer,
Fong, Fuentes, Furutani, Hall, Hayashi, Hernandez, Hill,
Huber, Huffman, Jones, Bonnie Lowenthal, Ma, Mendoza,
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Monning, Nava, V. Manuel Perez, Portantino, Ruskin,
Salas, Saldana, Skinner, Solorio, Swanson, Torlakson,
Torres, Torrico, Yamada, John A. Perez
NOES: Adams, Anderson, Bill Berryhill, Blakeslee, Conway,
Cook, DeVore, Emmerson, Fletcher, Fuller, Gaines,
Garrick, Gilmore, Hagman, Harkey, Jeffries, Knight,
Logue, Miller, Niello, Nielsen, Silva, Smyth, Tran,
Villines
NO VOTE RECORDED: Tom Berryhill, Charles Calderon,
Galgiani, Lieu, Nestande, Norby, Audra Strickland,
Vacancy
TSM:mw 8/9/10 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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