BILL ANALYSIS
AB 2448
Page 1
Date of Hearing: May 4, 2010
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Marty Block, Chair
AB 2448 (Furutani) - As Amended: February 19, 2010
SUBJECT : Public contracts: community college districts:
purchases.
SUMMARY : Authorizes a California Community College district
(CCCD) to award contracts for supplies and materials over
$50,000 to the bidder offering the best value at the lowest
cost. Specifically, this bill :
1)Defines "best value at lowest cost acquisition" as a
competitive procurement process where the award of a contract
for supplies and materials takes into consideration factors
such as the total cost or the operational cost or benefit to
the CCCD, the value of vendor-added services, the quality and
innovation of supplies and materials, the reliability of the
vendor's schedule, product warranties and vendor guarantees,
financial stability and quality assurances of the vendor,
vendor experience and prior consistency, and the economic
benefits to the general community including job creation.
2)Provides that when a CCCD determines that it can expect
long-term savings through the use of life-cycle cost
methodology, through the use of more sustainable products and
through reduced administrative costs, the CCCD may purchase
supplies and materials over $50,000 by contract let in
accordance with best value at the lowest cost acquisition
policies adopted by the CCCD governing board.
3)Requires that best value at lowest cost acquisition policies
consider price and service level proposals that reduce the
CCCDs overall operating costs, supply and material standards
that support the CCCDs strategic acquisition and management
program direction, procedures for protest and resolution, and
life-cycles of no fewer than three years.
4)Requires the award of a contract be made to the vendor
determined by the CCCD to be the best value to the CCCD, and
requires the CCCD to issue a written notice of intent to award
the contract stating in detail the basis of the award.
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5)Requires the CCCD to publicly announce the winning contractor,
the winning contractor's price proposal and the factors used
to evaluate the bids, the contractor's rating based on the
evaluation factors, and a summary of the rationale for the
contract award.
6)Requires CCCDs to ensure a fair and equitable opportunity to
compete for, and participate in, CCCD contracts, and to ensure
against discrimination in the award and performance of
contracts.
7)Requires a CCCD that elects to purchase supplies and materials
through the best value acquisition policies to submit a
report, as outlined, to the Legislative Analyst's Office (LAO)
by January 1, 2015. Requires the LAO to report to the
Legislature on the use of best value acquisition policies by
CCCDs by April 1, 2015.
8)Sunsets all of the aforementioned provisions on January 1,
2016.
9)Allows the governing board of a CCCD to authorize a contractor
to proceed with one or more changes or alterations to a
contract without securing bids if the cost of all changes or
alterations does not exceed defined amounts.
EXISTING LAW :
1)Requires a CCCD to let any contract involving an expenditure
of more than $50,000 for purchases of equipment, materials,
supplies, repairs, and services, other than construction
services, to the lowest responsible bidder or to reject all
bids.
2)Requires any single change or alteration in certain contracts
with a CCCD to be in writing, and allows the governing board
of the CCCD to authorize the contractor to proceed without
securing bids if the cost does not exceed 10% of the original
contract price.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by
Legislative Counsel; however, the Assembly Appropriations
Committee has requested to hear this bill.
COMMENTS : Purpose of this bill : The author seeks to help CCCDs
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maximize their resources by modifying contracting provisions as
follows:
1)Best value: According to the author, lowest price does not
always guarantee cost effectiveness, and it does not account
for what may be the most advantageous for a CCCDs needs.
CCCDs need the authority to make assessments based on criteria
in addition to price, accounting for the quality and longevity
of a product, for example that will lead to the best value
ultimately for the CCCD's investment.
2)Change orders: According to the author, current law needs to
be clarified to allow CCCDs to proceed with a change or
alteration without securing bids as long as the combined total
value of the changes does not exceed 10% of the original
contract price. For example, if one change order is valued at
5% greater (+5) than the original contract price and another
is valued at 5% less (-5), the 10% threshold would not have
been met.
Use of best value in California : Best value contracting has
generally been recognized as a viable alternative for
construction projects. Rather than awarding contracts based
upon a "lowest-cost" approach, best value in contracting allows
projects to be awarded to the contractor offering the best
combination of price and qualifications. In California, the
design-build construction method combines the requirements for
designing and constructing a project into one contract. The
contract is awarded to the design-build team with the best
value.
Best value contracting has also been used for the acquisition of
technology and related equipment. Since 2006, school districts
have been granted authority to procure bids for the acquisition
of computers, software, telecommunications equipment, microwave
equipment, and other related electronic equipment through
"competitive negotiation" designed to ensure contracts are
awarded based on proposals that are most advantageous in terms
of price as well as other factors. Additionally, SB 2009 (L.
Greene Chapter 144, Statutes of 1998) authorized municipal
utility districts (MUDs) serving more than 250,000 customers to
use "best value" procurements until January 1, 2006 to acquire
information technology (IT) and industry-specific equipment.
It appears that only one sector of state government is currently
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authorized to use best value contracting for the acquisition of
goods and services. AB 793 (Cox, Chapter 665, Statutes of 2001)
authorized MUDs to use best value procurement for individual
supplies and materials purchases over $50,000 until 2007. In
2006, the Sacramento Municipal Utility District (SMUD) reported
that since 1999 it had awarded 34 contracts, collectively worth
over $35 million, using the "best value" method. For 13
contracts totaling $27 million, SMUD attributed $8 million in
financial benefits to the use of a best value procurement
process. SB 1169 (Cox, Chapter 248, Statutes of 2006) made the
law permanent for MUDs that used the process before January 1,
2006, and provided that any MUD subsequently electing to use the
process submit a specified report to the LAO on or before
January 1, 2011. Under the law, if best value contracting is
not utilized by a MUD during this time period, the authority to
do so expires on January 1, 2012.
LAO findings relative to MUDs use of best-value : AB 793
required MUDs electing to use the best value procurement method
to submit a report to LAO and required the LAO to report to the
Legislature on the method's use. LAO found that while low cost
purchasing still has an important role in government purchasing,
getting the best value for a product or service does not always
mean choosing the lowest bidder. LAO also noted that an
organization must make the up-front investment necessary to
support best value procurements; procurement managers must
ensure staff are properly trained on the process and must help
their staff develop requirements that promote the organization's
strategic goals. LAO noted that, early on, best value
procurements can be time-consuming and cumbersome as bid
evaluation criteria are developed, but that with repeated use,
agencies can perform best value procurements with a similar
level of effort as traditional procurements. According to LAO,
based on the limited experience to date, best value procurement
authority appears to provide MUDs with an important tool.
Potential fiscal impact : According to the author, the Los
Angeles Community College District (LACCD) expects to spend more
than $100 million to purchase necessary furniture, fixtures, and
equipment. LACCD anticipates approximately $1 million in
savings due to reduced administrative costs through the best
value procurement method authorized by this bill. LACCD
indicates additional savings could be realized in better
life-cycle costs and reduced costs for disposal of items.
Additionally, LACCD estimates that the clarification for change
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orders could save an estimated 10% in administrative costs.
As previously noted in this analysis, Legislative Counsel has
keyed this bill non-fiscal. However, Assembly Appropriations
Committee has requested to hear this bill. While supporters
note that best value procurement will result in savings over the
long term, LAO points out that the initial cost of developing
evaluation criteria and reviewing contracts will potentially
result in increased costs to the state.
Prior legislation : AB 2550 (Furutani, 2008) was substantially
similar to this bill. AB 2550 was approved by the Legislature
and subsequently vetoed by the Governor. In his veto message,
the Governor noted concerns that the legislation could allow
subjective methods to govern the bidding process for procurement
of supplies and materials with a relatively short life-cycle,
which could be more open to manipulation and abuse in the bid
selection process. To address these concerns, the author added
a provision to this bill that requires best value acquisition
policies to consider a life-cycle of no fewer than three years.
REGISTERED SUPPORT / OPPOSITION :
Support
Community College League of California
Kern Community College District
Los Angeles Community College District
Mt. San Jacinto Community College District
San Jose-Evergreen Community College District
West Kern Community College District
Yosemite Community College District
Opposition
None on File
Analysis Prepared by : Laura Metune / HIGHER ED. / (916)
319-3960