BILL ANALYSIS
SENATE COMMITTEE ON EDUCATION
Gloria Romero, Chair
2009-2010 Regular Session
BILL NO: AB 2448
AUTHOR: Furutani
AMENDED: May 24, 2010
FISCAL COMM: No HEARING DATE: June 30, 2010
URGENCY: No CONSULTANT:Kathleen Chavira
SUBJECT : Public contracts: Community college districts.
KEY POLICY ISSUE
Should community colleges be authorized to use best value
contracting for the purchase of supplies and materials?
SUMMARY
This bill, until January 1, 2016, authorizes a community
college district to let any contract for expenditures
greater than $50,000 for the purchase of supplies and
materials in accordance with "best value at the lowest cost
acquisition" policies as adopted by the local governing
board, and clarifies existing law regarding the authority
of a community college governing board to authorize changes
or alterations to a contract without securing bids for
those changes/alterations.
BACKGROUND
Current law requires a community college governing board to
let any contract involving an expenditure of $50,000 or
more for purchase of equipment, materials, supplies repairs
and services, other than construction services, to the
lowest responsible bidder or to reject all bids. (Public
Contract Code 20651)
Current law also requires that changes or alterations to a
contract, and the associated costs, be specified in
writing, and authorizes a community college governing board
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to authorize a contractor to proceed with the change or
alteration without securing bids if the cost agreed upon
does not exceed the greater of the maximum expenditures
authorized under public contract code provisions or ten
percent of the original contract price. (PCC 20659)
Current law also authorizes school districts to consider,
in addition to price, factors such as vendor financing,
performance reliability, standardization, life-cycle costs,
delivery timetables, support logistics, the broadest
possible range of competing products and materials
available, fitness of purchase, manufacturer's warranties,
and similar factors in the award of contracts for
technology, telecommunications, related equipment,
software, and services, in recognition of the highly
specialized and unique nature of these items and services,
and the rapid technological changes they undergo. Current
law specifically limits this authority to the procurement
this type of equipment and prohibits its application to
contracts for construction or the procurement of any
product available in substantial quantities to the general
public (PCC 20118.2.).
Current law authorizes Municipal Utility Districts (MUDs)
to let contracts for the purchase of supplies and materials
in excess of $50,000 in accordance with "best value at the
lowest cost acquisition" policies adopted by the local
governing board and outlines specific elements to be
included in these policies. (Public Utilities Code
12751.3)
ANALYSIS
This bill
1) Authorizes community colleges, until January 1, 2016,
to use best value contracting, pursuant to lowest cost
acquisition policies adopted by the local governing
board, for the purchase of supplies and materials when
the expenditure exceeds $50,000 and the district
determines that it can expect long-term savings
through:
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a) The use of a life cycle cost methodology.
b) The use of more sustainable materials and
supplies.
c) Reduced administrative costs.
2) Requires that the best value policies adopted consider
all the following:
a) Price and service level proposals that
reduce overall operating costs.
b) Supplies and materials standards that
support the district's strategic acquisition and
management program direction.
c) A procedure for protest and resolution.
d) A life cycle of no fewer than three years.
3) Defines "best value at the lowest cost acquisition" as
a competitive procurement process whereby award of a
contract considers any of the following factors:
a) Total cost to the district.
b) Operational cost or benefit.
c) Added value to the district of vendor-added
services.
d) Quality and effectiveness of supplies,
materials, and services.
e) Reliability of delivery or installation
schedules.
f) Terms and conditions of product warranties
and vendor guarantees
g) Financial stability of the vendor.
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h) Vendor quality assurance program.
i) Vendor experience.
j) Consistency of the vendor's program.
aa) Economic benefits to the local community,
including, but not limited to job creation or
retention.
4) Requires the contract be awarded to the bidder whose
proposal is determined, in writing, to be the best
value to the district based upon the criteria set
forth in the request for proposal.
5) Requires the local governing board to issue written
notice of intent to award, as specified, and to
publicly announce its award, identify the winning
bidder and the details of the winning proposal, as
specified, and with the notice and contract file
sufficient to satisfy an external audit.
6) Requires the district to ensure all businesses have a
fair and equitable opportunity to compete for and
participate in district contracts and that
discrimination, as defined in specified law, does not
occur.
7) Requires a district using this authority to report
specified information by January 1, 2015, to the
Chancellor's Office.
8) Sunsets this authority on January 1, 2016.
9) Clarifies existing law regarding the authority of a
community college governing board to authorize
changes/alternations to a contract without securing
bids for those changes/alterations. Specifically, it
clarifies that the cost of all changes or alterations
must not exceed ten percent of the original contract
price.
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STAFF COMMENTS
1) Need for the bill . According to the author, this bill
addresses two problems. First, awarding contracts on
the basis of "lowest responsible bidder" does not
always result in the ability to purchase supplies and
materials in the most cost effective and economic
manner. An ability to consider criteria other than
price (such as longevity of product, sustainable
characteristics, operating expenses) and the ability
to include additional discounts and services are
necessary. This bill would provide the ability to
structure a competitive bid process that recognizes
life cycle cost, sustainable characteristics and
efficiency in the acquisition process. Second, the
bill clarifies current law regarding the percentage
change that triggers the need to secure bids for
changes/alterations by clarifying that the combined
total value of the changes does not exceed 10 percent
of the original contract price.
2) Best value contracting for goods and services . The
provisions of this bill are patterned after the
authority extended to Municipal Utility Districts
(MUDs) which appear to be the only sector of state
government currently 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 purchased over
$50,000 until 2007. SB 1169 (Cox, Chapter 248,
Statutes of 2006) extended this authority on a limited
basis, making the statute permanent for those that
used the process before January 1, 2006. However, any
MUD that did not use the "best value" contract process
prior to January 1, 2006, but now elects to use the
process, must submit a specified report to the
Legislative Analyst on or before January 1, 2011. If
best value contracting is not utilized by a MUD during
this time period, the authority to do so expires on
January 1, 2012.
3) Related LAO study . According to its statutorily
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required report on the use of best value procurement
by MUDs, the Legislative Analyst (LAO) opines that
best value procurement can provide MUDs with an
important tool. The LAO also notes that an
organization must make the up-front investment
necessary to support such procurement through staff
training and develop procurement requirements that
promote the organization's strategic goals. The LAO
also noted that, early on, best value procurements
could be time-consuming and cumbersome as bid
evaluation criteria are developed and fine-tuned.
4) Best value contracting in construction projects . Best
value contracting has generally been recognized as a
viable alternative for construction projects.
Traditionally, construction projects have been bid out
and awarded based upon a "lowest-cost" approach. Best
value, a competitive contracting process, allows
projects to be awarded to the contractor offering the
best combination of price AND qualifications, instead
of just the lowest bid. In California, for example,
design-build best value is a method of project
delivery/procurement based on combining the
requirements for designing and constructing a project
into one contract. In addition to submitting bids for
project cost, prospective design-build teams also
submit technical proposals. The technical proposals
are evaluated based on evaluation criteria, and scores
are compiled. The scores are then used to weigh or
adjust the submitted bid price. The contract is
awarded to the design-build team with the best value.
5) Best value contracting for technology equipment . Best
value contracting has also been used for the
acquisition of technology, telecommunications and
related equipment. As noted in the background of this
analysis, school districts are granted this authority,
but specifically prohibited from applying this
authority to contracts for construction or to the
procurement of any product available in substantial
quantities to the general public. Similarly,
Municipal Utility Districts (MUDs) serving more than
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250,000 customers have been authorized to use best
value procurements to acquire information technology
and industry specific equipment. This specific
authority was repealed in 2006.
6) Need for review . This bill provides somewhat broad
authority for districts to develop a variety of local
policies for implementing best value contracting for
supplies and materials. If successfully implemented
by districts, it is very likely that they will pursue
extension or elimination of the 2016 sunset on this
authority. While the bill currently requires
reporting of specified information to the Chancellor's
Office by districts that utilize this authority, the
requirement that the LAO use this data to generate a
report and recommendations on it use and possible
extension were recently deleted. Even the existing
statute on which this bill's provisions are based
requires LAO review of implementation by MUDs. Is it
prudent to extend such an authority without an
expectation of some review and analysis of its
implementation?
Staff recommends the bill be amended to provide for a
review, analysis, and recommendations to assist the
Legislature in determining whether or not to extend or
delete the sunset on this authority for community college
districts.
7) Prior legislation . This bill is almost identical to
AB 2550 (Furutani, 2008) which was vetoed by the
Governor whose veto message read, in pertinent part:
I support the notion that best value contracting
is a reasonable alternative for construction
projects which allows projects to be awarded
based on a combination of best price and
qualifications because construction projects
represent a large, long term investment of
resources. However, I am concerned that this
legislation may allow subjective methods to
govern the bidding process for procurement of
supplies and materials with a relatively short
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life cycle, which could be more open to
manipulation and abuse in the bid selection
process.
Staff notes that, unlike AB 2550, this bill requires
that contracts let in accordance with best value
policies must be for supplies and materials with a
life cycle of at least three years.
SUPPORT
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 received.