BILL ANALYSIS
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|Hearing Date:April 27, 2009 |Bill No:SB |
| |258 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: SB 258Author:Oropeza
As Amended:April 21, 2009 Fiscal: Yes
SUBJECT: Contractors: public works.
SUMMARY: Establishes a public works certification requirement
under an unnamed state certifying agency for licensed contractors
and subcontractors who perform public works projects.
Existing law, the Business and Professions Code:
1)Provides for the licensure and regulation of more than 250,000
contractors under the Contractors State License Law (Contractors
Law) by the Contractors' State License Board (CSLB) within the
Department of Consumer Affairs (DCA).
2)Authorizes the CSLB to adopt regulations to set various
application, licensure, and renewal fees, not to exceed specified
limits, and provides for the deposit of those fees in the
Contractors License Fund.
3)Requires the CSLB to initiate disciplinary action against a
licensee upon certified notification of the Labor Commissioner's
finding of the licensee's willful and deliberate violation of the
Labor Code.
4)Authorizes the CSLB to adopt regulations to establish specialty
classifications of contractors, and provides that in public works
contracts, the awarding authority shall determine the license
classification necessary to perform the project.
5)Requires contractors to obtain special certifications from the
CSLB in order to perform asbestos-related work or to engage in
hazardous substance removal or remedial action, as specified.
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Existing law, the Public Contract Code:
1)Authorizes a public entity to require that each prospective
bidder for a contract complete and submit a standardized
questionnaire and financial statement, including a complete
statement of the prospective bidder's experience in performing
public works.
2)Requires the Department of Industrial Relations, in collaboration
with affected agencies and interested parties, to develop model
guidelines for rating bidders, and draft the standardized
questionnaire, that may be used by public entities for these
purposes.
3)Requires the questionnaire and financial statement to be verified
under oath by the bidder in the manner in which civil pleadings
in civil actions are verified.
4)Authorizes a public entity to establish a process for
prequalifying prospective bidders on a quarterly basis and makes
a prequalification valid for one calendar year following the date
of initial prequalification.
This bill:
1)States legislative intent to certify that only the most qualified
contractors perform on public works projects in order to promote
the safety of California's publicly owned facilities and ensure
the best use of tax dollars.
2)Establishes within the Contractors Law, beginning January 1,
2012, that a contractor is prohibited from performing work as a
contractor or subcontractor on a public work contracted by the
state or a state agency, or any other public agency, unless the
contractor has obtained a public works certification from a state
certifying agency to be determined by the Legislature.
3)Provides that to obtain the public works certification, the
license qualifier shall submit the public works certification
prequalification document developed and administered by the
agency and receive certification from the agency.
4)Authorizes the agency to deny or revoke a public works
certification for a contractor's failure to comply with the laws
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which apply to public works, or for committing any acts which are
grounds for license denial, and requires revocation of a public
works certification to be subject to the Administrative
Procedures Act.
5)Specifies that the above provisions shall not be construed to:
a) Affect the requirements relating to specialty contractors.
b) Restrict the state or any other public agency from imposing
additional requirements on contractors in awarding public
works contracts.
c) Expand the enforcement authority of the agency.
6)Defines certain terms relative to the bill:
a) "Public agency" is a city, county, city and county,
including chartered cities and chartered counties, the
University of California and any special district, and any
other agency of the state for the local performance of
governmental or proprietary functions within limited
boundaries. "Public agency" also includes a nonprofit transit
corporation owned by a public agency, as specified.
b) "Public work" is any work that is subject to the
requirements of Chapter 1 (commencing with Section 1720) of
Part 7 of Division 2 of the Labor Code.
7)Provides that the certifying agency shall do all of the
following:
a) By January 1, 2011, establish and validate minimum
standards for the competency and prequalification of all
contractors performing work on public works projects through a
system of prequalification certification.
b) By March 1, 2010, establish advisory committees as
necessary to carry out these functions. Provides that the
committees shall be made up of contractor representation from
both the general contractor community and the subcontractor
community with at least one representative from the following
organizations on all committees or panels: Associated General
Contractors, Construction Employers Association, California
Legislative Conference of the Plumbing, Heating and Piping
Industry, and the National Electrical Contractors Association,
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and at least one representative from organized labor
designated by California Building and Construction Trades
Council.
c) By July 1, 2011, adopt regulations to enforce these
provisions.
d) Issue certification cards to contractors who have been
prequalified and certified pursuant under the bill.
e) Make information on certified contractors publicly
available.
8)The public works prequalification certification shall be
developed according to professionally accepted principles for
prequalification and should adhere as closely as possible to the
guidelines set forth in the Public Contract Code (see Existing
law, the Public Contract Code, above). The certification shall
not be based on a per-project basis and shall be based on a
per-applicant basis.
9)Establishes fees which shall be deposited into the Public Works
Certification Fund, as follows:
a) By January 1, 2011, requires the certifying agency to
establish fees necessary to implement the public works
certification, and charge each applicant the fee.
b) Until December 31, 2014, establishes a public works
certification examination fee of not more than $65, after
which the fee shall be not more than $125.
10)Creates the Public Works Certification Fund within the State
Treasury, which is continuously appropriated to the certifying
agency only for the costs to prequalify and certify contractors
and subcontractors, and issue certification cards.
FISCAL EFFECT: Unknown. This bill is keyed "fiscal" by
Legislative Counsel.
COMMENTS:
1.NOTE : Last Year's SB 1698 (Romero). This bill is essentially
the same as last year's SB 1698 (Romero) which was vetoed by the
Governor. That bill would have prohibited a contractor from
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performing work as a contractor or a subcontractor on a public
work unless the contractor obtained a public works certification
from the CSLB. The bill required CSLB to develop a certification
examination and required the qualifier for certification to pass
the license exam. The bill authorized the CSLB to charge a fee
in an amount sufficient to pay for the costs of administering the
examination.
That bill passed this Committee on a 5-3 vote. In the veto
message, the Governor stated:
"I believe that sufficient safeguards are already in place
to prevent contractors from bidding on public works projects
if they fail to comply with current Labor Code provisions.
This bill would create barriers to small business by adding
additional requirements to become a qualified bidder on
public works projects, while providing little additional
value to the public works process. By creating this
barrier, competition on public works projects could be
reduced, that may result in increased bid and project
costs."
2.Purpose. This bill is sponsored by the National Electrical
Contractors Association , the Construction Employers Association ,
the State Building and Construction Trades Council (Sponsors) to
establish a new pre-qualification requirement for contractors who
bid on public works projects.
3.Background. The Contractors State Licensing Board (CSLB)
establishes licensing requirements for contractors in California.
Existing law also authorizes CSLB to establish application,
licensure, and renewal fees. Additionally, The Department of
Industrial Relations, Division of Labor Standards Enforcement,
investigates public works complaints to ensure compliance with
public works laws including prevailing wages, certified payroll,
fringe benefits, apprenticeship statutes, and workers
compensation.
4.Public Works Complaint Enforcement. The Division of Labor
Standards Enforcement (DLSE) within the Department of Industrial
Relations (DIR) receives complaints and enforces the law
regarding prevailing wages on public works projects. An
employee, former employee, or anyone wishing to report a
violation of the State's public works laws can file a complaint
that prevailing wages were not paid on a public works project.
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The Sponsor indicates that complaints against contractors are
frequently settled out of court before they ever reach the DIR
review panel, and states:
The two primary reasons for this are lack of sufficient
enforcement staff at DIR, and the length of time and expense
associated with the appeals process. The frequency with which
these complaints are settled before they get to the board
indirectly encourages non-compliance, because contractors in
violation often go unpunished for their negligent or even
willful behavior. Even worse, they retain the ability to bid
on and secure contracts for public works projects.
Moreover, when an investigation discovers an infraction, steep fines
and damages are levied against the contractor. According to DIR, in
calendar year 2007 $5.6 million in wages were recovered and $6.1
million penalties assessed. Thus far in 2008, $3.4 million in wages
have been recovered and $3.7 million in penalties assessed.
Apparently DIR continues to make a robust effort at enforcement
of compliance issues, but has been drastically understaffed, due
to significant reductions in budget and staff resources. This
means that DIR cannot meet the current scale of oversight
demands. While the lack of state resources for enforcement
cannot be remedied in the short term, given the current fiscal
situation, this bill is an effort to address the problem via
heightened certification requirements. The Sponsor believes that
this bill will put contractors on notice that despite limited
resources, the state is nonetheless serious about compliance
issues, and may ease the investigatory burden on DIR for the
cases that come to their attention. A new certification exam is
therefore a necessity for the quality and safety of future public
works projects, according to the Sponsor.
5.Scope and Jurisdiction of CSLB Enforcement Regarding Public Works
Projects. As introduced, this bill would have established a
contractor public works certification program within the
Contractors State License Board. However this bill was amended
to provide that the certification would be done through a
"certifying agency to be determined by the Legislature." CSLB's
complaint process and procedures are designed to protect the
public in matters pertaining to construction and to assist in the
resolution of construction related complaints. CSLB handles any
violations of the Contractors License Law, whether the contractor
is licensed or unlicensed. However, the CSLB has no direct
involvement or jurisdiction over public works projects. Business
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and Professions Code, Section 7059 states that the public works
agency has the authority to select classifications for the
project. CSLB has no jurisdiction over protests or disputes with
the awarding entity on public works projects.
While the CSLB is not specifically involved in the enforcement of
public works projects, the Board presents information on its
Internet website intended to assist both contractors and
employing public agencies involved in public works projects. The
CSLB lists a number of resources that can help contractors learn
how to bid on public works projects, including:
Business and trade associations, such as chambers of
commerce and industry groups, that have workshops,
conferences and/or conventions that can provide training,
networking, and contract opportunities with the private and
public sector.
Agencies that award public works contracts that usually
provide briefings of the request for proposal and bid
process.
Private schools and community colleges that offer
courses on reading blueprints, estimating and bidding.
Government agencies that are required to post a
"Request for Proposal" for contracts that go out to bid.
The Request for Proposal usually lists all requirements and
specifications including contractor classifications.
In general, the CSLB does not take enforcement action for
violation of public works laws. However, the CSLB does have
authority to take action against a licensed contractor based upon
action taken by another public agency.
1.Arguments in Support. According to the Author's office, many
contractors are unaware of the additional rules regarding public
works projects. This results in those contractors who abide by
the laws to be at a competitive disadvantage relative to those
contractors who fail to comply with current labor laws and
regulations. In short, the good actors are punished for obeying
the law.
The Author further states, with infrastructure projects funded by
the bonds voters passed in 2006, and the federal stimulus dollars
coming to California, it is now more important than ever to
ensure that all contractors bidding on these public work projects
are knowledge about the process and applicable laws and
regulations.
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The State Building and Construction Trades Council , one of the
bill's sponsors, argues that unlike general contracting law,
public works contracts require specific protocols as their
projects are being constructed. For instance, construction
workers must be paid the local prevailing wage, the contractor
must maintain certified payrolls under penalty of law, and the
contractor must maintain special surety bonds.
Other supporters contend that current law requires public agencies
to use the contractor or contractors who submit the lowest
responsible bid on public works projects. These requirements are
in statute for good reason, as they ensure competitive bid
prices, protect against corruption and guarantee equity in the
bidding process. This places agencies in a position of having to
use contractors that might have submitted the low bid, but do not
have the experience, knowledge of public work requirements or
financial stability to complete the project. Providing a state
minimum standard of competency for contractors who wish to bid on
public works projects would correct this issue.
2.Arguments in Opposition. Opponents of this measure do not see
the need for this legislation, and argue that public agencies
already have the authority to pre-screen bidders on public works
projects to assure that the prime contractor and subcontractor
have the requisite experience, knowledge of public works
contracting law, and financial capacity to perform.
California Landscape Contractors Association (CLCA) sees the bill
as being inconsistent with the goal of encouraging greater small
business participation in government contracting and states:
"Requiring smaller contractors to obtain special . . .
certification before bidding on public works projects erects yet
another barrier that discourages participation in
taxpayer-financed works of improvement."
Associated Builders and Contractors (ABC) argues that the bill is
unneeded because of the existing certification authorization, but
contends that any type of certification issues for public works
is more appropriately placed in the Department of Industrial
Relations. However, ABC suggests before embarking on a new
certification program, some demonstration of the existence of a
problem needs to be provided, "particularly since certification
proposals often have the unintended impact of restricting
competition and choices for consumers and ultimately, for
taxpayers."
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California Professional Association of Specialty Contractors
(CALPASC) argues: "This bill will add one more barrier for small
and minority owned businesses who are trying to participate in
public works infrastructure projects." CALPASC further believes
that the bill is a "thinly veiled attempt by certain businesses
that are currently engaged in public works projects to keep other
businesses from competing for these jobs."
3.Who is the Certifying Agency? As introduced, the bill would have
established a contractor public work certification program within
the Contractors State License Board. However, as indicated
above, there is concern that the CSLB is not suited for this type
of certification program. Some have suggested that the
Department of Industrial Relations would be the appropriate
agency for the certification program. On April 21, the bill was
amended to remove references to the CSLB, and to instead refer to
a "certifying agency to be determined by the Legislature." While
this bill does not specify the CSLB as the certifying agency, it
still casts its provisions within the Contractors Law.
In light of the fact that the certifying agency is yet to be
determined, the Committee may want to consider whether or not the
Department of Industrial Relations may be the more appropriate
"certifying agency." If still unresolved, the Committee should
reserve the right to have the bill referred back to the Committee
depending on which agency is named in this measure.
SUPPORT AND OPPOSITION:
Support:
California Chapters of the National Electrical Contractors
Association (Sponsor)
Construction Employers Association (Sponsor)
State Building and Construction Trades Council (Sponsor)
Air Conditioning Sheet Metal Association
Air-conditioning & Refrigeration Contractors Association
California Legislative Conference of the Plumbing, Heating and
Piping Industry
Opposition:
Note : The opposition listed below is based upon the bill as
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introduced. The significant change in the amended version is to
recast references to the CSLB to instead refer to a "state
certifying agency to be named by the Legislature."
Associated Builders and Contractors
California Professional Association of Specialty Contractors
(CALPASC)
Associated General Contractors of California (AGC)
California Landscape Contractors Association
Engineering and Utility Contractors Association
Consultant:G. V. Ayers