BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1457 (Cogdill)
Hearing Date: 5/17/2010 Amended: 4/28/2010
Consultant: Bob Franzoia Policy Vote: G O 6-2
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BILL SUMMARY: SB 1457 would authorize the Department of General
Services (DGS) to undertake public works improvements by using
an alternative delivery method defined as job order contracting.
This bill would authorize DGS, whenever a public works
appropriation is made, to determine the most appropriate
delivery method for that project. This bill would require DGS
to follow specified criteria for those contracts and would set
forth the applicable labor and contracting standards, including
payment procedures, delivery methods, and remedies in the case
of default.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 Fund
Job order contract General/
authorization Special*
- Contract administration Estimated $8 to $23 savings
per project**
bid under job order contracting
- Job order work Unknown savings; See Staff Comments
* Service Revolving Fund
** Based on project cap of $250; See Staff Comments
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STAFF COMMENTS: This bill defines job order contract as a
competitively bid, fixed priced, indefinite quantity procurement
contract issued by a department to a job order contractor for a
definite project or work, as compiled from a catalog of
construction tasks to be performed pursuant to a job order
contract. (Each job order under a job order contract shall not
exceed the total cost limit of $250,000 as set forth in Public
Contract Code 10105 (b).)
Job order contracting is an indefinite quantity type of contract
that would enable DGS to accomplish more than one repair,
rehabilitation or maintenance project with a single,
competitively bid contract. It should reduce the administrative
costs of completing the traditional design-bid-construct cycle
for each project and allow DGS to decrease project duration and
cost. Contractors competitively bid an adjustment factor (for
example 1.15) to be applied to a catalog of construction tasks
with pre-set unit prices. The overall contract amount (the sum
of the individual projects that may be performed) is expressed
as a range in dollar volume. The low bid contractor performs a
series of projects one after the other. The price for each
project is a pre-set unit price multiplied by the quantity
multiplied by the competitively bid adjustment factor. Prices
are not negotiated and the contract is awarded to the bid with
the lowest factor.
This bill provides that the availability of job order
contracting shall not preclude the use of other methods of
project delivery, which includes sole source and design-build,
as authorized. DGS would be prohibited from using job order
contracting for architectural,
Page 2 SB 1457 (Cogdill)
landscape architectural, engineering, environmental and land
surveying services, construction project management, and
environmental services (Gov Code 4525).
As noted above, a job order contract may be for an unspecified
period of time. (Because this is a new project delivery method
for DGS, staff recommends the bill be amended to specify a
contract term of two years with an option to extend that term
for one year.) The contracting entity, in this case, DGS, will
have projects to be completed under the contract but may not
have all the projects that will be completed under the contract
identified at the time of the bid. In essence, DGS is bidding
the value of the work and the bids are on a percent of the unit
price which is set forth in a standardized manner in a "unit
price book" at national and state levels and then further
tailored to geographic areas of the state. For example, DGS
would identify work to be done under the contract and assign
unit prices to the work. Bids are made on a percent of the unit
price. One bidder may bid a factor (or multiplier) of 0.95 of
the unit price, another bidder may bid 1.0, and another bidder
may bid 1.15 with the individual bids being influenced by a
number of factors. In this example, the bid factor of 0.95
(which applies to all the unit prices in the job order) would
win the contract.
Some information indicates that job order contracting can result
in savings. Chapter 889/2003 authorized a four year pilot
project for the Los Angeles Unified School District to develop
cost effective options for the delivery of public works
projects, including job order contracting. A total cost limit
per contract was not imposed. An interim report for job order
contracts completed through December 31, 2005 indicated 221 job
orders totaling $16,060,959 were issued and 59 job orders were
completed. The report calculated a $397,717 (9.2 percent)
savings between the estimated and actual project costs on those
59 job orders. (?LAUSD opted to re-bid 6 scopes of work through
12/31/05 using JOC when the traditional approach resulted in
higher than estimated bids. While this work was not completed
as of 12/31/05, these Job Orders merit mention since LAUSD used
the same scope of work for both bid approaches providing a true
apples-to apples comparison. The JOC approach resulted in a
savings of $784,683, or 26 % of the original Low Bid Estimates.)
Chapter 570/2006 extended the authorization until December 1,
2012. Staff notes the University of California and the
California State University are authorized to use job order
contracting.
It appears there are savings in administering job order
contracts. To bid a design-bid-construct project with a cost of
$250,000, costs are estimated at $10,000 to $25,000. To bid a
job order contract with the same cost limit, costs are estimated
at $2,000 to $5,000. For a project with a cost of $75,000,
costs would be $10,000 to a lesser $15,000 while a job order
contract would remain at $2,000 to $5,000. For a bidder, the
ability to bid on multiple, similar projects at one time should
allow the bidder to submit, in the case of a job order contract,
a factor that is lower than if the bidder had to submit multiple
bids on similar projects. Estimating the difference is
difficult because the value of the work, if it was done under a
design-bid-construct contract, is unknown so there is no
available comparison. However, it is unlikely bids would
increase (and could decrease) for the construction portion of
smaller, more defined projects by more than 2.5 percent (based
on $1 million in total bids and four bids for
design-bid-construct contracts and eight bids for job order
contracts) and offset the savings from the administrative
portion of the contract.