BILL ANALYSIS �
AB 948
Page 1
Date of Hearing: March 29, 2011
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Marty Block, Chair
AB 948 (Furutani) - As Introduced: February 18, 2011
SUBJECT : Public contracts: competitive bidding: best value.
SUMMARY : Allows the University of California (UC) and the
California Community Colleges (CCC) to include "best value" as a
criteria for bid evaluation and selection for contracts for
goods and materials or services.
EXISTING LAW :
1)Requires the UC Regents to let all contracts involving an
expenditure of more than $100,000 annually for goods and
materials and services to the lowest responsible bidder
meeting specifications or else reject all bids. (Public
Contract Code �10507.7)
2)Requires a CCC 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. (PCC � 20651)
3)Provides the California State University (CSU) with broad
authority to conduct contracting and prescribe policies as
necessary, including using competitive means for obtaining
best value while complying with legislative intent regarding
competitive bids or proposals as it is expressed in Article 3
(commencing with PCC � 10300). (Education Code � 89036)
4)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
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procurement of 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)
5)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)
FISCAL EFFECT : Unknown, however the Los Angeles Community
College District expects to spend more than $100 million to
purchase necessary furniture, fixtures, and equipment and
anticipates $1 million in savings due to reduced administrative
costs in addition to savings realized in better life-cycle costs
and reduced costs for disposal of items. UC estimates savings
of more than $3 million annually.
COMMENTS : Need for this bill . According to the author,
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. 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. It
would also give UC the ability to access group purchasing
agreements put in place by other partner agencies that would
allow UC to realize cost savings on goods and services.
Best value for goods and services .
1)CSU has had broad contracting authority in existing law for
nearly two decades, authorizing it to use "competitive means
for obtaining best value while complying with legislative
intent regarding competitive bids or proposals." The CSU
Contract and Services Policy manual includes a minor reference
to the use of best value in procurement of goods, materials
and services, with the exception of information technology
contracts. Staff is not aware of a formal evaluation of CSU's
use of best value in this area.
2)MUDs are authorized to use best value procurement for
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individual supplies and materials purchases over $50,000 until
2007 �AB 793 (Cox), Chapter 665, Statutes of 2001]. 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 study of best value . AB 793 required LAO to report on the
use of best value procurement by MUDs, which LAO found can
provide MUDs with an important tool. The LAO noted 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.
Best value contracting for technology equipment . School
districts are granted this authority to use best value
contracting for the acquisition of technology,
telecommunications, and related equipment 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, MUDs
serving more than 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.
Best value for construction projects . 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. UC has limited
authority to utilize best value in awarding construction
contracts at UC San Francisco (UCSF) until January 1, 2012 �PCC
� 10506.4, created by SB 667 (Migden), Chapter 367, Statutes of
2006]. In its December 2010 interim report on the pilot
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program, UC reported that UCSF utilized best value criteria on
23 of 172 construction contracts. Of the 23 contracts, 12 (52%)
were awarded to the lowest bidder. UCSF received four written
bid protests out of the 23 solicitations, a rate well below that
experienced by UCSF during the same period from non-Pilot
Program solicitations. UC reports, "The four completed projects
have demonstrated the effectiveness of the best value method of
contractor selection. There were no claims, and except for owner
requested changes to the scope or schedule, these projects were
on budget and on time and had the required high quality. The
two projects nearing completion, one of which has a value of
$175 million, have also been successful in maintaining high
quality, schedule and budget."
Broad implementation authority . In order to ensure that this
authority is implemented uniformly by the campuses, staff
recommends an amendment to clarify that the UC and CCC governing
bodies will develop policies and procedures for using best value
as a criteria in bids for goods and materials or services.
Los Angeles Community College District (LACCD) construction
program . In late February 2011, the Los Angeles Times published
a series of articles about LACCD's $5.7 million construction
program, funded by locally approved bonds. The articles allege
poor planning, frivolous spending, shoddy workmanship, and
conflicts of interest in awarding contracts, as well as poor
oversight of the construction program by the LACCD Chancellor's
office. In response, LACCD Chancellor Daniel LaVista has
promised to work with the LACCD Board of Trustees on corrective
measures, including a review of the LACCD's ethics code and
conflict-of-interest standards; to reexamine LACCD's system for
awarding contracts and its planning and oversight of the
construction program; and Chancellor LaVista fired Larry
Eisenberg, who administered LACCD's construction program.
Prior legislation . AB 2448 (Furutani, 2010) authorized CCC to
use best value contracting for the purchase of supplies and
materials until January 2016, and was vetoed by Governor
Schwarzenegger because "? it may allow subjective methods to
govern the bidding process for procurement of supplies and
materials, which could be more open to manipulation and abuse in
the ultimate bid selection. Such abuse could lead to
non-competitive bidding and higher costs to the State's
taxpayers and community college students." AB 2550 (Furutani,
2008) was substantially similar to AB 2448 and was also vetoed
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by Governor Schwarzenegger. SB 1122 (Wright, 2010) increased,
from $50,000 to $100,000, the threshold above which UC is
required to competitively bid contracts for goods, materials,
and services.
REGISTERED SUPPORT / OPPOSITION :
Support
Community College League of California
Kern Community College District
Los Angeles Community College District
San Diego Community College District
San Jose-Evergreen Community College District
University of California
West Kern Community College District
Yosemite Community College District
Opposition
Professional Engineers in California Government
Analysis Prepared by : Sandra Fried / HIGHER ED. / (916)
319-3960