BILL ANALYSIS �
AB 1565
Page 1
Date of Hearing: March 27, 2012
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 1565 (Fuentes) - As Introduced: January 30, 2012
SUBJECT : Public contracts: school districts: bidding
requirements.
SUMMARY : Requires the prequalification questionnaire and
uniform system a school district uses to rate bidders on a
public works project to contain substantially similar
information, questions, and requirements to the questionnaire
and guidelines for rating bidders developed by the Department of
Industrial Relations (DIR), and requires prequalification for
school public works projects. Specifically, this bill :
1)Requires, when the school district board requires contractors
to prequalify for a project, that the questionnaire and
uniform system of rating bidders contain substantially similar
information, questions, and requirements to the standardized
questionnaire and model guidelines for rating bidders
developed by DIR.
2)Requires a school district to use prequalification for any
school facility construction project that receives funds under
the Leroy Green School Facilities Act of 1998, and further
requires:
a) The school district board to use the uniform system of
rating bidders adopted by the school district board, or if
the school district board has not adopted a system, to use
the standardized questionnaire and model guidelines for
rating bidders developed by DIR; and,
b) Requires that subcontractors also be prequalified.
3)Stipulates that the disqualification of a subcontractor by the
governing board of the district does not disqualify an
otherwise prequalified contractor.
4)Exempts school districts with an average daily attendance of
less than 2,500 from the provisions of this bill.
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5)Sunsets the provisions of this bill on January 1, 2018.
EXISTING LAW :
1)Allows the school district to use the prequalification process
for the following public works contracts:
a) Contracts costing $50,000 or more for equipment,
materials, supplies, non-construction services, and
non-maintenance repairs; or,
b) Contracts costing $15,000 or more for construction
projects.
2)Requires a school district using prequalification for public
works projects to adopt and apply a uniform system of rating
biddings on the basis of completed questionnaires and
financial statements in order to determine the size of the
contracts upon which each bidder shall be deemed qualified to
bid.
3)Prohibits school districts from furnishing bid proposal forms
to people who have not submitted a questionnaire and financial
statement for prequalification at least five calendar days
prior to the public bid opening date and have been
prequalified at least one day prior to the public bid opening
date.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "Since
state law requires the use of the lowest bidder, many
unqualified contractors are being awarded school construction
projects with little or no experience and who lack the financial
fortitude to accomplish a project on time and on budget. Under
current law, the selected contractors may file a significant
amount of change orders that increases the cost of the project.
In many instances, this also leads to cutting corners that
produce defects, prevailing wage violations, and unsafe working
conditions for workers.
"California voters passed a significant amount of school
infrastructure bonds in the November 2006, 2008, and 2010
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elections. Billions of state and local taxpayer dollars were
pledged to build and rehabilitate our state's public school
infrastructure. Taxpayers have the right to expect that the
state and their local school districts are investing their
monies wisely."
Background . Prequalification can be used by public entities
used to prequalify interested bidders prior to the actual bid.
Bidders are required to submit a questionnaire, financial
statements, a notarized statement from a surety, and proof of
insurance. Prequalification enables public entities to score a
contractor based previous performance, compliance with health,
safety, and labor laws, and the completion of recent projects
and the quality of performance. Prequalification also allows
public entities to determine whether a contractor has previously
worked on school construction projects or has a record of
litigation and criminal convictions related to construction
work.
AB 574 (Hertzberg), Chapter 972, Statutes of 1999, allowed many
public agencies to require licensed contractors that wish to bid
on public works jobs to prequalify for the right to bid on a
specific public works project. AB 574 further authorized public
entities to require prospective bidders to complete
questionnaires and required the DIR, in collaboration with
affected agencies and interested parties, to develop a
standardized questionnaire and model guidelines for rating
bidders that public entities may use. AB 574 applies to all
cities, counties, and special districts, but does not apply to
K-12 school districts.
Existing law does not require, but authorizes every public
agency to adopt a prequalification system. Current law allows a
public agency to establish two different kinds of
prequalification procedures for public works projects. A public
agency may establish a prequalification procedure linked to a
single project or adopt a procedure by which a contractor may
qualify to bid on projects which are put out for bid by that
agency for a period of one year after the date of initial
prequalification.
A public agency that requires prequalification must use a
standardized questionnaire and financial statement, adopt and
apply an objective uniform system of rating bidders based on
completed questionnaires and financial statements, and create an
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appeals process to allow a contractor denied prequalification to
challenge that determination.
Current law does not mandate a public entity to utilize the
prequalification process nor requires that an expenditure amount
trigger the use of the prequalification process.
This bill differs from SB 258 (Oropeza) of 2009, which required
that all school construction projects over $1 million use
prequalification. This bill requires all school construction
projects to use prequalification, regardless of cost.
Related Legislation . SB 600 (Rubio) of 2011, is an identical
bill that requires the prequalification questionnaire and
uniform system a school district uses to rate bidders on a
public works project to contain substantially similar
information, questions, and requirements to the questionnaire
and guidelines for rating bidders developed by DIR, and requires
prequalification for school public works projects. This bill
was held in the Assembly Appropriations Committee.
Previous Legislation . SB 258 (Oropeza) of 2009, would have
required the prequalification questionnaire and uniform system a
school district uses to rate bidders on a public works project
to contain substantially similar information, questions, and
requirements to the questionnaire and guidelines for rating
bidders developed by the Department of Industrial Relations
(DIR), and requires prequalification for school public works
projects costing $1 million or more. This bill was held in the
Assembly Appropriations Committee.
AB 574 (Hertzberg), Chapter 972, Statutes of 1999, allowed many
public agencies to require licensed contractors that wish to bid
on public works jobs to prequalify for the right to bid on a
specific public works project, or on public works project
undertaken by a public agency during a specified period of time.
Support . According to the sponsor, the State Building and
Construction Trades Council of California, "Regrettably, due to
the lack of available work in the private construction sectors,
school districts are being flooded with bids from contractors
with little or no experience on large construction public works
projects. Since state law requires the use of the lowest
bidder, many unqualified contractors are being awarded school
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construction projects with little or no experience and who lack
the financial fortitude to accomplish a project on time and on
budget.
"Under current law, the selected, but inexperienced contractor
may file a significant amount of change orders that increases
the cost of the project. In many instances, unqualified
contractors cut corners that produce defects, violate prevailing
wage law, and create an unsafe working condition for workers.
Under these circumstances, the students, the school district,
the taxpayers, and the qualified contractor and his or her
employees all lose.
"AB 1565 addresses these issues by ensuring school districts
continue to use the lowest competitive bid under a developed
prequalification process that is tailored to meet their
expectations and quality levels. The goal of prequalifying
contractors is to deliver a project on time, on budget and to
mitigate as many other risks as possible. A properly designed
prequalification system and a fair and objective evaluation
process like the one that was developed by DIR will result in a
list of qualified contractors who can meet the expectations for
the project."
According to the National Electrical Contractors Association,
California Chapters, and the California Legislative Conference
of the Plumbing, Heating, and Piping Industry, "With the recent
economic downturn, many school districts have been receiving
bids from contractors who have never performed school
construction and in some cases, school districts receive bids
from contractors who have never worked on a public works project
in general. Due to state laws that require that use of the
lowest bidder on school construction projects, these contractors
are being awarded school construction contracts even though they
may not be qualified to perform the work. Unqualified
contractors are the cause of many problems on school
construction projects. For example, an unqualified contractor
may not have the financial fortitude to finish a project; �the
contractor] may file an exorbitant amount of change orders
because they underbid the project and may present poor safety
conditions for their employees and the employees of other
contractors as they cut corners to make the project pencil out.
This all comes at the expense of the school districts, the
taxpayers, and the qualified contractors who were not awarded
the school construction project."
AB 1565
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Opposition . According to the California School Boards
Association, "This measure would require school districts to
prequalify bidders, and use questionnaires and rating systems
developed by DIR, or forms that cover the same issues, in order
to access funding from the State School Facilities Program
(SFP). Districts that build projects without matching funds
from the SFP, and choose to prequalify bidders, would also be
required to use questionnaires and a rating system that cover
the same issues as the questionnaire and rating system developed
by DIR.
"Under existing law, school districts and county offices of
education may prequalify bidders for construction projects and
have the flexibility to tailor their questionnaires and rating
systems to fit local circumstances. AB 1565 would require
prequalification in order to access funding from the SFP, even
though some districts may have determined prequalification to be
unnecessary because the contractors in their region are already
highly qualified with strong records of performance.
Prequalification will be particularly burdensome due to the
frequent use of multi-prime contracts, where 30 or 40
contractors may be involved in a single project. Due to the
length of the required questionnaires, and the legally required
appeals process, districts will be forced to devote a large
amount of time and money to project administration.
"Moreover, AB 1565 imposes prequalification requirements on
school districts and county offices of education, but not on
other public agencies. When the economy improves and
construction activity resumes, fewer contractors may be willing
to bid on school projects due to the prequalification
requirements. The reduced competition could increase the costs
of school construction."
Double-referred . This bill is double-referred to Assembly
Education Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
State Building and Construction Trades Council of California
(sponsor)
Associated General Contractors
AB 1565
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California Legislative Conference of the Plumbing, Heating and
Piping Industry
National Electrical Contractors Association, California Chapters
Opposition
Association of California Construction Managers
California School Boards Association
Coalition for Adequate School Housing
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301