BILL ANALYSIS �
AB 1565
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Date of Hearing: May 2, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1565 (Fuentes) - As Amended: April 26, 2012
Policy Committee: Business and
Professions Vote: 7-2
Education 8-1
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill requires large school districts to prequalify
prospective bidders on certain school construction projects
using a specified process. Specifically, this bill:
1)Requires all school districts with average daily attendance of
2,500 or more, for contracts on state-funded projects awarded
on or after January 1, 2014, to prequalify prospective
bidders, including subcontractors that would perform work
equivalent to more than 3% of the project cost.
2)Requires a school district, when requiring contractors to
prequalify on any public works project, to either use the
standardized forms and procedures developed by the Department
of Industrial Relations (DIR) pursuant to current law, or
develop a prequalification questionnaire and a contractor
rating system that, at a minimum, covers the issues addressed
in the DIR forms.
3)Makes all of the above inoperative on January 1, 2019.
4)Requires the Director of Industrial Relations (DIR), by
January 1, 2018, to report to the Legislature whether there
was a decrease in Labor Code violations on school contracts
during the time the bill's provisions were in effect and to
recommend improvements to the prequalification process.
FISCAL EFFECT
1)Unknown, but significant ongoing state-reimbursable General
AB 1565
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Fund (Prop 98) costs to school districts related to
establishing and administering the prequalification
process-likely as an additional contract cost for construction
management consultants. (About one-third of school districts
meet the enrollment threshold mandated under this bill.)
Additional costs would be incurred to address appeals from
contractors denied qualification. If this process added 0.1%
to 0.5% to project costs, for every $500 million in
state-funded school construction projects, state mandated
costs would be $500,000 to $2.5 million.
2)To the extent this process eliminates unqualified contractors
who would otherwise be the winning bidder, districts might
avoid certain costs associated with an underperforming
contractor, such as time delays or inferior construction, and
any associated legal costs.
3)The DIR will incur minor one-time costs ($75,000 or less) to
determine any impact of the prequalification process on Labor
Code violations and to make any recommendations for improving
the process.
COMMENTS
1)Background . AB 574 (Hertzberg)/Chapter 972 of 1999 authorized
certain public agencies to prequalify contractors wishing to
bid on public works projects. AB 574 further 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 for
prequalification. AB 574 applied to cities, counties, and
special districts, but not to school districts, which already
had statutory authority to prequalify contractors. Currently,
no government entity of any type is required to prequalify
contractors.
2)Purpose . According to the author and supporters, because state
law requires public contracts to be awarded to the lowest
bidder, many unqualified contractors, who lack adequate
financial resources to accomplish a project on time and on
budget, are bidding on school construction projects. This can
result in a significant number of change orders and/or cutting
corners that produce defects, prevailing wage violations and
unsafe working conditions for workers.
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The author asserts that "This bill will help ensure quality
construction of California schools at the lowest price by
requiring that school districts pre-qualify their contractors
on large construction projects. This will allow schools to
continue to utilize the lowest responsible bidder contracting
method which protects tax dollars, while ensuring that the
bidding pool is made up of competent and qualified
contractors."
This bill is sponsored by the State Building and Construction
Trades Council of California and supported by other labor
organizations and contractor organizations.
3)Another School Mandate ? The state currently owes school
districts about $3.4 billion in deferred mandate payments.
Moreover, annual state costs for district mandates total about
$200 million. Given these significant costs, and the state's
ongoing budget challenges, is this an appropriate time to
enact another state reimbursable mandate on school districts?
4)Opposition . The Coalition of Adequate School Housing
(C.A.S.H.) opposes this new mandate on schools, as do the
California School Boards Association, and the Association of
California Construction Managers. These entities contend local
school boards should have the discretion to decide whether
prequalification is necessary and within their best interests.
5)Prior Legislation . This bill is identical to SB 600 (Rubio) of
2011 and substantially similar to SB 258 (Oropeza) of 2010,
both of which were held on this committee's Suspense File. SB
258 applied to all school districts on projects exceeding $1
million, regardless of fund source.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081