BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1565 (Fuentes) - Public Contracts: School Districts
Amended: July 6, 2012 Policy Vote: Education 7-1
Urgency: No Mandate: Yes.
Hearing Date: August 16, 2012
Consultant: Jacqueline Wong-Hernandez
SUSPENSE FILE.
Bill Summary: AB 1565 requires a school district to prequalify a
prime contractor who provides a bid and all electrical,
mechanical and plumbing subcontractors utilized, if it meets
specified conditions.
Fiscal Impact:
Bonds: Substantial ongoing cost pressure on Proposition
1D funding and all future K-12 construction bonds.
Background: Existing law requires the governing board of a
school district to competitively bid, and award to the lowest
responsible bidder, any contract for a public project involving
an expenditure of $15,000 or more. (Public Contract Code �
20111)
Existing law also authorizes the governing board of the district
to require prequalification of prospective bidders for a
contract for a public project. A prospective bidder may be
required to complete and submit to the district a standardized
questionnaire and financial statement in a form specified by the
district, including a complete statement of the prospective
bidder's financial ability and experience in performing public
works. A school district that establishes a prequalification
process is required to adopt and apply a uniform system of
rating bidders on the basis of the completed questionnaires and
financial statements. School districts are authorized to
establish a process for prequalifying prospective bidders on a
quarterly basis and to consider a prequalification to be valid
for up to one calendar year following the date of initial
prequalification. (Public Contract Code � 20111.5)
Existing law also establishes the Local Agency Public
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Construction Act (applicable to all public entities except
school districts), which, as the result of AB 574 (Hertzberg,
Chapter 972, Statutes of 1999), also authorizes a public entity
to require prequalification of prospective bidders for a
contract. Generally, these procedures parallel those that apply
to school districts. In addition, AB 574 established the right
of a bidder to dispute a public entity's proposed
prequalification rating and requires an appeal process that
includes notification to the bidder, in writing, of the basis
for disqualification and supporting evidence and the opportunity
for the bidder to rebut this evidence. As required under AB 574,
the Department of Industrial Relations (DIR), in collaboration
and consultation with affected agencies and interested parties,
has developed model guidelines for rating bidders and drafted a
standardized questionnaire for use by public entities for the
purpose of prequalification. (Public Contract Code � 20100, �
20101)
Proposed Law: AB 1565, beginning with contracts awarded on or
after January 1, 2014 and until January 1, 2019, requires a
school district to prequalify a prime contractor who provides a
bid and all electrical, mechanical and plumbing subcontractors
utilized, if it meets all the following conditions: 1) Has an
average daily attendance (ADA) of 2,500 or greater; 2) receives
funds for any school facility construction project from the
state School Facility Program or from a future state school
bond; and, 3) involves a projected expenditure of $1,000,000 or
more.
This bill also requires school districts that opt to prequalify
bidders for a construction contract and that have an ADA of
2,500 or greater to: 1) Use a questionnaire that covers, at a
minimum, the issues covered by the standardized questionnaire
and model guidelines for rating bidders developed by the DIR,
and 2) prequalify a prime contractor who provides a bid and, if
utilized, all electrical, mechanical and plumbing
subcontractors.
Related Legislation: SB 600 (Rubio) 2011 was substantially
similar to this bill. That bill was held under submission in the
Assembly Appropriations Committee.
Staff Comments: Under existing law, the governing board of a
school district is authorized to require each prospective bidder
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for specified contracts to submit a standardized questionnaire
and financial statement, including information relating to
financial ability and experience in performing public works,
which is required to be verified under oath. Existing law
further requires a school district that has chosen to require
that information to adopt and apply a uniform system of rating
bidders on the basis of the completed questionnaires and
financial statements.
This bill would require school districts meeting the above
criteria to pre-qualify bidders for any project for which they
use state bond funding. Requiring school districts to
pre-qualify bidders in one of two ways specified in the bill
will create upfront costs to schools seeking construction
funding for both the expanded process and to process potential
appeals from contractors denied pre-qualification. These
activities create new cost pressure on existing and future
school bonds that would be expended on these activities.
Additionally, to the extent that the universe of bidders is
narrowed by the process, schools may end up paying more (in
state bond funding) for construction projects.
Legislative counsel has indicated that this bill may impose a
new reimbursable mandate on school districts. Since school
districts elect to utilize state construction bonds or
facilities funding, it is unlikely that requiring a
pre-qualification process would be deemed reimbursable. The
potential costs to a school district, however, still remain and
this bill creates a practical mandate on schools in need of new
construction funding.
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