BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 1565|
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THIRD READING
Bill No: AB 1565
Author: Fuentes (D), et al.
Amended: 7/6/12 in Senate
Vote: 21
SENATE EDUCATION COMMITTEE : 7-1, 6/27/12
AYES: Lowenthal, Alquist, Blakeslee, Liu, Price, Simitian,
Vargas
NOES: Huff
NO VOTE RECORDED: Runner, Hancock, Vacancy
ASSEMBLY FLOOR : 53-22, 5/30/12 - See last page for vote
SUBJECT : Public contracts: school districts
SOURCE : Author
DIGEST : This bill, 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
specified conditions.
ANALYSIS : 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 (PCC) Section 20111)
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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. (PCC Section 20111.5)
Existing law also establishes the Local Agency Public
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. (PCC
Sections 20100, 20101)
This bill, 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
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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.
Comments
Reason for only school districts . AB 574 (Hertzberg)
extended the authority to prequalify contractors to all
public agencies. Currently, however, no government entity
of any type is required to prequalify contractors.
California has authorized over $28 billion in funding for
K-12 facilities since 2002 (Propositions 1D, 55, and 47).
According to the sponsors, no other infrastructure sector
is as far reaching and as geographically diverse as school
construction and prequalification is necessary to ensure
the state's substantial investment results in quality
public school construction.
Mandates/increased costs to districts . This bill results
in a mandate as well as increased administrative costs to
school districts relative to school facility construction.
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.
The Senate Education Committee recently heard and
passed legislation to suspend level 3 developer fees,
which means that, once state new construction funds are
exhausted, districts will not have the ability to levy
higher fees to developers to cover their school facility
construction costs until 2014.
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The proposed budget for K-12 school districts relies
upon a voter approved tax initiative, and contains
automatic trigger cuts in order to accommodate that lost
revenue should the measure fail passage.
What is the cumulative effect of these policy and fiscal
decisions on school districts? In light of the existing
budgetary challenges faced by school districts, is this an
appropriate time to enact another state reimbursable
mandate or impose additional fiscal burdens upon school
districts?
Flexibility versus overall benefits . According to the
Senate Education Committee analysis, under existing law,
schools districts may prequalify contractors if they choose
and are authorized to develop their own rating systems and
questionnaires for this purpose. This bill requires a
school district that uses state bond funds to prequalify
prime contractors, and specified subcontractors and to use
a questionnaire that includes, at a minimum, the issues
covered by the standardized questionnaire and model
guidelines for rating bidders developed by the DIR.
This bill has been amended from prior versions seen by the
Senate Education Committee to limit its application to
school districts with an ADA of 2,500 or more and to
projects that involve expenditures of $1 million or more,
thereby affecting approximately one-third of school
districts. As a pilot project, this bill allows the
opportunity, to inform policymakers whether requiring
prequalification ultimately results in benefits to both the
district and the state.
Prior Legislation
SB 258 (Oropeza, 2010) would have required school districts
to prequalify contractors on public works projects
exceeding $1 million, pursuant to specified procedures.
The bill was held under submission in the Assembly
Appropriations Committee.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
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According to the Senate Appropriations Committee, bond,
substantial ongoing cost pressure on Proposition 1D funding
and all future K-12 construction bonds.
SUPPORT : (Verified 8/24/12)
California Association of Sheet Metal and Air Conditioning
Contractors'
California Legislative Conference of the Plumbing, Heating
and Piping
Industry
National Electrical Contractors Association, California
Chapter
State Building and Construction Trades Council, AFL-CIO
OPPOSITION : (Verified 8/24/12)
Association of California Construction Managers
California County Superintendents Educational Services
Association
California School Board Association
Coalition for Adequate School Housing
Construction Employers' Association
County School Facilities Consortium
California Association of School Business Officials
Riverside County School Superintendents' Association
ARGUMENTS IN SUPPORT : According to the author's office,
because current law requires school districts to use the
lowest bidder, many unqualified contractors are being
awarded school construction projects with little or no
experience in school construction. The author's office
contends that these contractors lack the financial
fortitude to accomplish a project on time and on budget,
may file an exorbitant amount of change orders that
increase project costs, and that in many instances cut
corners that produce defects, prevailing wage violations
and unsafe working conditions for workers. According to
the author's office, this bill will allow school districts
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.
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ARGUMENTS IN OPPOSITION : Opponents argue under existing
law, school districts and county offices of education
(COEs) already have the ability to prequalify bidders for
construction projects when local circumstances dictate, and
have the flexibility to develop questionnaires and rating
systems to fit those same circumstances. This bill
erroneously assumes that one size fits all - given the
unique characteristics of each community and region, the
requirement to replicate DIR's questionnaire may impair a
district's ability to respond to local conditions. This
bill also creates a costly new mandate that would require
significant additional work for school districts and COEs.
Prequalification will be particularly burdensome due to the
frequent use of multi-prime contacts, where as many as
30-40 contractors may be involved in a single project. In
addition, 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 at a time when they can lease afford
it.
ASSEMBLY FLOOR : 53-22, 5/30/12
AYES: Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill,
Block, Blumenfield, Bonilla, Bradford, Brownley,
Buchanan, Butler, Charles Calderon, Campos, Carter,
Chesbro, Davis, Dickinson, Eng, Feuer, Fong, Fuentes,
Furutani, Galgiani, Gatto, Gordon, Hall, Hayashi, Roger
Hern�ndez, Hill, Huber, Hueso, Huffman, Lara, Bonnie
Lowenthal, Ma, Mendoza, Mitchell, Monning, Nestande, Pan,
Perea, V. Manuel P�rez, Portantino, Skinner, Solorio,
Swanson, Torres, Wieckowski, Williams, Yamada, John A.
P�rez
NOES: Achadjian, Conway, Cook, Donnelly, Beth Gaines,
Garrick, Grove, Hagman, Harkey, Jeffries, Jones, Knight,
Logue, Mansoor, Miller, Morrell, Nielsen, Norby, Olsen,
Silva, Smyth, Wagner
NO VOTE RECORDED: Cedillo, Fletcher, Gorell, Halderman,
Valadao
PQ:dk 8/25/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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