BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Alan Lowenthal, Chair
2011-2012 Regular Session
BILL NO: SB 600
AUTHOR: Rubio
AMENDED: March 24, 2011
FISCAL COMM: Yes HEARING DATE: May 4, 2011
URGENCY: No CONSULTANT:Kathleen Chavira
SUBJECT : School District Bidding Requirements
SUMMARY
This bill requires a school district to pre-qualify
prospective bidders, as specified, for any school facility
construction project that receives funds under the state
School Facility Program. The bill also requires school
districts that opt to pre-qualify bidders for a contract to
use specified processes "substantially similar" to those
developed by the Department of Industrial Relations (DIR).
BACKGROUND
Current 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 (as
defined) involving an expenditure of $15,000 or more.
(Public Contract Code � 20111)
Current law also authorizes the governing board of the
district to require pre-qualification 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 pre-qualification 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
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initial prequalification. (Public Contract Code � 20111.5)
Current law 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 pre-qualification of prospective
bidders for a contract. Generally, these procedures
parallel those that existed for school districts. In
addition, AB 574 established the right of a bidder to
dispute the public entities 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
pre-qualification.
(Public Contract Code � 20100, � 20101)
ANALYSIS
This bill :
1) Requires a school district that opts to pre-qualify
prospective bidders for a contract to use a rating
system and questionnaire "substantially similar" to
the model guidelines for rating bidders and the
standardized questionnaire developed by the DIR for
use by public entities for this purpose under the
Local Agency Public Construction Act (LAPCA).
2) Requires a school district to pre-qualify prospective
bidders for any school facility construction project
that receives funds under the Leroy Green School
Facilities Act of 1998. More specifically it:
a) Requires a district that does not
use the procedures for pre-qualification
established for school districts, to use the
prequalification procedures established for other
public agencies under the LAPCA.
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b) For districts that use the school
district procedures for prequalification,
requires that the rating system and questionnaire
be "substantially similar" to those developed by
the DIR for use by other public entities.
c) Requires that subcontractors also be
prequalified.
3) Clarifies that the procedures for pre-qualification of
prospective bidders by a school district do not
preclude a local school district governing board from
prequalifying or disqualifying a subcontractor.
4) Clarifies that disqualification of a subcontractor by
a school district governing board does not disqualify
an otherwise prequalified contractor.
STAFF COMMENTS
1) Need for the bill . According to the author, "With
the recent economic downturn many school districts
have been receiving bids from contractors who have
never worked on public works projects, particularly
large school construction projects. Under current law,
school districts that do not use prequalification are
compelled to award a contract to the lowest bidder
even if that contractor is unqualified, does not have
the financial fortitude to finish the projects, and
may file an exorbitant amount of change orders because
they under bid the project. In many instances this
also leads to cutting corners that produce defects,
prevailing wage violations and unsafe working
conditions for workers." According to the author, 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.
2) Why only school districts ? AB 574 (Hertzberg, Chapter
972, Statutes of 1999) extended the authority to
pre-qualify contractors to all public agencies.
Currently, however, no government entity of any type
is required to pre-qualify contractors. California has
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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 pre-qualification
is necessary to ensure the state's substantial
investment results in quality public school
construction.
3) Limits flexibility . Under current law, schools
districts may pre-qualify contractors if they choose
and are authorized to develop their own rating systems
and questionnaires for this purpose. This bill would
require a school district that opts to pre-qualify
bidders for a contract, whether it accepts state bond
funds or not, to use a questionnaire and uniform
rating system that is "substantially similar" to that
developed by the DIR. A school district that does use
state bond funds is required to pre-qualify all
bidders, including subcontractors, for that project
and required to use the DIR developed models for
evaluating and rating bidders, as specified.
Some school districts do use pre-qualification and
employ questionnaires and rating systems which are
similar to those developed by the DIR (Los Angeles
Unified School District, for example). But is a
process that works for a district like LAUSD
appropriate for all districts? Should a district's
ability to determine when pre-qualification is
necessary and to tailor pre-qualification criteria to
meet their unique needs be compromised? Is there
evidence that requiring pre-qualification is necessary
to ensure good construction decisions and practices by
school districts? Does pre-qualification make sense
for districts with a limited construction program or
with a limited number of bidders for their projects?
4) Prior legislation/Mandated costs . SB 258 (Oropeza,
2010) would have required school districts to
prequalify contractors on public works projects
exceeding $1 million, pursuant to specified
procedures.
The Assembly Appropriations Committee analysis of SB
258 noted unknown, but significant ongoing
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state-reimbursable General Fund (Proposition 98) costs
to school districts related to establishing and
administering the prequalification process. The
analysis also noted that additional costs would be
incurred to address appeals from contractors denied
qualification. To the extent the pre-qualification
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.
According to the analysis, if the pre-qualification
process added 0.5% to project costs, for every $500
million in school construction projects exceeding $1
million, state mandated costs would be $2.5 million.
SB 258 was held under submission in the Assembly
Appropriations Committee.
SUPPORT
Associated General Contractors
California Labor Federation
California Legislative Conference of the Plumbing, Heating,
and Piping Industry
National Electrical Contractors Association - California
Chapter
PW Construction, Inc.
State Building and Construction Trades Council, AFL-CIO
OPPOSITION
Association of California Construction Managers
California Association of School Business Officials
Clovis Unified School District
Coalition for Adequate School Housing
County School Facilities Consortium
Kern Union High School District
Small School Districts' Association
Wiseburn School District