BILL ANALYSIS �
SB 600
Page 1
Date of Hearing: June 21, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 600 (Rubio) - As Amended: May 11, 2011
SENATE VOTE : 26-14
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
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less than 2,500 from the provisions of this bill.
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, "This
bill will help ensure quality construction of California schools
at the lowest price by requiring that school districts
prequalify 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."
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
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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
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
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projects to use prequalification, regardless of cost.
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 receiving 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 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 contractor 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 produces defects, prevailing wage violations, and
unsafe working conditions for workers. Under these
circumstances, the students, the school district, the taxpayers,
the workers, and the qualified contractor all lose.
"School districts may also have experienced excessive change
orders during the construction process from contractors. These
contractors often fail to deliver a project on schedule. Also,
it is important to note that some projects will require a
specialized contractor that has experience with specified
construction techniques? SB 600 addresses these issues by
ensuring school districts develop a process that meets 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 design
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
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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."
Opposition . According to the County School Facilities
Consortium (CSFC), "The prequalification of bidders can already
be done under current law. CSFC believes that SB 600 will
result in schools having to use additional time and scarce
resources for project administration, management, and legal
services, thus increasing more project expenditures. In
addition, the prequalification mandate will require an appeals
process. Further costs may occur due to project delays while
appeals and challenges are heard and go through this process.
The language in this bill usurps the flexibility that County
Offices of Education have to determine their own
prequalification documents based on their local bid market or
other local technical or experiential concerns for the
uniqueness of a given project."
According to the Association of California Construction Managers
(ACCM), "ACCM believes that school districts' elected school
boards should be allowed to exercise their judgment on what is
the most effective means of ensuring the delivery of their
school facility project. Currently, school districts provide
half or more of the cost of school projects through local funds
and have an incentive to select delivery methods that are most
efficient and effective. By mandating prequalification, school
districts would lose the option of alternative selection
processes or expanded bidding pool.
"Requiring prequalification will increase school district cost
in the bid selection process, particularly when a school
district chooses to use the Multiple Prime (MP) construction
delivery mechanism. MP has, as the name indicates, more than
one prime contractor for the school facility project.
Frequently, there are up to 20-30 prime contractors and
subcontractors. A significant number of prequalification
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packages would be made in order to select the contractors
providing different services as part of the school construction
or modernization project.
"Requiring the prequalification document to be similar to the
DIR �model] will greatly increase the amount of paperwork that
must be submitted, greatly increase school district requirements
to review that paperwork, increase cost for the school district
in the review process, and increase cost of a school facility
project. In the current bid climate, MP contracting provides
the most cost-effective means of constructing a school facility
project. This is because there is greater opportunity from
multiple low bids that when consolidated are lower than what has
been occurring with a general contractor submitting a bid. ACCM
is concerned that these cost increases will reduce the ability
of school districts to provide quality school facilities in the
most cost-effective manner."
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.
Double-referred . This bill is double-referred to Assembly
Education Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
State Building and Construction Trades Council (sponsor)
California Labor Federation
California Legislative Conference of the Plumbing, Heating and
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Piping Industry
National Electrical Contractors Association, California Chapters
Opposition
Association of California Construction Managers
California Association of School Business Officials
California School Boards Association
California's Coalition for Adequate School Housing
Clovis Unified School District
County School Facilities Consortium
Cupertino Union School District
Darden Architects, Inc.
Kern Union High School District
Ledesma & Meyer Construction Co., Inc.
PLUM Architects
Riverside County School Superintendents' Association
Small School Districts' Association
Wiseburn School District
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301