BILL ANALYSIS �
SENATE COMMITTEE ON EDUCATION
Alan Lowenthal, Chair
2011-2012 Regular Session
BILL NO: SB 835
AUTHOR: Wolk
AMENDED: June 30, 2011
FISCAL COMM: Yes HEARING DATE: September 1, 2011
URGENCY: No CONSULTANT:Daniel Alvarez
NOTE:
This bill has been referred to committee pursuant to Senate Rule
29.10 because Assembly amendments either deleted or
substantially changed the version of the bill that passed the
Senate earlier this year. At today's 29.10 hearing, the
committee may not amend the bill further and may only hold the
bill or return the bill as approved by the committee to the
Senate floor.
SUBJECT : University of California: Best Value Procedures.
SUMMARY
This bill extends the sunset and expands the application of the
University of California (UC) San Francisco pilot program - to
all UC campuses and medical centers - to award construction
contracts on a "best value" basis, rather than just the lowest
responsible bid. The sunset would be extended from January 1,
2012, to January 1, 2017.
BACKGROUND
Current law authorizes the University of California (UC) to
conduct a pilot program, from January 2007 through December
2011, at their San Francisco campus that allows for construction
contracts to be awarded on a "best value" basis, rather than
just to the lowest bid. (Public Contract Code � 10506.4 et.
seq.)
"Best value" means a procurement process whereby the lowest
responsible bidder may be selected on the basis of objective
criteria with the resulting selection representing the best
combination of price and qualifications.
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ANALYSIS
This bill:
1) Expands the "best value" pilot program to all UC campuses
and medical centers for construction projects exceeding $1
million.
2) Extends the sunset for the expanded pilot program from
January 1, 2012, to January 1, 2017, whereby the UC is
permitted to award construction contracts on the basis of
"best value" rather than just to the lowest bid.
3) Clarifies that the UC Regents will adopt and publish
guidelines for evaluating the qualifications of bidders
when awarding contracts based on "best value" procedures.
4) Redefines "best value" to mean a procurement process
whereby the lowest responsible bidder may be selected on
the basis of objective criteria for evaluating the
qualifications of bidders with the resulting selection
representing the best combination of price and
qualifications.
5) Requires UC to submit a report to the Legislature, by
January 1, 2016, that describes the various aspects of the
implementation of the program, including an assessment of
project performance and a summary of any delays or
increases in costs.
STAFF COMMENTS
1) Need for the bill . According the University of California,
the sponsor of the bill, "best value" contracting ensures
that there is a match between the price proposed and the
capability of the contractor to perform the work. Use of
the best value method of evaluation to select a contractor
allows the university to take into account both the
proposed price and other defined criteria, including
financial condition, relevant experience and demonstrated
management competency.
2) As passed by the Senate , the "best value" approach applied
only to UCSF campus and extended the pilot program sunset
to January 2015, with a report to the Legislature due
January 2012.
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3) Additional Background . Chapter 367, Statutes of 2006 (SB
667, Migden) established a five-year pilot program
(1/1/2007 - 12/31/2011) authorizing UCSF to assign a
"qualification score" to each construction contractor's bid
which could, when divided into the bidder's price, impact
determination of the lowest cost per quality point based
upon five factors which impart best value to the
University. The five statutory non-price factors are (1)
financial condition, (2) relevant experience, (3)
demonstrated management competency, (4) labor compliance,
and (5) safety record of the bidder.
4) Interim Report . In February 2010, the UC issued an interim
report on the "Best Value Pilot Program." Since the pilot
was initiated, UCSF reports having awarded 23 contracts
totaling $158.3 million under the program - the executive
summary indicates the following:
a) A decrease in bid protests, communication
problems, disputes, the need for multiple inspections
and re-work, change order requests and claims, and
litigation;
b) An increase in incentives for contractors to
perform high-quality work safely, while adhering to
high-labor standards;
c) Increased likelihood of contractors staffing a
project with their best workers and to choose
subcontractors which are most appropriate for the work
(rather than "low bid");
d) A reduction in administrative oversight and
contract/project management staff time.
UCSF believes that the Best Value Construction Pilot
Program has demonstrated that this selection method results
in contracts with a higher success rate in terms of price,
quality, and timely completion. Based on the volume of
construction contracts bid in 2009 and 2010 - and applying
the most conservative estimate of savings to that number
based on Pilot Program experience (savings = two percent of
contract value) - UCSF would expect to yield approximately
$30 million in annual savings. In addition, UCSF notes
that savings also accrue from avoiding costs associated
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with bid protests, claims, and litigation.
5) According to opponents the selection of a contractor based
on "best value" qualifications may lead to favoritism and
fraud. The lowest responsible bidder is an objective
standard devoid of interpretation.
6) Senate Rule 29.10 . This bill has been referred to
committee pursuant to rule 29.10 because Assembly
amendments either deleted or substantially changed the
version of the bill that passed the Senate earlier this
year. At today's 29.10 hearing, the committee may not
amend the bill further and may only hold the bill or return
the bill as approved by the committee to the Senate floor.
7) Assembly votes .
Floor: 50-23
Appropriations: 10-5
Business, Professions and Consumer Protection Committee:
6-1
SUPPORT (as of 10am Wednesday 8/30)
University of California
California Legislative Conference of the Plumbing, Heating and
Piping Industry
Associated General Contractors
National Electrical Contractors Association - California Chapter
OPPOSITION (as of 10am Wednesday 8/30)
Engineering and Utility Contractors Association
Southern California Contractors Association