BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1280|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SB 1280
Author: Pavley (D)
Amended: 5/2/12
Vote: 21
SENATE EDUCATION COMMITTEE : 9-0, 4/25/12
AYES: Lowenthal, Alquist, Blakeslee, Hancock, Huff, Liu,
Price, Simitian, Vargas
NO VOTE RECORDED: Runner, Vacancy
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Public contracts: University of California and
California
Community College districts
SOURCE : Glendale Community College District
Kern Community College District
Los Angeles Community College District
Peralta Community College District
San Bernardino Community College District
San Diego Community College District
San Jose-Evergreen Community College District
University of California
West Kern Community College District
Yosemite Community College District
DIGEST : This bill, until January 1, 2018, authorizes a
California Community College (CCC) district and the
University of California (UC) to let any contract for
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expenditures greater than $50,000 and $100,000,
respectively for the purchase of supplies and materials in
accordance with "best value" policies as adopted by the
local governing board, and UC Regents, respectively.
ANALYSIS : Existing law requires a community college
governing board to let any contract involving an
expenditure of $50,000 or more for purchase of equipment,
materials, supplies repairs and services, other than
construction services, to the lowest responsible bidder or
to reject all bids.
Existing law also requires that the Regents of the UC let
any contract involving an expenditure of $100,000 or more
for purchase of equipment, materials, supplies repairs and
services, other than construction services, to the lowest
responsible bidder or to reject all bids.
Existing law also authorizes school districts to consider,
in addition to price, factors such as vendor financing,
performance reliability, standardization, life-cycle costs,
delivery timetables, support logistics, the broadest
possible range of competing products and materials
available, fitness of purchase, manufacturer's warranties,
and similar factors in the award of contracts for
technology, telecommunications, related equipment,
software, and services, in recognition of the highly
specialized and unique nature of these items and services,
and the rapid technological changes they undergo. Existing
law specifically limits this authority to the procurement
this type of equipment and prohibits its application to
contracts for construction or the procurement of any
product available in substantial quantities to the general
public.
Existing law authorizes Municipal Utility Districts (MUDs)
to let contracts for the purchase of supplies and materials
in excess of $50,000 in accordance with "best value at the
lowest cost acquisition" policies adopted by the local
governing board and outlines specific elements to be
included in these policies.
This bill:
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1. Authorizes community college districts, until January 1,
2018, to use best value contracting, pursuant to
policies adopted by the local governing board, for the
purchase of supplies and materials when the expenditure
exceeds $50,000 and the district determines that it can
expect long-term savings through the use of objective
performance criteria other than price.
2. Defines "best value" as value determined by objective
performance criteria that may include, but are not
limited to:
Price features.
Long-term functionality.
Life-cycle costs.
Overall sustainability.
Required services to make operational for the
community college.
Other criteria deemed appropriate by the
community college district.
3. Requires that a CCC district adopting best value
policies consider all of the following:
Price and service level proposals that reduce
overall operating costs, including end-of-life
expenditures and impacts.
Equipment, services, supplies and materials
standards that support strategic acquisition and
management program direction.
A procedure for bid protest and resolution.
4. Authorizes consideration of the following factors:
Total cost to the district, as specified.
Operational cost or benefit as a result of a
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contract award.
Added value to the district of vendor-added
services.
Quality and effectiveness of supplies, materials,
and services.
Reliability of delivery or installation schedules.
Terms and conditions of product warranties and
vendor guarantees.
Financial stability of the vendor.
Vendor's quality assurance program.
Vendor experience.
Consistency of the vendor's program, as specified,
with the district's supplies and materials procurement
program.
Economic benefits to the local community,
including, but not limited to job creation or
retention.
Environmental benefits to the local community.
5. Requires the contract be awarded to the bidder whose
proposal is determined, in writing, to be the best value
to the district based solely upon the criteria set forth
in the request for proposal.
6. Requires the local governing board to issue written
notice of intent to award, as specified, and to publicly
announce its award, identify the winning bidder and the
details of the winning proposal, as specified, and with
the notice and contract file sufficient to satisfy an
external audit.
7. Requires the district to ensure all businesses have a
fair and equitable opportunity to compete for and
participate in district contracts and that
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discrimination, as defined in specified law, does not
occur.
8. Requires a district opting to use this authority to
report specified information by January 1, 2016, to the
Chancellor's Office.
9. On or before February 1, 2017, the Legislative Analyst
Office (LAO) shall report to the Legislature on the use
of best value procurement by the UC.
10.Establishes parallel authority, requirements, and
responsibilities to the UC with the following
differences:
Applies the best value authority to contracts of
$100,000 or more.
Authorizes best value when the UC determines it
can expect long term savings through the use of
life-cycle cost methodology, the use of more
sustainable goods and material, and reduced
administrative costs.
Defines "best value" as the most advantageous
balance of price, quality, service, performance and
other elements, as defined by the university and
achieved as delineated in the bill.
Applies its provisions to all campuses of the UC
including medical centers, national laboratories, and
any future UC locations.
Clarifies that the best value authority granted
by the bill applies solely to the procurement of
goods, materials, or services and prohibits its
application to construction contracts.
11.Sunsets the best value authorities extended to both the
CCC and the UC on January 1, 2018.
Comments
I. Experience with best value contracting . This bill
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proposes best value contracting for the acquisition of
goods and services. While this will be the first
attempt authorized for educational entities, best value
has been authorized and used in other instances.
A. Best value contracting for goods and services . The
provisions of this bill are generally patterned after
the authority extended to MUDs which appear to be the
only sector of state government currently authorized
to use best value contracting for the acquisition of
goods and services. AB 793 (Cox), Chapter 665,
Statutes of 2001, authorizes MUDs to use best value
procurement for individual supplies and materials
purchased over $50,000 until 2007. SB 1169 (Cox),
Chapter 248, Statutes of 2006, extends this authority
on a limited basis, making the statute permanent for
those that used the process before January 1, 2006.
However, any MUD that did not use the "best value"
contract process prior to January 1, 2006, but now
elects to use the process, must submit a specified
report to the Legislative Analyst on or before January
1, 2011. If best value contracting is not utilized by
a MUD during this period, the authority to do so
expires on January 1, 2012.
B. Best value contracting in construction projects .
Best value contracting has generally been recognized
as a viable alternative for construction projects.
Traditionally, construction projects have been bid out
and awarded based upon a "lowest-cost" approach. Best
value, a competitive contracting process, allows
projects to be awarded to the contractor offering the
best combination of price AND qualifications, instead
of just the lowest bid. In California, for example,
design-build best value is a method of project
delivery/procurement based on combining the
requirements for designing and constructing a project
into one contract. In addition to submitting bids for
project cost, prospective design-build teams also
submit technical proposals. The technical proposals
are evaluated based on evaluation criteria, and scores
are compiled. The scores are then used to weigh or
adjust the submitted bid price. The contract is
awarded to the design-build team with the best value.
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The Senate Education Committee recently heard and
passed SB 1509 (Simitian, 2012) which eliminates the
sunset on the authority of CCC and K-12 districts to
use design-build for their construction projects.
C. Best value contracting for technology equipment .
Best value contracting has also been used for the
acquisition of technology, telecommunications and
related equipment. As noted in the background of this
analysis, school districts are granted this authority,
but specifically prohibited from applying this
authority to contracts for construction or to the
procurement of any product available in substantial
quantities to the general public. Similarly, MUDs
serving more than 250,000 customers have been
authorized to use best value procurements to acquire
information technology and industry specific
equipment. This specific authority was repealed in
2006.
II. Related LAO study . According to its 2006 statutorily
required report on the use of best value procurement by
MUDs, the LAO opines that best value procurement can
provide MUDs with an important tool. The LAO also notes
that an organization must make the up-front investment
necessary to support such procurement through staff
training and develop procurement requirements that
promote the organization's strategic goals. The LAO
also noted that, early on, best value procurements could
be time-consuming and cumbersome as bid evaluation
criteria are developed and fine-tuned.
III. Broader discretion . In 2011, issues and concerns were
raised around the implementation of the Los Angeles
Community College District's (LACCD) construction
program. An independent panel was appointed by the
District's Chancellor to review the district's
rebuilding projects and recommend changes to ethics
rules and construction oversight. In January 2012, the
panel recommended that district implement stronger
financial controls, modify construction management
structures and implement new procedure to ensure all
actions within the building program met the highest
ethical standards. The panel also determined that the
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building program generally had achieved "a good level of
success" in the number of projects that had been
completed. The LACCD reports that it has taken numerous
steps to reform its building program by strengthening
the District Citizen's Oversight Committee, directing
the preparation of a master budget plan, and
implementing cost controls.
Prior Legislation
This bill is almost identical to AB 2448 (Furutani, 2010)
and AB 2550 (Furutani, 2008), with the exception that these
bills did not include the provisions regarding the UC.
Both bills were vetoed by the Governor whose veto messages
read, in pertinent part:
AB 2448 (Furutani, 2010) - This bill is substantially
the same as legislation I have vetoed in the past
because it may allow subjective methods to govern the
bidding process for procurement of supplies and
materials, which could be more open to manipulation and
abuse in the ultimate bid selection. Such abuse could
lead to non-competitive bidding and higher costs to the
State's taxpayers and community college students.
AB 2550 (Furutani, 2008) - I support the notion that
best value contracting is a reasonable alternative for
construction projects which allows projects to be
awarded based on a combination of best price and
qualifications because construction projects represent
a large, long term investment of resources. However, I
am concerned that this legislation may allow subjective
methods to govern the bidding process for procurement
of supplies and materials with a relatively short life
cycle, which could be more open to manipulation and
abuse in the bid selection process.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 5/22/12)
Glendale Community College District (co-source)
Kern Community College District (co-source)
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Los Angeles Community College District (co-source)
Peralta Community College District (co-source)
San Bernardino Community College District (co-source)
San Diego Community College District (co-source)
San Jose-Evergreen Community College District (co-source)
University of California (co-source)
West Kern Community College District (co-source)
Yosemite Community College District (co-source)
ARGUMENTS IN SUPPORT : According to the author's office,
awarding contracts on the basis of "lowest responsible
bidder" does not always result in the ability to purchase
supplies and materials in the most cost effective and
economic manner. An ability to consider criteria other
than price (such as longevity of product, sustainable
characteristics, operating expenses) and the ability to
include additional discounts and services are necessary.
This bill provides the ability to structure a competitive
bid process that recognizes life cycle cost, sustainable
characteristics and efficiency in the acquisition process.
According to the author's office, this bill allows the UC
and the CCC the ability to stretch scarce funds as far as
possible by giving them the flexibility to make wise
procurement decisions.
PQ:do 5/22/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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