BILL ANALYSIS �
SB 1280
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Date of Hearing: July 3, 2012
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Marty Block, Chair
SB 1280 (Pavley) - As Amended: June 26, 2012
SENATE VOTE : 33-0
SUBJECT : Public contracts: University of California and
community college districts: competitive bidding: best value.
SUMMARY : Authorizes a California Community College (CCC)
district and the University of California (UC), until January 1,
2018, to let any contract for 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.
Specifically, this bill :
1)Authorizes CCC 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:
a) Price features.
b) Long-term functionality.
c) Life-cycle costs.
d) Overall sustainability.
e) Required services to make operational for the community
college.
f) Other criteria deemed appropriate by the community
college district.
3)Requires that a CCC district adopting best value policies
consider all of the following:
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a) Price and service level proposals that reduce overall
operating costs, including end-of-life expenditures and
impacts.
b) Equipment, services, supplies and materials standards
that support strategic acquisition and management program
direction.
c) A procedure for bid protest and resolution.
4)Authorizes consideration of the following factors:
a) Total cost to the district, as specified.
b) Operational cost or benefit as a result of a contract
award.
c) Added value to the district of vendor-added services.
d) Quality and effectiveness of supplies, materials, and
services.
e) Reliability of delivery or installation schedules.
f) Terms and conditions of product warranties and vendor
guarantees.
g) Financial stability of the vendor.
h) Vendor's quality assurance program.
i) Vendor experience.
j) Consistency of the vendor's program, as specified, with
the district's supplies and materials procurement program.
aa) Economic benefits to the local community, including, but
not limited to job creation or retention.
bb) 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 CCC
district based solely upon the criteria set forth in the
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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 CCC district to ensure all businesses have a fair
and equitable opportunity to compete for and participate in
district contracts and that discrimination, as defined in
specified law, does not occur.
8)Requires a CCC district opting to use this authority to report
specified information by January 1, 2016, to the Chancellor's
office, and requires the Legislative Analyst Office (LAO) to
request this information and report to the Legislature, as
specified, by January 1, 2017.
9)Establishes parallel authority, requirements, and
responsibilities to UC with the following differences:
a) Applies the best value authority to contracts of
$100,000 or more.
b) Authorizes best value when 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.
c) Defines "best value" as the most advantageous balance of
price, quality, service, performance and other elements, as
defined by UC and achieved as delineated in the bill.
d) Applies its provisions to all UC campuses, including
medical centers, national laboratories, and any future UC
locations.
e) Clarifies that the best value authority granted by this
bill applies solely to the procurement of goods, materials,
or services and prohibits its application to construction
contracts.
10)Requires UC to provide specified information to the LAO
before July 1, 2016, and requires LAO to report to the
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Legislature on the use of best value procurement by the UC, as
specified, by February 1, 2017.
11)Sunsets the best value authorities extended to both CCC and
UC on January 1, 2018.
EXISTING LAW :
1)Requires a CCC 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. (Public Contract Code � 20651)
2)Requires that the UC Regents 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. (PCC � 10507.7)
3)Authorizes UC to use best value for construction projects
valued over $1 million until January 1, 2017. (PCC � 10506.4)
4)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. (PCC � 20118.2.)
5)Authorizes Municipal Utility Districts 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. (Public
Utilities Code � 12751.3)
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FISCAL EFFECT : This bill was approved by the Senate
Appropriations Committee pursuant to Senate Rule 28.8.
COMMENTS : Need for this bill . According to the author, UC and
CCC can only consider up-front costs for the acquisition of
materials, equipment, services, and supplies. In many cases,
this process prevents these public institutions from purchasing
products in the most cost effective manner. This bill would
allow, on a five-year pilot basis, UC and CCC to structure a
competitive bid process using best value procurement, allowing
them to consider factors such as life-cycle costs, servicing
costs, durability, and factors other than price. In order to
stretch their scarce funds, UC and CCC should have the
flexibility necessary to be able to make wise procurement
decisions.
Use of best value in California . This bill proposes best value
contracting for the acquisition of goods and services. While
this would be the first attempt authorized for educational
entities, best value has been authorized and used in other
instances.
1)Best value contracting for goods and services. The provisions
of this bill are generally patterned after the authority
extended to Municipal Utility Districts (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,
authorized 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, extended 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 has since elected to use the
process, must have submitted a specified report to the LAO on
or before January 1, 2011. If best value contracting was not
utilized by a MUD during this period, the authority to do so
expired on January 1, 2012.
2)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
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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. SB 1509 (Simitian), pending in the Assembly Education
Committee, would eliminate the sunset on the authority of CCC
and K-12 districts to use design-build for their construction
projects. SB 835 (Wolk), Chapter 636, Statutes of 2011,
authorized UC to use best value for construction projects
valued over $1 million until January 1, 2017, extending and
expanding a pilot program established by SB 667 (Migden),
Chapter 367, Statutes of 2006.
3)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.
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.
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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 UC. Both bills were vetoed by the Governor
Schwarzenegger, 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.
REGISTERED SUPPORT / OPPOSITION :
Support
Community College League of California
Glendale Community College District
Kern Community College District
Los Angeles Community College District
Peralta Community College District
San Diego Community College District
San Jose-Evergreen Community College District
West Kern Community College District
Yosemite Community College District
Opposition
None of file.
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Analysis Prepared by : Sandra Fried / HIGHER ED. / (916)
319-3960