BILL ANALYSIS �
SB 1280
Page 1
Date of Hearing: August 8, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1280 (Pavley) - As Amended: August 6, 2012
Policy Committee: Higher
EducationVote:8-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes a community college district (CCD) and the
University of California (UC), until January 1, 2018, to award
contracts for supplies and materials over $50,000 and $100,000,
respectively, to the lowest responsible bidder offering the
"best value," as determined pursuant to specified policies
adopted by district governing boards and by UC. Specifically,
this bill:
1) Defines "best value" as the most advantageous balance of
price, quality, service, performance, and other elements as
defined by the district board or UC.
2) Specifies procedures for districts and UC to follow in
advertising, evaluating, and awarding such contracts.
3) Requires CCDs using the above authority to report
specified information to the Chancellor's Office by January
1, 2016, and requires the Legislative Analyst's Office
(LAO) to request this information from the Chancellor's
Office by July 1, 2016, and requires UC to provide the LAO
with similar information by that date.
4) Requires the LAO to report to the Legislature by January
1, 2017 on CCD's use of this contracting method, and by
February 1, 2017 on UC's use of this contracting method,
including any recommendation as to whether this authority
should be continued.
FISCAL EFFECT
SB 1280
Page 2
1)Minor absorbable one-time costs for UC and CCDs to provide the
required information for the LAO, and for the LAO to complete
the required reports.
2)Any costs to districts would be non-reimbursable, as the bill
is discretionary.
3)To the extent UC and CCDs successfully implement best value
purchasing, significant savings could be realized over time.
UC estimates that it could save up to $20 million in five
years in computer software and hardware alone.
COMMENTS
1) Purpose . 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 purchasing products in the most cost
effective manner. SB 1280 allows UC and CCC, on a five-year
pilot basis, to structure a competitive bid process using
best value procurement, considering factors such as
life-cycle costs, servicing costs, durability, and factors
other than price. The author believes that, in order to
stretch their scarce funds, UC and CCC should have the
flexibility necessary to be able to make wise procurement
decisions. (The California State University has had
statutory authority to do best value contracting for many
years.)
2) According to UC, "With traditional, lowest price
procurement methodology, organizations often pay more over
time if the quality of a good or service is poor, or if
additional factors that were not calculated into the price
of a product during the bid evaluation process increase
costs over time. These factors include but are not limited
to: freight, delivery, maintenance, warranty terms,
service, training, energy usage, payment terms and
end-of-life disposal costs. Additionally, the use of best
value can be beneficial in the procurement of commodities
where the relative cost of the product is generally the
same in the marketplace but other services and product
features change frequently or can vary greatly among
suppliers, such as with computer hardware and software."
3) Results of Best-Value Contracting . AB 793 (Cox)/Chapter
SB 1280
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665 of 2001, authorized municipal utility districts (MUDs)
to use best value procurement for individual supplies and
materials purchases over $50,000 until 2007. (This
authority was extended in subsequent legislation.) AB 793
required MUDs electing to use this method to submit a
report to the LAO, who was required to submit an evaluation
to the Legislature. The LAO found that while low-cost
purchasing still has an important role in government
purchasing, getting the best value for a product or service
does not always mean choosing the lowest bidder. LAO also
noted that an organization must make the up-front
investment necessary to support best value procurement, and
procurement managers must ensure staff are properly trained
on the process and must help their staff develop
requirements that promote the organization's strategic
goals. LAO noted that, early on, best value procurements
can be time-consuming and cumbersome as bid evaluation
criteria are developed, but that with repeated use,
agencies can perform best value procurements with a similar
level of effort as traditional procurements. According to
LAO, based on the limited experience to date, best value
procurement authority appears to provide MUDs with an
important tool.
4) Recommended Technical Amendments . On page 6, line 30,
strike "if" and insert "when". On page 9, line 1, strike
"January" and insert "February".
5) Prior Legislation . AB 2448 (Furatani, 2010) and AB 2550
(Furutani, 2008) were both similar to this bill, but only
applied to the community colleges. Both bills were vetoed
by Governor Schwarzenegger, who while supportive in
concept, expressed concerns that the legislation could
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 bid selection
process.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081