BILL ANALYSIS �
AB 1581
Page 1
Date of Hearing: May 7, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1581 (Buchanan) - As Amended: April 10, 2014
Policy Committee: EducationVote:7-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill requires school districts entering into specified
school building lease contracts to comply with the requirements
to prequalify and rate prospective bidders, if the project is
funded with state bond funds, the expenditure for the project is
$1 million or more, and the average daily attendance (ADA) of
the school district is more than 2,500. Specifically, this
bill:
1)Specifies that if a lease-leaseback project or a lease-to-own
project is funded by state school facilities bond funds and
the project is $1 million or more, the person, firm or
corporation that constructs the building, including, but not
limited to, the prime contractor and if used, the electrical,
mechanical, and plumbing subcontractor, shall be required to
comply with the prequalification requirements, including the
requirement to complete and submit a standardized
prequalification questionnaire and financial statement that is
verified under oath and is not a public record.
2)Specifies the requirement for a governing board of a school
district to adopt and apply a uniform system of rating bidders
on the basis of the completed questionnaires and financial
statements applies to a person, firm, or corporation that
constructs a building specified in the lease-leaseback and
lease-to-own sections of the law.
3)Authorizes a school district to require the completed
questionnaire and financial statement for prequalification to
be submitted more than 10 business days prior to the fixed
date for the public opening of sealed bids. Authorizes a
school district to require a bidder to be prequalified more
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than five business days prior to the fixed date.
4)Specifies that "bidders" include a prime contractor that is
either a general engineering contractor or a general building
contractor as defined in Section 7056 and 7057, respectively,
of the Business and Professions Code, and if utilized, each
electrical, mechanical and plumbing contractor, whether as a
prime contractor or as a subcontractor.
5)Authorizes a school district to require the list of
prequalified general contractors and electrical, mechanical,
and plumbing subcontractors to be made available more than
five business days prior to the fixed dates for the public
opening of sealed bids.
6)Specifies that the provisions of this bill apply only to
contracts awarded on or after January 1, 2015
FISCAL EFFECT
1)Unknown, state-reimbursable General Fund/Proposition 98 costs
to school districts to establish or modify a prequalification
process. Most districts have an established prequalification
process pursuant to existing law governing public works
contracts utilizing state facility bond funds. Additionally,
some districts, such as Los Angeles Unified School District,
already require a prequalification process for lease-leaseback
and lease-to-own contracts. Additional costs would be incurred
to address appeals from contractors denied qualification. For
example, if this process added 0.1% to project costs, for
every $100 million in state-funded school construction
projects, state mandated costs would be $100,000.
2)Minor/absorbable costs to the Office of Public School
Construction as the bill clarifies existing law and practice
related to lease-leaseback agreements.
COMMENTS
1)Purpose. Under current law, school districts are required to
competitively bid any public works contract over $15,000 and
award the contract to the lowest responsible bidder. AB 1565
(Fuentes), Chapter 808, Statutes of 2012, requires, until
January 1, 2019, school districts using state school
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facilities bond funds to establish a prequalification process
whereby a prospective bidder, and any electrical, mechanical
and plumbing subcontractors, of a public works contract with a
projected expenditure of $1 million or more, is required to
complete a standardized questionnaire provided by the district
and submit a financial statement.
This bill clarifies that the entity constructing a building,
and if utilized, an electrical, mechanical, and plumbing
subcontractor, under a lease-leaseback and lease-to-own
contract must comply with the prequalification process if the
project meets the requirements specified in AB 1565 (the
school district has more than 2,500 ADA, is using state bond
funds, and the project is $1 million or more).
According to the sponsor, the State Building and Construction
Trades Council, unqualified contractors cut corners that
produce defects and cost overruns, violate prevailing wage law
and create an unsafe working condition for workers.
Prequalification can provide useful information to school
districts required to accept the lowest responsible bidder on
public works contracts. Some school districts have been
advised that prequalification only applies to "bidders," and
as there are no "bidders" in a lease-leaseback process,
prequalification does not apply. This bill clarifies that
prequalification was intended to apply to any school facility
project that uses state bond funds.
2)Background . Current law authorizes school districts to design
their own questionnaire, but requires the questionnaire to
cover the issues contained in the standardized questionnaire
and model guidelines for rating bidders developed by the DIR.
The questionnaire may require contractors to provide
information regarding the company and its financial status,
including bankruptcy or civil lawsuits; licensing information;
prior contracting experience; and violation of federal, state
or local laws, including prevailing wage.
Lease-leaseback allows a school district, without advertising
for bid, to rent district property for a minimum of $1 a year,
to any person, firm or corporation. The person, firm or
corporation constructs the school building and rents the
facility back to the school district. At the end of the
lease, the district resumes title to the building and site.
In practice, some school districts have used state and local
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bond funds to make construction payments during construction.
The lease is terminated when the building is constructed.
In a lease-to-own agreement, the school district, through a
bidding process, may enter into a contract with a person,
firm, or corporation with the lowest bid, under which that
entity that receives the contract will construct the building
on a designated site and lease the property to the school
district. The school district gets the title at the end of
the lease.
Analysis Prepared by : Misty Feusahrens / APPR. / (916)
319-2081