BILL ANALYSIS �
AB 1581
Page 1
ASSEMBLY THIRD READING
AB 1581 (Buchanan)
As Amended April 10, 2014
Majority vote
EDUCATION 7-0 APPROPRIATIONS 12-5
-----------------------------------------------------------------
|Ayes:|Buchanan, Olsen, Ch�vez, |Ayes:|Gatto, Bocanegra, |
| |Gonzalez, Nazarian, | |Bradford, |
| |Weber, Williams | |Ian Calderon, Campos, |
| | | |Eggman, Gomez, Holden, |
| | | |Pan, Quirk, |
| | | |Ridley-Thomas, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
| | |Nays:|Bigelow, Donnelly, Jones, |
| | | |Linder, Wagner |
| | | | |
-----------------------------------------------------------------
SUMMARY : 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 of 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 that 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
AB 1581
Page 2
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
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 Business and Professions Code Section
7056 and 7057, respectively, 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 : According to the Assembly Appropriations
Committee:
1)Unknown, likely minor, state-reimbursable General Fund and
Proposition 98 (1988) costs to school districts to establish
or modify a prequalification process.
2)Minor and absorbable costs to the Office of Public School
Construction as the bill clarifies existing law and practice
related to lease-leaseback agreements.
COMMENTS : 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 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
AB 1581
Page 3
standardized questionnaire provided by the district and submit a
financial statement.
A prequalification process is beneficial under a system where a
school district must accept the lowest responsible bidder for
public works contracts. AB 1565 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
Department of Industrial Relations. The questionnaire may
require contractors to provide detailed information regarding
the company and its financial status, including whether the
company has been in bankruptcy or involved in a civil lawsuit;
licensing information; prior contracting experience (whether the
contractor has completed other public works projects); whether
the contractor has been involved or been found to have violated
any federal, state or local laws; and whether the contractor has
violated any labor and health and safety laws, including
prevailing wage.
A rating system enables a local agency to exclude bids from
companies that do not meet minimum points. While there is no
guarantee that a company that meets minimum points may not have
financial problems or provide substandard work, this process
reduces the risk when selecting a contractor with the lowest
bid. A contractor that goes bankrupt before completion of a
project or completes a project with faulty construction will
result in increased costs to complete the project or to redo the
project and potential litigation to recoup funds a contractor
had already received.
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, who was also the
sponsor of AB 1565, some school districts have been advised that
the prequalification process only applies to "bidders," and as
there are no "bidders" in a lease-leaseback process,
prequalification does not apply. The sponsor states that
prequalification was intended to apply to any school facility
AB 1581
Page 4
project that uses state bond funds. The way the contract is
awarded is irrelevant.
Lease-leaseback is a process whereby a governing board of a
school district may, without advertising for bid, 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 bond funds to make construction
payments during construction. The lease is terminated when the
building is constructed.
In a lease-to-own agreement, the governing board of a 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.
It is important to note that the bill intends to require the
entity constructing the building (and any of the specified
subcontractors), which may or may not be the entity that entered
into the lease agreement with the school district, to comply
with the prequalification requirements.
This bill also clarifies what "bidders" means by providing cross
references to "prime contractor," "general contractor," "general
building contractor," and "subcontractors" specified in the
Business and Professions Code and the Public Contracts Code.
The bill allows a school district to require submissions of the
questionnaire and financial statements more than the 10 days
prior to a bid opening and require a contractor to be
prequalified more than five days before the fixed date.
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087
FN: 0003725
AB 1581
Page 5