BILL ANALYSIS �
AB 1857
Page 1
ASSEMBLY THIRD READING
AB 1857 (Frazier)
As Amended March 28, 2014
Majority vote
TRANSPORTATION 13-2 APPROPRIATIONS 13-4
-----------------------------------------------------------------
|Ayes:|Lowenthal, Linder, |Ayes:|Gatto, Bocanegra, |
| |Achadjian, Ammiano, | |Bradford, |
| |Bloom, Bonta, Buchanan, | |Ian Calderon, Campos, |
| |Daly, Frazier, Gatto, | |Eggman, Gomez, Holden, |
| |Holden, Nazarian, | |Linder, Pan, Quirk, |
| |Quirk-Silva | |Ridley-Thomas, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Wagner, Patterson |Nays:|Bigelow, Donnelly, Jones, |
| | | |Wagner |
-----------------------------------------------------------------
SUMMARY : Establishes a four-year pilot program at California
Department of Transportation (Caltrans) to test the
effectiveness of the "best value" procurement method for
purchasing and equipping heavy mobile fleet vehicles and special
equipment. Specifically, this bill :
1)Authorizes Caltrans to purchase and equip heavy mobile fleet
vehicles and special equipment using the "best value"
procurement method.
2)Defines "best value" procurement as a method of selecting a
proposal based on an evaluation of the following factors in
addition to price:
a) Total cost of ownership, including warranty, under which
all repair costs are covered by the provider, other repair
costs, maintenance costs, fuel consumption, and salvage
value;
b) Product performance, productivity, and safety standards;
c) The supplier's ability to perform to contract
requirements; and,
AB 1857
Page 2
d) Environmental benefits, including reduction of
greenhouse gas (GHG) emissions, criteria pollutant
emissions, or of toxic or hazardous materials.
1)Requires that the solicitation provided to prospective bidders
disclose minimum qualifications along with all weighted
evaluation criteria.
2)Requires Caltrans to utilize a scoring method based on the
weighted evaluation criteria and price in determining the
successful bid.
3)Limits total procurements using the "best value" procurement
method to $20 million annually.
4)Requires, on June 1, 2008, the Department of General Services
(DGS) to prepare an evaluation of the "best value" procurement
pilot, including a recommendation on whether or not the
process should be continued by Caltrans.
5)Requires the DGS evaluation to be posted on Caltrans' Internet
Web site on or before June 30, 2018.
6)Sunsets and repeals these provisions on January 1, 2019.
EXISTING LAW :
1)Requires the DGS to investigate and establish the need to
acquire all state-owned motor vehicles.
2)Requires all state agency contracts for the acquisition of
motor vehicles to be made by, or under the supervision of,
DGS.
3)Generally requires state agency contracts for goods and
services to be awarded to the lowest bidder, with exceptions
for information technology equipment, which can be procured
using a weighted value-effective acquisition process.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Caltrans indicates that about $25 million of its current $28.5
million equipment budget would be eligible for purchase within
AB 1857
Page 3
the $20 million annual limit of the pilot program. Assuming
initial costs using best value procurement could be up to 5%
greater than under competitive bidding, total annual
procurement costs could be up to $1 million greater during the
four years of the pilot program. (State Highway Account)
2)Costs per (1) could be more than offset by long-term ongoing
savings to the extent the vehicles and equipment acquired
using the best value procurement process result in lower
maintenance and repair costs, lower fuel consumption, and
higher resale value.
3)DGS would incur one-time costs of at least $150,000 to
evaluate the program, which would require comparison of all
purchase, operations and maintenance cost factors among
similar equipment procured using best value and competitive
bidding.
COMMENTS : The majority of public sector contracts in California
are awarded strictly on a low-bid basis where the contractor
submitting the lowest responsive and responsible bid is awarded
the contract. While the low-bid procurement system has a
long-standing legal precedence and has promoted open
competition, there are concerns that a system based strictly on
the lowest price does not provide the best overall product value
and can result in higher costs over the long-term.
In California, DGS sets the state procurement policies and
provides purchasing services for all state departments. In
certain circumstances, however, DGS delegates purchasing
authority to individual state departments as it has with
Caltrans for the procurement of heavy mobile fleet vehicles and
special equipment.
According to the author, the current low-bid procurement method
forces Caltrans, when purchasing heavy mobile fleet vehicles and
special equipment, to select the lowest bidder regardless of
whether or not the equipment being purchased performs better,
gets better gas mileage, has fewer GHG emissions, has improved
warranties, or has higher salvage or resale value. The author
argues that as a result, Caltrans is often forced to work with
less than adequate equipment, unreliable suppliers, limited
warranties and performance, and higher than normal maintenance
costs. This, in turn, increases costs and adversely affects
AB 1857
Page 4
Caltrans' ability to operate at peak performance to complete
critical work with minimal disruption to the travelling public.
The author introduced this bill to allow Caltrans to test a
system of procuring and equipping heavy mobile fleet vehicles
and special equipment using a "best value" procurement method.
Specifically, this bill will allow Caltrans, until January 1,
2019, to solicit bids and procure heavy mobile fleet vehicles
and special equipment based on a number of factors including
price. These factors include warranty, repair costs,
maintenance costs, fuel consumption, salvage values, product
performance, productivity, safety standards, ability of a
supplier to perform to contract requirements, and environmental
benefits including reduction of GHG emissions, air pollutants,
or toxic or hazardous materials. This bill also requires
Caltrans to disclose the minimum requirements for qualification
in a "best value" procurement solicitation that is provided to
prospective bidders and to weigh the evaluation factors along
with price when selecting a successful bidder. This bill limits
purchases using this method to a total $20 million annually and
requires DGS to evaluate the effectiveness of the pilot,
including a recommendation on whether or not the process should
be continued at Caltrans. The DGS evaluation must be prepared
on June 1, 2018 and is required to be posted on Caltrans
Internet Web site on or before June 30, 2018.
This bill is similar to AB 2403 (Smyth), Chapter 495, Statutes
of 2008, which despite being passed by the Legislature and
signed by the Governor, was not enacted because it was joined to
a bill that was vetoed (AB 2560 (Lieu) of 2008) by then Governor
Schwarzenegger. This bill is identical to AB 2403 except that
this bill provides for updated reporting dates and increases the
amount available for procurement under the pilot from $15
million to $20 million.
Best value procurement is not new. A literature search revealed
that a number of other states allow for bidding process similar
to the "best value" procurement process described in this bill.
In fact, according to the National Association of State
Procurement Officials' (NASPO) 2011-12 Survey of State
Procurement Practices, 34 states use life-cycle costing, e.g.,
taking into account costs of owning and operating the product,
in determining awards to vendors. Additionally, California has
AB 1857
Page 5
long allowed for similar weighing of factors in addition to
price in solicitations when procuring Information Technology
goods and services.
Writing in support of this bill, Caterpillar Inc. and its
California dealers claim that the state would benefit from
moving to a life cycle cost model and away from the current
lowest bidder approach. They note that allowing Caltrans to
make a broader-based evaluation of equipment purchase options
will attract the most qualified bidders who are accountable for
delivering the highest quality product. They also note that the
result of including "downstream" operating costs associated with
equipment purchase decisions into solicitations and bids will
likely result in lower overall costs for the department.
Also writing in support of this bill, the bill's sponsor,
Transportation California, notes that the "best value"
procurement method, as provided in this bill, would provide
Caltrans with an optional procurement method to be tested (on a
pilot basis) to determine whether overall savings can be
achieved when purchasing heavy duty vehicles and special
equipment. They note that this is one of several measures they
are pursuing this year to address better and more sustainable
programs within Caltrans.
Related legislation: AB 2620 (Rendon) of 2014, would among
other things, develop a sustainability program for the state's
procurement of shipping and transportation services and impose
requirements on the solicitation for the procurement of services
to specify how a bidder must disclose emissions of GHGs and
encourages state agencies to use the least costly level of
service mode to achieve on-time delivery. That bill is set for
hearing in the Assembly Accountability and Administrative Review
Committee.
Previous legislation: AB 2403 (Smyth), Chapter 495, Statutes of
2008, would have authorized Caltrans to purchase and equip heavy
mobile fleet vehicles and special equipment by means of best
value bidding. AB 2403, which was identical to this bill,
passed both houses of the legislature, was chaptered but was
never enacted because it was joined with AB 2560 (Lieu) of 2008,
which was vetoed by Governor Schwarzenegger.
AB 2560 (Lieu) of 2008,would have required DGS to establish
AB 1857
Page 6
criteria to rank the environmental and energy benefits and costs
for the potential procurement of medium- and heavy-duty vehicles
by state and local governments. That bill was vetoed by then
Governor Schwarzenegger on the grounds that it would impose
significant costs at a time of financial crisis.
Analysis Prepared by : Victoria Alvarez / TRANS. / (916)
319-2093
FN: 0003734