BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: Ab 1857
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: frazier
VERSION: 3/28/14
Analysis by: Eric Thronson FISCAL: yes
Hearing date: June 24, 2014
SUBJECT:
Caltrans equipment procurement
DESCRIPTION:
This bill permits the California Department of Transportation
(Caltrans) to conduct a pilot program to purchase and equip
heavy mobile fleet vehicles and special equipment by means of
best value procurement.
ANALYSIS:
Existing law requires the Department of General Services (DGS)
to investigate and establish the need for acquiring new
state-owned motor vehicles and for all state agencies to acquire
motor vehicles through, or under the supervision of, DGS.
Existing law further requires state agencies to award contracts
for goods and services to the lowest responsible bidder, with a
few limited exceptions.
This bill :
Permits Caltrans to conduct a pilot program to purchase and
equip heavy mobile fleet vehicles and special equipment by
means of best value procurement.
Defines best value procurement as a method of selecting a
proposal based on an evaluation of the following factors in
addition to price:
Total cost of ownership, including repair and
maintenance costs
Product performance, productivity, and safety standards
The supplier's ability to perform to the contract
requirements
Environmental benefits, including reduction of
greenhouse gas emissions, reduction of air pollutant
emissions, or reduction of toxic or hazardous materials
AB 1857 (FRAZIER) Page 2
Requires Caltrans to develop and utilize a scoring method
based on these factors, with predetermined weighted values, as
well as price in determining the winning bid.
Limits Caltrans' best value procurements to $20 million
annually.
Requires DGS, by June 1, 2018, to evaluate Caltrans'
experience with best value procurement and for Caltrans to
post the evaluation on its website.
Repeals this pilot program on January 1, 2019.
COMMENTS:
1.Purpose . According to the author, this bill is intended to
provide Caltrans with an optional procurement method to
determine whether overall savings may be achieved by
evaluating factors other than price when purchasing heavy-duty
vehicles and equipment. While the standard lowest responsible
bid procurement process provides a clear and objective measure
to ensure the lowest initial procurement cost, it prevents
Caltrans from considering other value-related factors when
purchasing heavy vehicles. The author suggests that, while
initial procurement costs may be higher with best value
procurement, through this alternative procurement method
Caltrans will realize overall life-cycle cost savings.
2.Experience suggests that best value procurement works .
According to the National Association of State Procurement
Officials' 2011-2012 Survey of State Procurement Practices, 34
states use full life-cycle costs to determine contract awards
to vendors. Studies suggest that results have generally been
good when public agencies utilize best value procurement,
despite the long-standing precedence for the low-bid
procurement system.
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 for procuring heavy vehicles
and equipment. They note that allowing Caltrans to make a
broader based evaluation of equipment purchase options will
attract qualified bidders and hold them accountable for
delivering the highest quality product. They also note that
the result of including "downstream" operating costs
associated with equipment purchase decisions into
AB 1857 (FRAZIER) Page 3
solicitations and bids will likely result in lower overall
costs. Caltrans subjects much of its heavy equipment to
strenuous, taxing work, and therefore factoring the cost of
the equipment over its entire lifespan appears reasonable and
responsible.
3.What is the impact of this bill ? The bill's sponsor,
Transportation California, notes that the potential savings
resulting from this bill represents one of several measures
the organization is pursuing this year to address better and
more sustainable programs within Caltrans. This bill may have
a significant impact, as Caltrans indicates that its current
equipment budget is $28.5 million, so the $20 million annual
limit of the pilot program would represent a large portion of
its annual equipment expenditure.
4.Saving money vs. achieving environmental goals . Research
suggests that if Caltrans considers full life-cycle costs
during procurement of heavy equipment, it will experience
lower overall costs. The author argues that cost savings is
the main goal of this bill. If Caltrans makes its procurement
decisions based on the first three factors described in this
bill - namely, total life-cycle cost of ownership, product
performance, and the supplier's ability to perform warranty
work - it seems likely that the state could realize cost
savings through best value procurement. The fourth evaluation
factor specified in this bill, the environmental benefits
expected from the purchase, however, seems unlikely to lead to
lower costs. In fact, considering reduction of greenhouse gas
emissions during heavy equipment procurement is likely to
increase costs, given that clean-air technology is relatively
new and therefore often more expensive.
Existing law declares that it is the policy of this state to
establish a state transportation energy policy that results in
the least environmental and economic cost to the state and the
purchase of the cleanest and most efficient passenger and
light-duty automobiles for state vehicle fleets. For example,
AB 236 (Lieu), Chapter 593, Statutes of 2007, required DGS by
2009 to update its vehicle purchasing methodology to rank the
environmental and energy benefits and costs of light-duty
motor vehicles. Encouraging Caltrans to consider the
potential environmental impacts of its heavy equipment during
procurement is a reasonable goal and generally follows the
Legislature's attitude toward improving the state's
environment. It likely will not, however, lead to cost
AB 1857 (FRAZIER) Page 4
savings for Caltrans. If the goal of this bill is for
Caltrans to save money through an alternative procurement
method, the committee may wish to amend the bill to remove the
evaluation factor involving the potential environmental
benefits of a heavy vehicle purchase.
5.Previous legislation . 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 then Governor
Schwarzenegger vetoed (AB 2560 [Lieu]).
Assembly Votes:
Floor: 60-14
Appr: 13-4
Trans: 13-2
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 18,
2014.)
SUPPORT: Transportation California (sponsor)
California Manufacturers & Technology Association
California Taxpayers Association
Caterpillar, Inc.
John Deere
OPPOSED: None received.