BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
AB 1857 (Frazier) - Caltrans: vehicle and equipment procurement.
Amended: March 28, 2014 Policy Vote: T&H 10-1
Urgency: No Mandate: No
Hearing Date: August 4, 2014
Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: AB 1857 would authorize the Department of
Transportation (Caltrans) to purchase and equip heavy mobile
fleet vehicles and special equipment using a best value
procurement method until January 1, 2019, as specified.
Fiscal Impact:
Unknown annual increases in vehicle and equipment purchase
costs, if best value procurement results in higher initial
costs, likely offset by life-cycle cost savings over time.
(State Highway Account)
One-time costs to the Department of General Services (DGS),
likely in the range of $150,000 in 2017-18, to prepare an
evaluation of Caltrans' best value procurement pilot
program. (General Fund)
There could be a shift in administrative workload from DGS
to Caltrans to the extent that Caltrans would have purchased
these vehicles through DGS procurement absent the bill.
Background: Existing law requires Caltrans to purchase heavy
equipment, such as large dump trucks, graders, snow removal
equipment, loaders, and other construction equipment, using the
standard lowest responsible bid procurement process. While this
method provides a clear and objective measure to ensure the
lowest initial procurement cost, it prevents Caltrans from
considering other value-related considerations such as overall
life-cycle costs related to operations and maintenance,
including initial price, equipment performance, fuel efficiency,
and warranty benefits. This bill is intended to provide
Caltrans with an optional procurement method on a pilot basis to
determine whether overall savings may be achieved by evaluating
AB 1857 (Frazier)
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factors other than price when purchasing heavy duty vehicles and
equipment.
Proposed Law: AB 1857 would authorize Caltrans to purchase and
equip up to $20 million worth of heavy duty vehicles and special
equipment annually using a best value procurement method based
on the following factors in addition to price:
Total ownership costs, including warranty, repair and
maintenance costs, fuel consumption, and salvage value.
Product performance, productivity, and safety
standards.
Supplier ability to perform contract requirements.
Environmental benefits, including reductions of
greenhouse gas emissions, air pollutant emissions, or
toxic or hazardous materials.
The bill would also require DGS to prepare an evaluation of
Caltrans' use of best value procurement by June 1, 2018,
including a recommendation on whether the process should be
continued. The bill requires the evaluation to be posted on
the Caltrans website by June 30, 2018. The authority to use
this alternative procurement method would sunset on January 1,
2019.
Related Legislation: This bill is substantially similar to AB
2403 (Smyth), Chap. 495/2008. Although AB 2403 was chaptered,
it was never enacted because it was contingent upon approval of
AB 2560 (Lieu), which was vetoed by Governor Schwarzenegger.
Staff Comments: This bill would allow Caltrans to procure up to
$20 million in heavy equipment purchases using best value
procurement. Caltrans indicates its current equipment budget is
only $28.5 million, but $25 million in planned purchases are
expected to be for heavy mobile fleet vehicles and heavy
equipment. There are currently 900 off-road equipment vehicles
in Caltrans' fleet, and about 130 of these will need to be
replaced by 2020 to meet specified emission reduction goals. It
is likely that Caltrans will fully utilize the $20 million cap
for heavy mobile fleet vehicle and special equipment purchases
annually.
Staff notes that consideration of other factors apart from
lowest price is likely to result in higher initial costs for
vehicle purchases. The magnitude of the cost differential is
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unknown at this time, but if costs were initially 5% higher,
Caltrans would spend an additional $1 million per year over
three years. Caltrans estimates that best value procurement
could result in long-term savings due to lower maintenance and
repair costs, improved performance and fuel efficiency, and
increased resale value. While initial outlay would likely be
higher than using the traditional lowest responsible bidder
procurement method, Caltrans expects best value procurement to
result in overall life-cycle cost savings.
AB 1857 requires DGS to prepare an evaluation of Caltrans' use
of best value for heavy equipment purchases and recommend to the
Legislature whether the authority should continue by June 1,
2018. DGS would incur staff time to evaluate whether the pilot
program is achieving its goals by assessing maintenance and
repair costs, warranty usage, fuel compensation, and the effect
of performance-related factors on productivity, and comparing
these factors to expenses on equipment purchased through
traditional lowest bid. DGS is likely to incur staffing costs
in the range of $150,000 in 2017-18 to complete the evaluation
and submit a report.