BILL ANALYSIS �
AB 1971
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Date of Hearing: May 7, 2014
ASSEMBLY COMMITTEE ON EDUCATION
Joan Buchanan, Chair
AB 1971 (Bocanegra) - As Amended: March 28, 2014
SUBJECT : Public contracts: school districts: competitive
bidding: best value
SUMMARY : Establishes an alternative method for evaluating and
selecting public works contracts for projects over $1 million
based on the best value for a school district. Specifically,
this bill :
1)Expresses the intent of the Legislature to enable school
districts to use cost-effective options for building and
modernizing school facilities. Finds and declares that the
Legislature has recognized the merits of best value
procurement through its authorization of the method by the
University of California (UC). Through UC's report, best
value procurement method has been found to reduce contract
delays, change orders, and claims resulting in savings in both
contract costs and administration.
2)Further expresses the intent of the Legislature that the best
value procurement method is not intended to change in any
manner any guideline, criteria, procedure, or requirement of
the governing board of a school district to let any contract
for a project to the lowest responsible bidder or else reject
all bids.
3)Establishes the following definitions:
a) "Best value" means a procurement process whereby the
selected bidder may be selected on the basis of objective
criteria for evaluating the qualifications of bidders with
the resulting selection representing the best combination
of price and qualifications.
b) "Best value contract" means a contract entered into
pursuant to this bill.
c) "Best value contractor" means a properly licensed
person, firm, or corporation that submits a bid for, or is
awarded, a best value contract.
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d) "Demonstrated management competency" means the
experience, competency, capability, and capacity of the
proposed management staffing to complete projects of
similar size, scope, or complexity.
e) "Financial condition" means the financial resources
needed to perform the contract. The criteria used to
evaluate a bidder's financial condition shall include, at a
minimum, capacity to obtain all required payment bonds, and
required insurance.
f) "Labor compliance" means the ability to comply with, and
past performance with, contract and statutory requirements
for the payment of wages and qualifications of the
workforce. The criteria used to evaluate a bidder's labor
compliance shall include, at a minimum, the bidder's
ability to comply with the apprenticeship requirements of
the California Apprenticeship Council and the Department of
Industrial Relations, its past conformance with such
requirements, and its past conformance with requirements to
pay prevailing wages on public works projects.
g) "Project" has the same meaning as "public project" is
defined in subdivision (c) of Section 22002 of the Public
Contract Code (PCC).
h) "Qualifications" means financial condition, relevant
experience, demonstrated management competency, labor
compliance, the safety record of the bidder, and to the
extent relevant, the preceding qualifications as they
pertain to all subcontractors proposed to be used by the
bidder for designated portions of the work.
i) "Relevant experience" means the experience, competency,
capability, and capacity to complete projects of similar
size, scope, or complexity.
j) "Safety record" shall be deemed "acceptable" if its
experience modification rate for the most recent three-year
period is an average of 1.00 or less, and its average total
recordable injury or illness rate and average lost work
rate for the most recent three-year period do not exceed
the applicable statistical standards for its business
category, or if the bidder is a party to an alternative
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dispute resolution system as provided for in Section 3201.5
of the Labor Code. If the experience modification rate for
the most recent three-year period is or was 1.00 or higher,
a bidder may attach a letter of explanation that the school
district may review and take into consideration when
evaluating the bidder's acceptable safety record.
aa) "Skilled and trained workforce" means a workforce that
meets both of the following criteria, as applicable:
i) All the workers are either registered apprentices or
skilled journeypersons.
ii) As of January 1, 2015, at least 30 percent of the
skilled journeypersons are graduates of an apprenticeship
program for the applicable occupation that was either
approved by the Chief of the Division of Apprenticeship
Standards pursuant to Section 3075 of the Labor Code or
located outside California and approved for federal
purposes pursuant to the apprenticeship regulations
adopted by the federal Secretary of Labor.
(1) As of January 1, 2016, at least 45 percent of
the skilled journeypersons are graduates of an
apprenticeship program for the applicable occupation
that was either approved by the Chief of the Division
of Apprenticeship Standards pursuant to Section 3075
of the Labor Code or located outside California and
approved for federal purposes pursuant to the
apprenticeship regulations adopted by the federal
Secretary of Labor.
(2) As of January 1, 2017, at least 60 percent of
the skilled journeypersons are graduates of an
apprenticeship program for the applicable occupation
that was either approved by the Chief of the Division
of Apprenticeship Standards pursuant to Section 3075
of the Labor Code or located outside California and
approved for federal purposes pursuant to the
apprenticeship regulations adopted by the federal
Secretary of Labor.
iii) A school district and a contractor are not required
to track the percentage of journeypersons that are
graduates of an apprenticeship program if the governing
board of the school district has entered into a project
labor agreement that will bind all contractors and
subcontractors performing work on the project and
complies with PCC Section 2500.
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4)Authorizes the governing board of any school district, for
projects over $1 million to use the best value procurement
method in accordance with this bill. Specifies that the
governing board of any school district shall let any contract
for a project pursuant to this bill to the selected bidder
that represents the best value or else reject all bids.
5)Specifies that the bidder may be selected on the basis of the
best value to the governing board of the school district. In
order to implement this method of selection, the governing
board of the school district shall adopt and publish
procedures and required guidelines for evaluating the
qualifications of the bidders that ensure the best value
selections by the school district are conducted in a fair and
impartial manner. These procedures and guidelines shall
conform to the provisions in this bill and shall be mandatory
for the school district when using best value selection.
6)Specifies that if the governing board of the school district
deems it to be for the best interest of the school district,
the governing board of the school district may, on the refusal
or failure of the successful bidder for a project to execute a
tendered contract, award it to the second bidder that
represents the best value. If the second bidder fails or
refuses to execute the contract, the governing board of the
school district may likewise award it to the third bidder.
7)Requires the governing board of a school district to use the
following procedure when awarding best value contracts:
a) The governing board of the school district shall prepare
a solicitation for bids and give notice pursuant to PCC
Section 20112.
b) The governing board of the school district shall
establish a procedure to prequalify bidders.
c) Requires each solicitation for bids to do all of the
following:
i) Invite prequalified bidders to submit sealed bids in
the manner prescribed by this bill.
ii) Include a section identifying and describing the
following:
(1) Criteria that the governing board of the
school district will consider in evaluating the
qualifications of the bidders.
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(2) The methodology and rating or weighting system
that will be used by the governing board of the school
district in evaluating bids and specifically whether
proposals will be rated according to numeric or
qualitative values.
(3) The relative importance or weight assigned to
the criteria for evaluating the qualifications of
bidders identified in the request for bids.
d) Final evaluation of the best value contractor shall be
done in a manner that prevents cost or price information
from being revealed to the committee evaluating the
qualifications of the bidders prior to completion and
announcement of that committee's decision.
8)Requires the selection of the best value contractor to be made
as follows:
a) The governing board of the school district shall
evaluate the qualifications of the bidders based solely
upon the criteria set forth in the solicitation documents,
and shall assign a qualification score to each bid.
b) Factors in determining a qualification score shall
include, but are not limited to, price, relevant
experience, skilled and trained workforce, and acceptable
safety record and shall be weighted in accordance with the
following:
i) At least 50 percent of the total weight or
consideration shall be given to the following factors:
relevant expertise, skilled and trained workforce, and
acceptable safety record. A factor shall not make up less
than 15 percent of the total weight or consideration.
ii) No more than 50 percent of the total weight or
consideration shall be given to price. A bidder that
qualifies as a certified small business shall receive a
5-percent bid preference.
c) The award of the contract shall be made to the bidder
whose bid is determined, by the school district in writing,
to be the best value to the governing board of the school
district. To determine the best value contractor, the
governing board of the school district shall divide each
bidder's price by its qualifications score. The lowest
resulting cost per quality point will represent the best
value bid.
d) The governing board of the school district shall issue a
written decision of its contract award.
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e) Upon issuance of a contract award, the governing board
of the school district shall publicly announce its award
identifying the best value contractor to which the award is
made, the project, the project price, and the selected best
value contractor's score based on the qualifications
criteria for evaluating the bidders listed in the request
for bids. The notice of award shall be made public and
include the score of the selected best value contractor in
relation to all other responsive bidders and their
respective prices. The names of the remaining responsive
bidders may be concealed upon the request of the bidders,
in which case the governing board of the school district
shall determine an alternative method for publicly
announcing its award of the contract. The contract file
shall include documentation sufficient to support the
decision to award.
9)Sunsets on January 1, 2022, and as of that date is repealed,
unless a later enacted statute, that is enacted before January
1, 2022, deletes or extends that date.
EXISTING LAW :
1)Requires the governing board of a school district to
competitively bid and award to the lowest bidder contracts
involving the following:
a) An expenditure of $50,000 or more for the purchase of
equipment, materials, or supplies, services (except for
construction services), and repairs.
b) An expenditure of $15,000 or more for a public contract
project defined as construction, reconstruction, erection,
alteration, renovation, improvement, demolition, repair,
painting or repainting of any publicly owned, leased, or
operated facility. (PCC) Sections 20111 and 22002)
2)Establishes a process, until January 1, 2020, for school
district and community college district governing boards to
enter into a design-build contract for both the design and
construction of education facility projects over $2.5 million.
(Education Code (EC) Section 17250.20)
3)Specifies the elements required to be included in a
design-build request for proposal (including significant
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factors, subfactors, methodology, rating and weighting schemes
for evaluating proposals) and establishes, among others,
prequalification, bonding and labor compliance program
requirements (EC Sections 17250.10 - 17250.50 and 81700-81708)
4)Requires, until January 1, 2019, a school district with an
average daily attendance of more than 2,500 using state school
facility bond funds for a public project with an expenditure
of $1 million or more to require prospective bidders, and if
utilized, all electrical, mechanical, and plumbing
subcontractors, to complete and submit a standardized
prequalification questionnaire and financial statement. (PCC
Section 20111.6)
5)Authorizes, until January 1, 2017, the UC to use the best
value method to award contracts based on best value
procedures. (PCC Section 10506.4)
FISCAL EFFECT : None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS : Background . Under current law, K-12 school districts
are required to competitively bid any public works contract over
$15,000 and award the contract to the lowest responsible bidder.
Under the traditional method for school facility construction,
a school district would first hire an architect to design a
school facility and then issue a bid for the construction phase,
awarding the contract to the lowest bidder. This process is
commonly called "design-bid-build".
Design Build . Existing law authorizes two other temporary
methods for awarding public contracts that are not based solely
on the lowest bidder. AB 1402 (Simitian), Chapter 421, Statutes
of 2001, established a process called "design-build" that
enables a school district to issue a bid for both the design and
construction of projects over $10 million and authorizes school
districts to consider factors other than cost. Under a
design-build process, a K-12, California Community College (CCC)
district, or other public or private agency issues a bid for
both design and construction of a facility. A general
contractor may collaborate with an architect/engineer to submit
a proposal, or a general contractor may submit the proposal and
subcontract with an architect/engineer.
Prior to using a design-build process for a project, a school
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district must make written findings that using the design-build
method for the project will meet at least one of the following
objectives: reduce comparable project costs, expedite the
project's completions, or provide features not achievable
through the traditional design-bid-build process. The school
district must also establish a process to prequalify
design-build entities using a standard questionnaire developed
by the Department of Industrial Relations. The questionnaire
requires contractors to provide detailed information regarding
the company and its financial status.
Rather than selecting the contractor based solely on the lowest
offer, the K-12 or CCC district may use criteria in addition to
cost, which may include qualification, experience, proposed
design approach, life cycle costs, project features and project
functions. Based on the criteria selected by a governing board,
the proposals are scored and awarded to the bidder whose
proposal is considered to be the best value to the school
district<1>. Design build contracting can expedite the
construction of a project, avoid conflicts between
architects/engineers and contractors, and according to
experiences from school and CCC districts, reduce costs by
reducing change orders once construction begins. The
authorization for design build sunsets on January 1, 2020.
Best Value Pilot Program . SB 667 (Migden), Chapter 367,
Statutes of 2006, established a pilot program for the UC.
Initially authorized for five years, the bill allowed the UC San
Francisco to award contracts based on the best value for the
university. Under this process, UC prequalifies bidders, then
evaluates the bid based on answers to a separate best value
questionnaire and assigns a qualification score. UC then
divides each bidder's price by its qualification score. The
lowest resulting cost per quality point represents the best
value bid.
In a report to the Legislature in January 2010, the UC reported
that 23 contracts totaling $158.3 million were issued under the
best value pilot program. Of the 23 contracts, 12 contracts
---------------------------
<1> "Best value" for the purposes of design build does not have
the same definition as that proposed by this bill. For design
build, "best value" is defined as "a value determined by
objective criteria and may include, but need not be limited to,
price, features, functions, life-cycle costs, and other criteria
deemed appropriate by the school district."
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were low bid contracts. According to the report, the
"University Representatives for all these projects [four
completed and two almost completed projects] have been unanimous
in their praise of this process that has already demonstrated
numerous advantages such as decreased bid protests and
communication problems, decreased the need for multiple
inspections and re-work, decreased disputes, change order
requests, claims and litigation and increased incentives for
contractors to perform their work safety and to adhere to high
labor and quality standards." UC concludes that the best value
pilot program fosters better quality work, less labor and safety
problems, better qualified persons/contractors, better on-time
completion, and better on-budget performance. In 2011, SB 835
(Wolk), Chapter 636, Statutes of 2011, expanded the authority to
all UC campuses and extended the sunset from January 1, 2012 to
January 1, 2017.
This bill establishes a best value procurement process for
school districts. The bill is mostly modeled after the statutes
for the best value pilot program authorized for the UC. "Best
value" is defined as a procurement process whereby the selected
bidder may be selected on the basis of objective criteria for
evaluating the qualifications of bidders with the resulting
selection representing the best combination of price and
qualifications. The bill applies to projects over $1 million.
A governing board interested in this method must adopt
procedures and required guidelines for evaluating the
qualifications of bidders to ensure that the process is fair and
impartial. Districts are required to prequalify bidders based
on a questionnaire and a rating scale. The solicitation for
bids will invite prequalified bidders to submit sealed bids.
The solicitation for bids must also include information on how
the school district will be evaluating the qualification of
bidders, including the criteria that will be used, the
methodology and the rating or weighting system that will be
used, and the weight that will be assigned to the criteria for
evaluation.
Process for selecting the best value contractor . Similar to
UC's best value pilot program, this bill requires the governing
board of a school district to evaluate the qualification of the
bidders solely upon the criteria specified in the solicitation
documents and assign a qualification score to each bid. A
bidder's price is divided by the qualification score received by
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the bidder. The bidder with the lowest cost per quality point
represents the best value bid. The bill prohibits the cost or
price information from being revealed to the committee
evaluating the qualifications of the bidders prior to completion
and announcement of the committee's decision.
The statutes for UC's best value pilot program do not specify
the factors required to be used for selecting contractors or the
weight of the factors. This bill specifies that the factors in
determining the qualification score include, but is not limited
to: price, relevant experience, skilled and trained workforce,
and acceptable safety record. The bill requires the following
formula:
----------------------------------------------------
| | |
|At least 50% |No one of the following can be less |
| |than 15% |
| | |
| |Relevant experience |
| | |
| |Skilled and trained workforce |
| | |
| |Acceptable safety record |
| | |
| | |
|---------------+------------------------------------|
|No more than |Price |
|50% | |
|---------------+------------------------------------|
|5% Preference |Certified small business |
| | |
----------------------------------------------------
Can these factors be determined through the prequalification
process ? The factors required to be used by this bill are
slightly different than the factors used in the UC pilot
program. The factors used by the UC included the bidder's
financial condition, relevant experience, demonstrated
management competency, labor compliance, and safety record.
Under current law, school districts seeking state facility bond
funds must prequalify and rate potential bidders that requires a
potential bidder to provide detailed information regarding the
company and its financial status, including whether the company
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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 contractors that do not meet minimum points or
standards.
According to the Los Angeles Unified School District (LAUSD),
who sought introduction of this bill, whereas the
prequalification questionnaire may determine minimum
qualifications, the information solicited through the best value
procurement method will enable a school district to evaluate a
bidder's qualification and background based on more specific
needs of a project. The Committee may wish to consider that the
prequalification questionnaire is developed by school districts.
The factors required by this bill can be incorporated in a
school district's prequalification questionnaire.
Committee amendments.
1)Evaluation committee . The requirement to award a contract to
the lowest responsible bidder ensures that preferences are not
given to preferred contractors regardless of cost. This bill
requires the evaluation to be done in a manner that prevents
the cost or price information from being revealed to the
evaluation committee. Staff recommends additionally
prohibiting the identity of the contractor from being revealed
to the evaluation committee and requiring the evaluation
meeting to be open to the public.
2)Limit the term for the authority to use the best value
procurement method . The bill currently authorizes school
districts to use a best value procurement method for a period
of five years. Staff recommends limiting the authority to two
years.
3)Evaluation . This bill has a sunset date of January 1, 2022;
however, there is no requirement for an evaluation. While the
authority to use a best value procurement method expires after
two years, staff recommends a five year sunset of the statute
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to allow time for an evaluation. Staff recommends requiring
each district that uses the best value procurement method to
submit a report completed by an independent third party to the
Legislative Analyst's Office (LAO) and requiring the LAO to
submit a report to the Legislature based on the information
received from the district reports. The timeline for the
reports shall be as follows:
a) Interim report from school districts to the LAO: July
1, 2017
b) Interim report from the LAO to the Legislature: January
1, 2018
c) Final report from school districts to the LAO: January
1, 2019
d) Final report from the LAO to the Legislature: July 1,
2019
The reports from school districts shall include, but is not
limited to, the following information:
a) A description of the projects awarded using the best
value procedures.
b) The contract award amounts.
c) The best value contractors awarded the projects.
d) A description of any written protests concerning any
aspect of the solicitation, bid, or award of the best value
contracts, including the resolution of the protests.
e) A description of the prequalification process.
f) The criteria used to evaluate the bids, including the
weighting of the criteria and an assessment of the
effectiveness of the methodology.
g) If a project awarded under this article has been
completed, an assessment of the project performance, to
include a summary of any delays or cost increases.
4) Numeric or qualitative values . The bill requires the
solicitation for bid to describe the methodology and rating or
weighting system that will be used by the governing board of
the school district in evaluating bids and whether the
proposals will be rated according to numeric or qualitative
values. However, under the process for selecting a best value
contractor, a qualification score is required. Requiring a
school district to specify whether the evaluation is based on
one or the other is confusing and inconsistent with the
provision in the bill requiring a qualification score. Staff
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recommends striking the requirement for the solicitation for
bids to specify whether the proposals will be rated according
to numeric or qualitative values.
Arguments in support . The LAUSD states, "Since the economic
downturn, school districts found more and more contractors
bidding on school construction projects that had limited or no
school construction experience. Not being able to evaluate a
bidder based on factors other than lowest price, a school
district is subjecting itself to significant change orders,
project delays and cost overruns due to a contractor's inability
to navigate the complicated school construction process."
Arguments in opposition . The Howard Jarvis Taxpayers
Association opposes the bill and states, "This proposal is
contrary to the public interest because the so-called "best
value" model incorporates arbitrary criteria which can easily be
manipulated so as to achieve the desired result of selecting a
favored bidder. This runs the risk of leading to higher costs,
increased change-orders, and a general irresponsible use of
taxpayers dollars. Indeed the traditional model of sealed
competitive bidding is the only way to ensure these projects do
not fall victim to fraud, favoritism, and corruption. This is
especially true for large seven figure contracts as envisioned
by this bill."
Prior related legislation . SB 835 (Wolk), Chapter 636, Statutes
of 2011, extended the sunset of the best value pilot program for
the UC to January 1, 2017 and expanded the program to all UC
campuses.
SB 667 (Migden), Chapter 367, Statutes of 2006, established the
best value pilot program for the UC San Francisco campus for
five years.
REGISTERED SUPPORT / OPPOSITION :
Support
Air Conditioning Sheet Metal Association
California Association of School Business Officials
California chapter of the National Electrical Contractors
Association
California Legislative Conference of the Plumbing, Heating and
Piping Industry
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Los Angeles Unified School District
State Building and Construction Trades Council
Opposition
Associated Builders and Contractors of California
Howard Jarvis Taxpayers Association
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087