BILL ANALYSIS �
AB 1971
Page 1
ASSEMBLY THIRD READING
AB 1971 (Bocanegra)
As Amended May 14, 2014
Majority vote
EDUCATION 7-0
-----------------------------------------------------------------
|Ayes:|Buchanan, Olsen, Ch�vez, | | |
| |Gonzalez, Nazarian, | | |
| |Weber, Williams | | |
|-----+--------------------------+-----+--------------------------|
| | | | |
-----------------------------------------------------------------
SUMMARY : Establishes the School Districts - Best Value
Procurement Pilot Program for evaluating and selecting public
works contracts 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.
AB 1971
Page 2
b) "Best value contract" means a competitively bid 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.
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" as
defined in Public Contract Code (PCC) Section 22002 (c).
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
AB 1971
Page 3
experience modification rate for the most recent three-year
period is an average of 1 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
dispute resolution system as provided for in Labor Code
Section 3201.5. If the experience modification rate for
the most recent three-year period is or was 1 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% 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 Labor Code Section 3075 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% 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 Labor Code
Section 3075 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% 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 Labor Code
Section 3075 or located outside California and
approved for federal purposes pursuant to the
AB 1971
Page 4
apprenticeship regulations adopted by the federal
Secretary of Labor.
iii) Specifies that 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.
4)Authorizes, until January 1, 2017, four school districts,
including the Los Angeles Unified School District (LAUSD) and
one large, one medium and one small 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
AB 1971
Page 5
Section 20112.
b) The governing board of the school district shall
establish a procedure to prequalify bidders.
c) Each solicitation for bids shall 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.
(2) The methodology and rating or weighting system
that will be used by the governing board of the school
district in evaluating bids.
(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 the identity of the bidders
and the 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. Requires the meeting to evaluate bids to be open
to the public.
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
AB 1971
Page 6
experience, skilled and trained workforce, and acceptable
safety record and shall be weighted in accordance with the
following:
i) At least 50% 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%
of the total weight or consideration.
ii) No more than 50% of the total weight or
consideration shall be given to price. A bidder that
qualifies as a certified small business shall receive a
5% 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.
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.
AB 1971
Page 7
9)Requires a school district that uses the best value
procurement method to submit to the Legislative Analyst an
interim report completed by an independent third party on or
before July 1, 2017, and a final report on or before January
1, 2019.
10)Requires the reports to include, but are 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.
11)Requires the Legislative Analyst's Office to submit an
interim report to the appropriate policy and fiscal committees
of the Legislature on the use of the best value procurement
method by school districts on or before January 1, 2018, and a
final report on or before July 1, 2019. Specifies that the
report may include the information provided from the school
district reports and any pertinent information that the
Legislative Analyst's Office deems instructive in evaluating
whether the best value procurement method should be continued,
expended, or prohibited.
12)Sunsets on January 1, 2020, and as of that date is repealed,
unless a later enacted statute, that is enacted before January
1, 2020, deletes or extends that date.
AB 1971
Page 8
13)Finds and declares that a special law is necessary and that a
general law cannot be made applicable within the meaning of
California Constitution Article IV Section 16 because of the
need to establish a pilot project for a limited number of
school districts of varying sizes, including, but not limited
to, the LAUSD, to determine the potential benefits and
consequences of using best value procurement to facilitate
infrastructure improvements and ease fiscal impacts.
FISCAL EFFECT : Unknown. 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".
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
were low bid contracts. According to the report, "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
AB 1971
Page 9
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. 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 four
school districts: the LAUSD, and three currently unspecified
districts, representing one large, one medium and one small
district, for a period of two years. This 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. This 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
the bidder. This bidder with the lowest cost per quality point
represents the best value bid. This bill prohibits the identity
AB 1971
Page 10
of the bidders and 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. This bill also requires the evaluation meeting to be
open to the public.
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. This 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 |
| | |
----------------------------------------------------
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.
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087
FN: 0003496
AB 1971
Page 11