BILL ANALYSIS                                                                                                                                                                                                    



          SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
                              Senator Isadore Hall, III
                                        Chair
                                2015 - 2016  Regular 

          Bill No:           AB 975           Hearing Date:    6/29/2015
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          |Author:    |Frazier                                              |
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          |Version:   |5/4/2015    Amended                                  |
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          |Urgency:   |No                     |Fiscal:      |Yes             |
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          |Consultant:|Felipe Lopez                                         |
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          SUBJECT: Local Agency Public Construction Act: bid criteria


            DIGEST:    This bill prohibits local public agencies and school  
          districts from disqualifying prospective bidders on public works  
          contracts through its uniform system of rating bidders, based  
          solely on whether a prospective bidder has filed a claim against  
          a project owner through the courts, mediation, or arbitration.

          ANALYSIS:
          
          Existing law:
          
          1)Sets, under the Local Agency Public Construction Act (LAPCA),  
            the requirements for competitive bidding on various types of  
            contracts awarded by state and local agencies, including a  
            school district.

          2)Authorizes, under the LAPCA, a public entity or school  
            district to require prospective bidders for a construction  
            contract to complete and submit to the governing board a  
            prequalification questionnaire and financial statement, and  
            requires the board to adopt and apply a uniform system of  
            rating bidders on the basis of completed questionnaires and  
            financial statements. 

          This bill prohibits local public agencies and school districts  
          from disqualifying prospective bidders on public works contracts  
          through its uniform system of rating bidders, based solely on  







          AB 975 (Frazier)                                   Page 2 of ?
          
          
          whether a prospective bidder has filed a claim against a project  
          owner through the courts, mediation, or arbitration

          Background

          Purpose of the bill.   According to the author, "AB 975 is  
          intended to address a troubling trend involving public works  
          construction pre-qualification questionnaires.  Specifically, a  
          number of public agencies have begun disqualifying, or  
          significantly penalizing, any contractor who has been involved,  
          or is involved, in any claim with a public agency, whether  
          initiated by the contractor or the public agency.  Arguably,  
          these clauses stand in violation of the 14th Amendment as they  
          deem parties guilty, thus denying them the opportunity to bid,  
          regardless of whether or not the parties have actually been  
          found guilty." 

          The Local Agency Public Construction Act (LAPCA).  The LAPCA  
          allows, but does not require, public agencies to establish a  
          process to evaluate and pre-qualify prospective bidders on  
          public works projects.  An agency may choose to require  
          prospective bidders to submit a standardized questionnaire and a  
          financial statement, which includes the prospective bidder's  
          experience in performing public works.  If the agency selects  
          this procedure, it must adopt a uniform rating system to  
          determine the minimum requirements permitted for qualification  
          to bid and the type and size of contracts for which each bidder  
          is eligible to bid.  It also must offer an appeals process to  
          allow prospective bidders to dispute their proposed  
          pre-qualification rating.  

          The LAPCA directs the Department of Industrial Relations (DIR)  
          to develop a model questionnaire and guidelines for a uniform  
          rating system that can be used by public agencies.  The DIR  
          questionnaire requires contractors to provide detailed  
          information regarding the company and its financial status,  
          including whether the company has been in bankruptcy or involved  
          in a civil lawsuit, licensing information, prior contracting  
          experience, 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 assigns  
          points according to a bidder's answers to the questionnaire and  
          enables a local agency to exclude bids from companies that do  
          not meet a minimum number of points.  








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          The LAPCA applies to all cities, counties and special districts,  
          but does not apply to school districts, which have separate code  
          sections pertaining to pre-qualification.  

          Prior/Related Legislation
          
          AB 566 (O'Donnell, 2015) requires, until January 1, 2019, school  
          districts to require prospective bidders on public contracts to  
          submit a pre-qualification questionnaire and financial  
          statement, if the expenditure of the project is $1 million or  
          more, regardless of the funding source, and the average daily  
          attendance (ADA) of the school district is more than 2,500.   
          (Pending in Senate Appropriations Committee)

          AB 1581 (Buchanan, Chapter 408, Statutes of 2014) required,  
          until January 1 2019, school districts entering into  
          lease/leaseback or lease-to-own contracts to required  
          prospective bidders to submit a pre-qualification questionnaire  
          and financial statement, if the project is funded with state  
          bond funds, the expenditure of the project is $1 million or  
          more, and the ADA of the school district is more than 2,500.

          AB 1565 (Fuentes, Chapter 808, Statutes of 2012,) required,  
          beginning with contracts awarded on or after January 1, 2014 and  
          until January 1, 2019 school districts to require prospective  
          bidders on public contracts to submit a pre-qualification  
          questionnaire and financial statement, if the project is funded  
          with state bond funds, the expenditure of the project is $1  
          million or more, and the ADA of the school district is more than  
          2,500.

          AB 281 (Bermudez, 2003) would have prohibited the bidder  
          pre-qualification form that is required under the LAPCA from  
          disqualifying a bidder solely based on the bidder's financial  
          capacity, provided that the bidder otherwise qualifies for the  
          public works contract.  (Never heard in Assembly Local  
          Government Committee)

          AB 611 (Villaraigosa, Chapter 390, Statutes of 1997) allowed  
          school districts to pre-qualify bidders on a quarterly basis and  
          allowed the pre-qualification to be valid for up to one calendar  
          year.

          FISCAL EFFECT:                 Appropriation:  No    Fiscal  








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          Com.:             Yes          Local:          Yes


            SUPPORT:  

          Construction Employers Association (Source)
          Air Conditioning Sheet Metal Association
          Air-conditioning & Refrigeration Contractors Association
          Associated Builders and Contractors of California
          Associated General Contractors
          California Chapters of the National Electrical Contractors  
          Association
          California Concrete Contractors Association
          California Legislative Conference of the Plumbing, Heating and  
          Piping Industry
          Finishing Contractors Association of Southern California
          United Contractors

          OPPOSITION:

          None received

          ARGUMENTS IN SUPPORT:    According to the Construction  
          Employer's Association, "this bill is intended to address a  
          troubling trend involving public works construction  
          prequalification questionnaires.  Specifically, a number of  
          public agencies have begun disqualifying, or significantly  
          penalizing through their pre-qualification process, any  
          contractor who has been involved, or is involved, in any claim  
          with a public agency, whether initiated by the contractor or the  
          public agency."

          CEA further argues that, "These pre-qualification questions  
          represent a fundamental denial of a contractor's basic due  
          process rights.  The automatic disqualification ignores the  
          specific circumstances surrounding a claim, the severity of the  
          claim, the outcome of the claim, whether the contractor  
          prevailed, whether the claim was the result of a subcontractor,  
          architect or engineer or whether the claim was simply erroneous.  
          AB 975 does not preclude public agencies from asking about prior  
          claims, nor does it preclude them from factoring in the  
          disposition of said claims, it simply provides that the  
          existence of a claim cannot be considered a disqualifying  
          factor."
          








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          DUAL REFERRAL:  Senate Education Committee