BILL ANALYSIS Ó
SB 376
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Date of Hearing: July 7, 2015
ASSEMBLY COMMITTEE ON HIGHER EDUCATION
Jose Medina, Chair
SB
376 (Lara) - As Amended June 29, 2015
[Note: This bill is double referred to the Assembly
Accountability and Administrative Review Committee and will be
heard as it relates to issues under its jurisdiction.]
SENATE VOTE: 24-14
SUBJECT: Public contracts: University of California
SUMMARY: Modifies the requirements for qualifying as a lowest
responsible bidder or best value awardee for contracts for
materials, goods, and services at the University of California
(UC). Specifically, this bill:
1)Makes findings and declarations that the UC has squandered
public resources via contracting out to for-profit private
contractors that charge significant administrative overhead.
2)Requires a bidder to certify in writing to the UC that the bid
includes a total employee compensation package, including
fringe benefits, that is valued at a basis that does not
materially undercut the average per-employee value of total
compensation for employees at the UC who perform comparable
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work at the relevant campus, medical center, or laboratory,
where the proposed work will be performed.
3)Specifies that the aforementioned requirements apply
specifically to contracts for building maintenance, cleaning,
or custodial services, call center services, clerical
services, dining and food services, gardening, grounds keeping
and plant nursery services, laborer services, mailroom
services, parking, shuttle bus, truck driving, or
transportation services, security services, storekeeper
services, patient care technical employee services, patient
billing services, medical transcribing services, patient
escort services, or nursing assistant services.
4)Exempts the application of said requirements to employees who
are mentally or physically handicapped, or both, who have been
issued a license for employment for employment at less than
minimum wage by the Industrial Welfare Commission; and,
exempts public works projects conducted by public agencies.
5)Requires the UC to: a) include in its request for proposals a
calculation which considers the criteria outlined in number
two above; and, b) use all known cost escalators in the
calculation to project the future rate of growth of average
per-employee total compensation costs.
6)Eliminates the exception to the $100,000 threshold for
competitive bidding of contracts for personal services.
7)Makes the threshold applicable to any renewal or extension of
an existing contract if it involves an expenditure of $100,000
or more annually.
8)Makes technical and clarifying changes to existing law.
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EXISTING LAW:
1)Outlines the requirements and procedures for competitive
bidding at the UC; and, outlines requirements and procedures,
specifically for the acquisition of materials, goods, and
services (Public Contract Code Section 10500, et seq.).
2)Declares the intent of the Legislature to facilitate the
participation of small businesses, particularly small
disadvantaged or minority business enterprises, women business
enterprises, and disabled veteran business enterprises in
business contracting with the UC (PCC Section 10500.5).
3)Requires the UC to let any contract involving an expenditure
of $100,000 or more annually for goods and materials, or for
services to be performed (other than personal or professional
services) to the lowest responsible bidder (PCC Section
10507.7).
4)Authorizes the UC, when it determines that it can expect
long-term savings, as specified, to select the lowest
responsible bidder on the basis of the best value to the
university (PCC Section 10507.8).
FISCAL EFFECT: According to the Senate Appropriations
Committee, costs to UC to be below $66 million. Costs are
primarily due to the requirement that bidders certify total
compensation packages for their employees and ensuring that they
are comparable to those of UC employees. Actual costs are
unknown and would depend upon a number of factors, including the
impacts the bill would have on future contracting behavior by
UC, the number of contracts entered into in the future, and any
increases in bid prices to reflect the required compensation
parity. Additionally, UC administrative costs of $350,000 for
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bid renegotiation.
COMMENTS: Background. According to a 2012 UC Berkeley Labor
Center report, entitled, "Temporary Workers in California are
Twice as Likely as Non-Temps to Live in Poverty: Problems with
Temporary and Subcontracted Work in California," in California
almost one-quarter of a million people worked in the temporary
help services industry in 2010. The report finds that temporary
and subcontracted workers on a whole, are more likely to be
female, less likely to be white non-Hispanic, and less likely to
have a high school diploma or equivalency certificate than the
average non-temporary employee.
Additionally, the report finds that temporary and subcontracted
employees are twice as likely as non-temporary employees to live
in poverty, receive food stamps, and be on Medicaid. The report
finds that temporary and subcontracted employees earned roughly
18 percent less than equivalent non-temporary employees of the
same age, gender, and ability.
The report also finds that temporary and subcontracted employees
were also more susceptible to workplace illness and injury, and
were less likely to get benefits. The report notes that lowered
wages mean that temporary and subcontracted employees rely more
on the state safety net than their direct-hire counterparts and
that these employment arrangements undermine worker protections
by allowing employers to avoid certain provisions of worker
protection; making it difficult to enforce other protections.
Lastly, the report finds that these employment relationships
create downward pressure on wages.
Need for the measure. According to the author, "SB 376 seeks to
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address the growing challenge to California of the use of
contingent workers to replace employees, and the consequential
effect it has on wages and worker protections." The author
contends that this measure will ensure that the UC evaluates the
total employee compensation package of bids for contract work in
order to ensure that employment that is contracted out to
contingent workers does not, "undercut the value of existing
university employees."
Current UC practices for contracting out. According to the UC,
Article 5 of its contract with employees represented by American
Federation of State, County and Municipal Employees (AFSCME),
addresses the issue of contracting out. The provisions
specifically prohibit the UC from contracting out services
solely on the basis that savings will result from lower
contractor pay rates and benefits for services customarily
performed by bargaining unit employees. The UC is permitted to
contract out for special services and equipment unavailable
internally, to obtain special expertise or efficiencies better
provided through an outside contractor, for short-term temporary
staffing needs, financial necessity, and for remote facilities.
The bargaining contract also provides that when the UC contracts
for services customarily provided by AFSCME unit employees, it
must provide a copy of any request for proposals within 10
business days of issuance, requires the UC to provide all
relevant non-confidential written information used in the making
of the contracting out decision, requires accommodation of any
meeting request by AFSCME, and establishes a complaint process
through the Office of the President, Office of Labor Relations.
The Office of the President is required to make the final
determination whether conditions were met and the decision is
not grievable or arbitrable.
To note, the contract also requires that, for bargaining unit
employees laid off or released because of a contract, the UC
make available another bargaining unit position for which the
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employee is qualified at the same location.
Arguments in support. According to the California Labor
Federation, the UC continues to contribute to the problem of
regularly relying on a "subcontracted worker model, risking the
jobs and putting downward pressure on wages of direct hire
employees." The Labor Federation contends that, "SB 376
implements improved standards to pay its subcontracted employees
at a level that does not undercut the wages of comparable
regular UC employees in order for that bidder to qualify as a
'lowest responsible bidder' or best value awardee.'"
Arguments in opposition. According to the UC, the system has a
number of policies, guidelines, and collective bargaining
agreements in place to minimize the impact contracting for
services could have on current employees. The UC states that,
"SB 376 may limit the ability of the UC to contract for unique,
specialized services, and could limit the types of cultural
services it offers to the communities in which campuses are
located. The UC contends that this measure would increase the
number of competitive bids that the UC would have to administer
by eliminating the ability to extend or renew an existing
contract for services.
Committee consideration. Committee staff understands that
presently, the California State University System (CSU) follows
a similar process to that of the UC. The Committee may wish to
consider if the provisions of this measure should also be made
applicable to the CSU.
REGISTERED SUPPORT / OPPOSITION:
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Support
American Federation of State, County and Municipal Employees,
AFL-CIO
California Labor Federation
California Teamsters Public Affairs Council
Central Labor Council of Contra Costa County, AFL-CIO
Opposition
University of California
Analysis Prepared by:Jeanice Warden / HIGHER ED. / (916)
319-3960
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