BILL ANALYSIS AB 2548 Page 1 Date of Hearing: May 3, 2000 ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT John Longville, Chair AB 2548 (Cox) - As Amended: April 10, 2000 SUBJECT : Municipal utility districts: purchase of supplies and materials SUMMARY : Authorizes the board of the Sacramento Municipal Utility District (SMUD) to procure supplies and materials on the basis of best value criteria. Specifically, this bill : 1)Authorizes the board of SMUD to purchase supplies and materials when the expenditure exceeds $50,000, in accordance with best value acquisition policies, as defined, adopted by the board. 2)Permits the board to authorize the general manager to act for the board in determining the best value bidder in accordance with best value acquisition, as defined, policies and to award a contract to that bidder. 3)Defines the best value acquisition as a competitive procurement process that may take into consideration any of the following factors: a) The total cost of the district for its use or consumption of supplies and materials; b) The operational cost or benefit incurred by the district as a result of contract award; c) The value to the district of value-added services; d) The quality, effectiveness, and innovation of supplies, materials and services; e) The reliability of delivery or installation schedules; f) The terms and conditions of product warranties and vendor guarantees; g) The vendor's financial stability, quality assurance AB 2548 Page 2 programs, and experience with the provision of supplies, material, and services. h) The consistency of the vendor's proposed supplies, materials, and services with the district's overall supplies and material procurement program. ) Requires SMUD to submit a report to the Legislature not later than three years from the date on which it commences the best value procurement practices. EXISTING LAW : 1)Allows, under the Municipal Utility District Act of 1921 (MUD Act), municipal utility districts (MUDs) to provide various utility services, including water supply, sewage treatment, power and light, transportation and communications to areas that include more than one county. There are a total of 5 MUDs in California. 2)Provides that the purchase of all supplies and materials by any MUD with a population of 250,000 or more shall be let by contract to the lowest responsible bidder when the required expenditure exceeds $50,000. For all other MUDs, expenditures in excess of $25,000 shall be let by contract to the lowest responsible bidder. 3)Provides that the dollar limits shall be annually adjusted to reflect the percentage change in the U.S. Department of Commerce's Implicit Price Deflator for state and local government purchases of goods and services. FISCAL EFFECT : None COMMENTS : 1)The MUD Act requires that all contracts for the procurement of supplies and materials must be awarded strictly on the basis of which supplier is deemed the "lowest responsible bidder" by the district's general manager. AB 2548 Page 3 2)According to the sponsor, SMUD, the argument against awarding contracts solely based on price is that non-price attributes or "value-added services" (e.g. vendor financial stability, reliability of supply, delivery and vendor warranties and guarantees) are ignored in lieu of the rationale that the cheapest bid is the best bid. According to the sponsor of this bill, the "best value" procurement practice that this bill proposes will enable SMUD to lower the cost of electricity to customers and improve the quality of service. 3)AB 2548 gives SMUD statutory authority to use best value procurement practices so that it can enter into strategic alliances with vendors of supplies and materials in order to reduce operating costs and improve overall operating efficiencies. According to the sponsor, through strategic alliances, vendors provide value to the customer beyond the commodity in the area of services, product enhancement, information, process improvements, and training and positive community impact. 4)AB 2548 requires SMUD, upon completion of the first three years of the best value procurement practice, to submit a report to the Legislature summarizing and comparing it against the traditional "lowest responsible bidder" method. REGISTERED SUPPORT / OPPOSITION : Support Sacramento Municipal Utility District [SPONSOR] Opposition None on file Analysis Prepared by : Frances Chacon / L. GOV. / (916) 319-3958