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  

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               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.  








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          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