BILL ANALYSIS 1
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SENATE ENERGY, UTILITIES AND COMMUNICATIONS COMMITTEE
DEBRA BOWEN, CHAIRWOMAN
AB 2548 - Cox Hearing Date: June 13, 2000
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As Amended: May 15, 2000
NON-FISCAL B
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DESCRIPTION
Current law requires municipal utility districts (MUDs) to
award contracts for supplies and materials to the lowest
responsible bidder for contracts of more than $25,000 (in
districts with populations over 250,000, the law applies to
contracts over $50,000). This dollar level is adjusted
annually to reflect U.S. Department of Commerce price
indicators for state and local government purchases.
This bill allows MUDs to use a "best value" criteria to
award contracts, allowing districts to consider other
factors besides cost when awarding supply and material
contracts over $50,000.
This bill allows MUDs to delegate decision-making authority
in determining which contract should be awarded to their
general managers.
This bill also requires that once a MUD decides to adopt a
best value procurement process, it must submit a report to
the Legislature within three years.
BACKGROUND
Currently, the process for letting contracts over $25,000,
and, for larger districts, over $50,000, requires the
utility to put out a request for proposals (RFP) that
describes the supplies or materials needed, deadlines, and
any other relevant information required for the development
of a bid. Vendors respond to the RFP with an offer to
provide those goods for a specific price. These bids are
evaluated by the MUD's elected board (or, in some cases,
the board's appointed general manager) and under existing
law's "lowest responsible bidder" criteria, the vendor with
the lowest price is awarded the contract.
This bill would allow MUDs to use something known as the
"best value procurement process." Under this proposal,
vendors responding to an RFP wouldn't just be judged on
price, they'd be judged on a number of criteria laid out in
the bill.
Under this bill, the best value acquisition policies
adopted by any MUD board must, at a minimum, consider:
1)Price and service levels which reduce operating
costs;
2)Supplies and materials standards; and,
3)A procedure to resolve protests from vendors.
Once the MUD board establishes its policies, any best value
acquisition may - but is not required to - take into
account the following:
1)The total cost of the contract;
2)The operational cost or benefit of the contract;
3)The value of any vendor-added services;
4)The quality, effectiveness, and innovation of
supplies, materials, and services;
5)The reliability of delivery and installation
schedules;
6)The terms and conditions of product warranties and
vendor guarantees;
7)The financial stability of the vendor;
8)The vendor's quality assurance program;
9)The vendor's experience; and
10) The vendor's consistency of the proposed
supplies with the district's overall procurement
program.
QUESTIONS
1.Should "best value acquisition" contracting be extended
to municipal utility districts for supplies and
materials?
2.Should this bill rely only on "best value" or should it
instead rely on "best value at the lowest price?"
3.Should the authority to award "best value" contracts rest
only with the elected board members of a MUD or should
the elected board be permitted to delegate
decision-making authority to its appointed general
manager?
COMMENTS
1)Best Value . The notion of allowing public agencies to
buy supplies and materials using a "best value" process
instead of the traditional "low bid" process is an idea
that's growing in popularity. Some state agencies have
the authority to purchase this way in specified instances
because many have realized that while the low bid method
may save taxpayer dollars in the short run, it may wind
up actually being more expensive to taxpayers in the long
run.
However, at the state level, contracts awarded under the
notion of "best value" also include the caveat that the
winning bidder should be the one who provides the "best
value at the lowest price." Specifically, this concept
is embodied in Government Code Section 14661, which deals
with the awarding of design-build construction contracts.
As such, the author and committee may wish to consider
amending this bill to require bids to be awarded to the
vendor that provides the "best value at the lowest
price."
2)Eyes Open Or Shut . The low bidding process is also a
"blind" bidding process in that the names of the bidders
aren't known to the people selecting the winning bid.
The names are, after all, not important if the agency is
required to pick the lowest responsible bidder and one of
the benefits of such a system is it's virtually
impossible to show favoritism and steer lucrative
contracts toward certain vendors.
This blind bidding is lost in best value procurements
because if an agency is going to judge a contract award
on a vendor's history, performance, financial stability,
experience, etc., it's clearly going to have to know who
the bidders are.
While value bidding can give taxpayers great value, it
also can be an extremely subjective process because
variables such as the quality of a product and the
reputation of a supplier are open to interpretation by an
individual bid reviewer.
3)Accountability - Who Makes The Decisions? All MUDs are
made up of elected board members who are directly
accountable to the voters. While this bill requires the
elected board to create - presumably in an open meeting
process subject to a public vote - the "best value
acquisition policies" that will govern the award of
contracts, this bill also allows a board to delegate to
its general manager the sole authority to determine which
bidder(s) meet the criteria established by the board.
This runs contrary to Public Utilities Code 12751, which
only allows a board to authorize its general manager to
reject all bids for a given contract and to decide
whether, after all bids have been rejected, the contract
should be put out to bid again.
Public Utilities Code Section 12751.1 was created in 1987
to allow certain MUD boards to authorize the general
manager to determine the lowest responsible bidder and to
award a contract to that bidder.
Public Utilities Code Section 12751.2, created in 1997 by
SB 357 (Rainey), Chapter 313, Statutes of 1997, was
sponsored by the East Bay Municipal Utility District. It
gives certain MUD boards the ability to authorize the
general manager to act for the board in determining the
lowest responsible bidder in contracts up to $100,000.
Giving an appointed general manager the sole authority to
reject all bids or the sole authority to determine who
the lowest responsible bidder is in a "blind bidding"
situation is vastly different than the concept in this
bill, which allows boards to give a general manager the
sole authority to award a "value based" contract. Under
this bill, the general manager will know who all of the
bidding vendors are and the MUD board will be allowed to
give the general manager the sole discretion over which
bidder shall be awarded the contract.
Granted, the general manager is accountable to the MUD
board and the MUD board is accountable to the voters, but
the author and committee may wish to consider whether an
MUD board should have the authority to delegate sole
decision-making authority to its general manager in a
"value based" procurement system.
4)Double Referral . Should this measure be approved by this
committee, the Senate Rules Committee has asked that it
be referred to the Senate Local Government Committee.
ASSEMBLY VOTES
Assembly Utilities & Commerce Committee(9-0)
Assembly Local Government Committee(9-0)
Assembly Floor (72-3)
POSITIONS
Sponsor:
Sacramento Municipal Utility District
Support:
None on file.
Oppose:
None on file.
Anna Ferrera
AB 2548 Analysis
Hearing Date: June 13, 2000