Existing provisions of the California Constitution provide that the University of California constitutes a public trust and require the university to be administered by the Regents of the University of California (regents), a corporation in the form of a board, with full powers of organization and government, subject to legislative control only for specified purposes, including any competitive bidding procedures as may be applicable to the university by statute for the letting of construction contracts, sales of real property, and purchasing of materials, goods, and services. Existing law requires the regents, except as provided, to let all contracts involving an expenditure of $100,000 or more annually for goods and materials or services, excepting personal or professional services, to the lowest responsible bidder meeting certain specifications, or to reject all bids. Existing law, until January 1, 2018, also authorizes the bid evaluation and selection for these contracts to be determined by the best value, as defined.

This bill, beginning January 1, 2018, would require a bidder, to qualify as a lowest responsible bidder or best value awardee on contracts for specified services, among other requirements, to certify in writing to the University of California (UC) that the bid includes a total employee compensation package that is valued on a per-employee basis at a level sufficient that it does not materially undercut the average per-employee value of total compensation for UC employees who perform comparable work at the relevant campus, medical center, or laboratory at which the bidder proposes to perform the work. The bill would require the UC to include in its request for proposals a calculation of the average per-employee value of total compensation for UC employees who perform comparable work at the relevant location, as prescribed. The bill would, for these purposes, require contracts for services involving an expenditure of $100,000 or more annually to include any renewals or extensions of the contract that would result in an expenditure of $100,000 or more annually.

This bill would exclude specified employees and public works from these provisions.

Existing provisions of the California Constitution provide that the University of California constitutes a public trust and require the university to be administered by the Regents of the University of California (regents), a corporation in the form of a board, with full powers of organization and government, subject to legislative control only for specified purposes, including such any competitive bidding procedures as may be applicable to the university by statute for the letting of construction contracts, sales of real property, and purchasing of materials, goods, and services. Existing law requires the regents, except as provided, to let all contracts involving an expenditure of $100,000 or more annually for goods and materials or services, excepting personal or professional services, to the lowest responsible bidder meeting certain specifications, or to reject all bids. Existing law, until January 1, 2018, also authorizes the bid evaluation and selection for these contracts to be determined by the best value. value, as defined.

This bill, beginning January 1, 2018, would require a bidder, to qualify as a lowest responsible bidder or best value awardee on contracts for specified services, among other requirements, to certify in writing to the University of California (UC) that the bid includes a total employee compensation package that is valued on a per-employee basis at a level sufficient that it does not materially undercut the average per-employee value of total compensation for UC employees who perform comparable work at the relevant campus, medical center, or laboratory at which the bidder proposes to perform the work. The bill would also require the bidder to provide any applicable collective bargaining agreements and to notify the UC of any changes in the submitted bid information during the performance of the contract. The bill would require the UC to include in its request for proposals a calculation of the average per-employee value of total compensation for UC employees who perform comparable work at the relevant location, as prescribed. The bill would, for these purposes, require contracts for services involving an expenditure of $100,000 or more annually to include any renewals or extensions of the contract that would result in an expenditure of $100,000 or more annually.

This bill would exclude specified employees and public works from these provisions.

Existing provisions of the California Constitution provide that the University of California constitutes a public trust and require the university to be administered by the Regents of the University of California (regents), a corporation in the form of a board, with full powers of organization and government, subject to legislative control only for specified purposes, including such competitive bidding procedures as may be applicable to the university by statute for the letting of construction contracts, sales of real property, and purchasing of materials, goods, and services. Existing law requires the regents, except as provided, to let all contracts involving an expenditure of $100,000 or more annually for goods and materials or services, excepting personal or professional services, to the lowest responsible bidder meeting certain specifications, or to reject all bids. Existing law, until January 1, 2018, also authorizes the bid evaluation and selection for these contracts to be determined by the best value.

This bill, would, beginning January 1, 2018, would require a bidder, to qualify as a lowest responsible bidder or best value awardee on contracts for specified services, among other requirements, to certify in writing to the University of California (UC) that the bid includes a total employee compensation package that is valued on a per-employee basis at a level sufficient that it does not materially undercut the average per-employee value of total compensation for UC employees who perform comparable work at the relevant campus, medical center, or laboratory at which the bidder proposes to perform the work. The bill would also require the bidder to provide any applicable collective bargaining agreements and to notify the UC of any changes in the submitted bid information during the performance of the contract and to submit an annual certified audit statement for the work performed under the contract. The bill would require the UC to include in its request for proposals a calculation of the average per-employee value of total compensation for UC employees who perform comparable work at the relevant location, as prescribed. The bill would, for these purposes, require contracts for services involving an expenditure of $100,000 or more annually to include any renewals or extensions of the contract that would result in an expenditure of $100,000 or more annually.

This bill would exclude specified employees and public works from these provisions.

Existing provisions of the California Constitution provide that the University of California constitutes a public trust and require the university to be administered by the Regents of the University of California (regents), a corporation in the form of a board, with full powers of organization and government, subject to legislative control only for specified purposes, including such competitive bidding procedures as may be applicable to the university by statute for the letting of construction contracts, sales of real property, and purchasing of materials, goods, and services. Existing law requires the regents, except as provided, to let all contracts involving an expenditure of $100,000 or more annually for goods and materials or services, excepting personal or professional services, to the lowest responsible bidder meeting certain specifications, or to reject all bids. Existing law, until January 1, 2018, also authorizes the bid evaluation and selection for these contracts to be determined by the best value.

This bill would, beginning January 1, 2018, require a bidder, to qualify as a lowest responsible bidder or best value awardee on contracts for specified services, among other requirements, to certify in writing to the University of California (UC) that the bid includes a total employee compensation package that is valued on a per-employee basis at a level sufficient that it does not materially undercut the average per-employee value of total compensation for UC employees who perform comparable work at the relevant campus, medical center, or laboratory at which the bidder proposes to perform the work. The bill would also require the bidder to notify the UC of any changes in the submitted bid information during the performance of the contract and to submit an annual certified audit statement for the work performed under the contract. The bill would require the UC to include in its request for proposals a calculation of the average per-employee value of total compensation for UC employees who perform comparable work at the relevant location, as prescribed. The bill would, for these purposes, require contracts for services involving an expenditure of $100,000 or more annually to include any renewals or extensions of the contract that would result in an expenditure of $100,000 or more annually.

This bill would exclude specified employees and public works from these provisions.

 VETO  

Bill No: SB 959

Author:

:

Vote:

SENATE EDUCATION COMMITTEE: 7-2, 3/30/16

AYES: Liu, Block, Hancock, Leyva, Mendoza, Monning, Pan

NOES: Huff, Vidak

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16

AYES: Lara, Beall, Hill, McGuire, Mendoza

NOES: Bates, Nielsen

SENATE FLOOR: 24-14, 6/1/16

AYES: Beall, Block, Cannella, De León, Galgiani, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan, Pavley, Roth, Wieckowski

NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Glazer, Huff, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak, Wolk

NO VOTE RECORDED: Allen, Runner

SENATE FLOOR: 25-14, 8/30/16

AYES: Allen, Beall, Block, Cannella, De León, Galgiani, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan, Pavley, Roth, Wieckowski

NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Glazer, Huff, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak, Wolk

ASSEMBLY FLOOR: 52-25, 8/18/16 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill modifies the requirements for qualifying as a lowest responsible bidder or best value awardee for contracts for specified types of service contracts at the University of California (UC) by requiring a bidder to certify in writing that its employees are compensated at a level that does not undercut, by more than five percent, the average per-employee value of total compensation for UC employees who perform comparable work, as specified, and beginning January 1, 2018, makes these provisions applicable to any renewal or extension of an existing contract for goods, materials and services involving an expenditure of $100,000 or more annually.

ANALYSIS:

Existing law:

1. Outlines the requirements and procedures for competitive bidding at the UC. Existing law outlines requirements and procedures, specifically for the acquisition of materials, goods and services. (Public Contract Code § 10500, et seq.)
2. 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 § 10507.7)
3. 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 §10507.8)
4. 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 § 10500.5)

This bill modifies the requirements for qualifying as a lowest responsible bidder or best value awardee for contracts for materials, goods, and services at the UC. Specifically, this bill:

1. Establishes a number of new requirements for bidders. Specifically, this bill:
   1. 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 per-employee basis that does not undercut, by more than five percent, the average per-employee value of total compensation for employees at the UC who perform comparable work at the relevant campus, medical center, or laboratory, where the proposed work will be performed. In addition, it:
      1. Applies these requirements specifically to contracts for building maintenance, cleaning, or custodial services, call center 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.
      2. Exempts the application of these requirements to employees who are mentally or physically handicapped, or both, who have been issued a license for employment at less than minimum wage by the Industrial Welfare Commission.
      3. Exempts public works projects conducted by public agencies from these requirements.
   2. Requires the UC to:
      1. Include in its request for proposals a calculation which considers the criteria outlined in 1) above.
      2. Use all known cost escalators in the calculation to project the future rate of growth of average per-employee total compensation costs.
   3. Requires a bidder to certify in writing that the bidder has not been found liable for violation of compensation, work hours, or working conditions related provisions of the Penal Code, or Labor Code, as specified, or any Wage Order Issued by the Industrial Welfare Commission for specified amounts, within the prior five years.
   4. Declares the records provided by the bidder/contractor to be subject to public records act laws, as specified and authorizes the UC to redact any confidential information, as specified, and to delay response until after a bid process is complete, if applicable.
2. Makes, beginning January 1, 2018, the $100,000 threshold for competitive bidding of contracts for goods, materials and services to be performed applicable to any renewal or extension of an existing contract if it involves an expenditure of $100,000 or more annually.
3. Makes findings and declarations that the UC has squandered public resources via contracting out to for-profit private contractors that charge significant administrative overhead.

Comments

1. Need for the bill. According to the author, this bill seeks to 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. This bill requires the UC, when evaluating bids for contract work, to evaluate the total employee compensation package and ensure that it does not undercut wages and benefits of existing university employees. According to the author, the UC serves as an anchor institution in the market in which it operates, and as a public institution, and the third-largest California employer, should adopt and promote policies that respect its employees and protect workers’ rights.
2. Related study. According to a 2012 study by the UC Berkeley Labor Center, Temporary Workers in California are Twice as Likely as Non-Temps to Live in Poverty: Problems with Temporary and Subcontracted Work in California, almost one-quarter of a million people worked in the temporary help services industry in California in 2010. These workers were slightly younger, more likely to be female, less likely to be white non-Hispanic, and less likely to have a high school diploma or GED than the average non-temp worker. These workers were also more susceptible to workplace illness and injury, earned less than their non-temp counterparts, and were less likely to get benefits. The report notes that lowered wages mean that these workers 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 and making it difficult to enforce other protections. The report also notes that these employment relationships create downward pressure on wages.
3. UC's Fair Wage/Fair Work Plan. In July 2015, the UC adopted a Fair Wage/Fair Work Plan. Under the Plan, the UC has established a minimum level of pay for employees to ensure that all UC workers are provided a fair wage with a goal of reaching a minimum wage of $15 per hour on October 1, 2017. In addition, the UC reports that it is implementing annual compensation audits and interim audits, paid for by the contractor, to monitor wage and working conditions as well as compliance with federal, state, and UC workplace laws and policies for contracted employees working pursuant to contracts entered into or renewed after October 2015. The UC will also establish a phone hotline and central online system to report complaints directly to the Office of the President.

In light of the activities already planned as part of the UC’s Fair Wage/Fair Work Plan, is this bill necessary?

1. Consequences? This bill increases the complexity of the bidding process for both the UC and potential bidders. It would likely result in an increase in UC’s costs for procuring services and could potentially limit the pool of qualified bidders. The Legislature may wish to consider:
   • • What would be the impact on smaller businesses (particularly those which are disadvantaged or minority business enterprises, women business enterprises and disabled veteran business enterprises) wishing to contract with the UC?
     • How would these provisions affect the efforts of the University to respond to recent directives that the UC minimize its administrative costs and operate more efficiently in order to more cost effectively meet the state’s teaching and research needs?

Prior Legislation

This bill is substantively similar to SB 376 (Lara, 2015) which was heard and passed by the Senate Education Committee in April 2015, by a vote of 7-2. SB 376 was subsequently vetoed by the Governor, whose message read, in pertinent part:

It's worth noting that the University of California recently responded to criticisms of its wage and contracting practices with a plan to incrementally increase its minimum wage for both employees and contract workers, and a pledge to better oversee contracts generally.

The effort to provide increased compensation to those who work for UC - either directly or on a contract basis - is well-intentioned, but I'm not prepared to embrace the provisions of this bill.

I would caution the University, however, to provide a transparent accounting of its contracts and clearly demonstrate how the interests of all its lower paid workers are being protected.

It is unclear whether the new provisions of this bill respond to the Governor’s message.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Assembly Appropriations Committee, UC estimates that its total annual spending on service contracts of the types that would be subject to the provisions of this bill is $345 million, with just over one half of this amount representing contracts at UC's 10 campuses and the remainder representing contracts at UC's five medical centers. Of this total, an estimated 60% ($207 million) constitutes labor costs. Assuming a 30% increase in costs related to providing parity in benefits and a 12.5% increase in costs related to wage parity, total annual costs would be $88 million. These costs will come from a variety of UC fund sources, including the State General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.

In addition to increased contract costs, UC will incur administrative costs of several hundred thousand dollars to calculate average per-employee compensation for every type of contract and to factor in all known cost escalators to project future per-employee costs. There will be additional administrative costs, likely in the millions of dollars over time, associated with revising contract bid specifications, maintaining information provided by prospective and successful bidders for potential Public Records Act requests, and performing additional bidding due to the bill’s restrictions on contract renewals or extensions.

SUPPORT: (Verified 10/12/16)

American Federation of State, County and Municipal Employees, Local 3299

California Federation of Teachers

California Labor Federation

California Teamsters Public Affairs Council

University of California Student Association

OPPOSITION: (Verified 10/12/16)

Association of California Cities – Orange County

California Chamber of Commerce

Los Angeles Area Chamber of Commerce

Sacramento Metropolitan Chamber of Commerce

San Gabriel Valley Economic Partnership

Orange County Business Council

University of California

USCB, America, Inc.

GOVERNOR'S VETO MESSAGE:

I am returning Senate Bill 959 without my signature.

This bill seeks to bring wage and benefit parity to the University of California's contracted workers in specific job categories, such as custodial, clerical and food services, and other services associated with the University's medical enterprises.

Earlier this year, the author requested and the Legislature approved a specific state audit of UC contracting practices and contracted employees. As has been the case with prior audits, this process will likely yield some number of recommendations for change, and it would be prudent to await the recommendations from the State Auditor before embarking on the path prescribed by this bill.

While this audit is pending, I would strongly caution the University to keep its spending in check, specifically as it relates to the compensation of its highest wage earners-many of whom already make hundreds of thousands of dollars more in salary and benefits than the average UC employee or its contracted workers in the aforementioned job categories.

Continuing to enrich the highest paid workers-and they are workers for the public good-will only undermine UC's essential argument that it can't afford parity policies such as the one contemplated in this bill.

ASSEMBLY FLOOR: 52-25, 8/18/16

AYES: Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Holden, Irwin, Jones-Sawyer, Levine, Linder, Lopez, Low, McCarty, Medina, Mullin, O'Donnell, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Williams, Wood, Rendon

NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Wilk

NO VOTE RECORDED: Roger Hernández, Kim, Nazarian

Prepared by:

10/18/16 12:24:39

**** END ****

 UNFINISHED BUSINESS  

Bill No: SB 959

Author:

:

Vote:

SENATE EDUCATION COMMITTEE: 7-2, 3/30/16

AYES: Liu, Block, Hancock, Leyva, Mendoza, Monning, Pan

NOES: Huff, Vidak

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16

AYES: Lara, Beall, Hill, McGuire, Mendoza

NOES: Bates, Nielsen

SENATE FLOOR: 24-14, 6/1/16

AYES: Beall, Block, Cannella, De León, Galgiani, Hall, Hancock, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leno, Leyva, Liu, McGuire, Mendoza, Mitchell, Monning, Pan, Pavley, Roth, Wieckowski

NOES: Anderson, Bates, Berryhill, Fuller, Gaines, Glazer, Huff, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak, Wolk

NO VOTE RECORDED: Allen, Runner

ASSEMBLY FLOOR: 52-25, 8/18/16 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill modifies the requirements for qualifying as a lowest responsible bidder or best value awardee for contracts for specified types of service contracts at the University of California (UC) by requiring a bidder to certify in writing that its employees are compensated at a level that does not undercut, by more than five percent, the average per-employee value of total compensation for UC employees who perform comparable work, as specified, and beginning January 1, 2018, makes these provisions applicable to any renewal or extension of an existing contract for goods, materials and services involving an expenditure of $100,000 or more annually.

Assembly Amendments delete the requirement for bidders to provide the UC with specified information, including spreadsheets showing all applicable compensation and benefits, and also remove the notification requirements for successful bidders.

ANALYSIS:

Existing law:

1. Outlines the requirements and procedures for competitive bidding at the UC. Existing law outlines requirements and procedures, specifically for the acquisition of materials, goods and services. (Public Contract Code § 10500, et seq.)
2. 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 § 10507.7)
3. 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 §10507.8)
4. 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 § 10500.5)

This bill modifies the requirements for qualifying as a lowest responsible bidder or best value awardee for contracts for materials, goods, and services at the UC. Specifically, this bill:

1. Establishes a number of new requirements for bidders. Specifically, this bill:
   1. 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 per-employee basis that does not undercut, by more than five percent, the average per-employee value of total compensation for employees at the UC who perform comparable work at the relevant campus, medical center, or laboratory, where the proposed work will be performed. In addition, it:
      1. Applies these requirements specifically to contracts for building maintenance, cleaning, or custodial services, call center 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.
      2. Exempts the application of these requirements to employees who are mentally or physically handicapped, or both, who have been issued a license for employment at less than minimum wage by the Industrial Welfare Commission.
      3. Exempts public works projects conducted by public agencies from these requirements.
   2. Requires the UC to:
      1. Include in its request for proposals a calculation which considers the criteria outlined in 1) above.
      2. Use all known cost escalators in the calculation to project the future rate of growth of average per-employee total compensation costs.
   3. Requires a bidder to certify in writing that the bidder has not been found liable for violation of compensation, work hours, or working conditions related provisions of the Penal Code, or Labor Code, as specified, or any Wage Order Issued by the Industrial Welfare Commission for specified amounts, within the prior five years.
   4. Declares the records provided by the bidder/contractor to be subject to public records act laws, as specified and authorizes the UC to redact any confidential information, as specified, and to delay response until after a bid process is complete, if applicable.
2. Makes, beginning January 1, 2018, the $100,000 threshold for competitive bidding of contracts for goods, materials and services to be performed applicable to any renewal or extension of an existing contract if it involves an expenditure of $100,000 or more annually.
3. Makes findings and declarations that the UC has squandered public resources via contracting out to for-profit private contractors that charge significant administrative overhead.

Comments

1. Need for the bill. According to the author, this bill seeks to 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. This bill requires the UC, when evaluating bids for contract work, to evaluate the total employee compensation package and ensure that it does not undercut wages and benefits of existing university employees. According to the author, the UC serves as an anchor institution in the market in which it operates, and as a public institution, and the third-largest California employer, should adopt and promote policies that respect its employees and protect workers’ rights.
2. Related study. According to a 2012 study by the UC Berkeley Labor Center, Temporary Workers in California are Twice as Likely as Non-Temps to Live in Poverty: Problems with Temporary and Subcontracted Work in California, almost one-quarter of a million people worked in the temporary help services industry in California in 2010. These workers were slightly younger, more likely to be female, less likely to be white non-Hispanic, and less likely to have a high school diploma or GED than the average non-temp worker. These workers were also more susceptible to workplace illness and injury, earned less than their non-temp counterparts, and were less likely to get benefits. The report notes that lowered wages mean that these workers 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 and making it difficult to enforce other protections. The report also notes that these employment relationships create downward pressure on wages.
3. UC's Fair Wage/Fair Work Plan. In July 2015, the UC adopted a Fair Wage/Fair Work Plan. Under the Plan, the UC has established a minimum level of pay for employees to ensure that all UC workers are provided a fair wage with a goal of reaching a minimum wage of $15 per hour on October 1, 2017. In addition, the UC reports that it is implementing annual compensation audits and interim audits, paid for by the contractor, to monitor wage and working conditions as well as compliance with federal, state, and UC workplace laws and policies for contracted employees working pursuant to contracts entered into or renewed after October 2015. The UC will also establish a phone hotline and central online system to report complaints directly to the Office of the President.

In light of the activities already planned as part of the UC’s Fair Wage/Fair Work Plan, is this bill necessary?

1. Consequences? This bill increases the complexity of the bidding process for both the UC and potential bidders. It would likely result in an increase in UC’s costs for procuring services and could potentially limit the pool of qualified bidders. The Legislature may wish to consider:
   • • What would be the impact on smaller businesses (particularly those which are disadvantaged or minority business enterprises, women business enterprises and disabled veteran business enterprises) wishing to contract with the UC?
     • How would these provisions affect the efforts of the University to respond to recent directives that the UC minimize its administrative costs and operate more efficiently in order to more cost effectively meet the state’s teaching and research needs?

Prior Legislation

This bill is substantively similar to SB 376 (Lara, 2015) which was heard and passed by the Senate Education Committee in April 2015, by a vote of 7-2. SB 376 was subsequently vetoed by the Governor, whose message read, in pertinent part:

“It's worth noting that the University of California recently responded to criticisms of its wage and contracting practices with a plan to incrementally increase its minimum wage for both employees and contract workers, and a pledge to better oversee contracts generally.

The effort to provide increased compensation to those who work for UC - either directly or on a contract basis - is well-intentioned, but I'm not prepared to embrace the provisions of this bill.

I would caution the University, however, to provide a transparent accounting of its contracts and clearly demonstrate how the interests of all its lower paid workers are being protected.”

It is unclear whether the new provisions of this bill respond to the Governor’s message.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Assembly Appropriations Committee, UC estimates that its total annual spending on service contracts of the types that would be subject to the provisions of this bill is $345 million, with just over one half of this amount representing contracts at UC's 10 campuses and the remainder representing contracts at UC's five medical centers. Of this total, an estimated 60% ($207 million) constitutes labor costs. Assuming a 30% increase in costs related to providing parity in benefits and a 12.5% increase in costs related to wage parity, total annual costs would be $88 million. These costs will come from a variety of UC fund sources, including the State General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.

In addition to increased contract costs, UC will incur administrative costs of several hundred thousand dollars to calculate average per-employee compensation for every type of contract and to factor in all known cost escalators to project future per-employee costs. There will be additional administrative costs, likely in the millions of dollars over time, associated with revising contract bid specifications, maintaining information provided by prospective and successful bidders for potential Public Records Act requests, and performing additional bidding due to the bill’s restrictions on contract renewals or extensions

SUPPORT: (Verified 8/19/16)

American Federation of State, County and Municipal Employees, Local 3299

California Federation of Teachers

California Labor Federation

California Teamsters Public Affairs Council

University of California Student Association

OPPOSITION: (Verified 8/19/16)

Association of California Cities – Orange County

California Chamber of Commerce

Los Angeles Area Chamber of Commerce

Sacramento Metropolitan Chamber of Commerce

San Gabriel Valley Economic Partnership

Orange County Business Council

University of California

USCB, America, Inc.

ASSEMBLY FLOOR: 52-25, 8/18/16

AYES: Alejo, Arambula, Atkins, Bloom, Bonilla, Bonta, Brown, Burke, Calderon, Campos, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Dodd, Eggman, Frazier, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Holden, Irwin, Jones-Sawyer, Levine, Linder, Lopez, Low, McCarty, Medina, Mullin, O'Donnell, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Mark Stone, Thurmond, Ting, Waldron, Weber, Williams, Wood, Rendon

NOES: Achadjian, Travis Allen, Baker, Bigelow, Brough, Chang, Chávez, Dahle, Beth Gaines, Gallagher, Grove, Hadley, Harper, Jones, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte, Olsen, Patterson, Steinorth, Wagner, Wilk

NO VOTE RECORDED: Roger Hernández, Kim, Nazarian

Prepared by:

8/29/16 18:45:37

**** END ****

SENATE THIRD READING

STR Bill Id:SB 959

Author:(Lara)

As Amended Ver:August 15, 2016

Majority vote

SENATE VOTE: 24-14

SUMMARY: Modifies the requirements for qualifying as a lowest responsible bidder or best value awardee for contracts for specified types of service contracts at the University of California (UC) by requiring a bidder to certify in writing that its employees are compensated at a level that does not undercut, by more than 5%, the average per-employee value of total compensation for UC employees who perform comparable work, as specified; and, beginning January 1, 2018, makes these provisions applicable to any renewal or extension of an existing contract for goods, materials and services involving an expenditure of $100,000 or more annually. 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. Establishes a number of new requirements for bidders, including:
   1. 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 per-employee basis that does not undercut, by more than 5%, the average per-employee value of total compensation for employees at the UC who perform comparable work at the relevant campus, medical center, or laboratory, where the proposed work will be performed;
   2. Applies these requirements specifically to contracts for building maintenance, cleaning, or custodial services, call center 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;
   3. Exempts the application of these requirements to employees who are mentally or physically handicapped, or both, who have been issued a license for employment at less than minimum wage by the Industrial Welfare Commission; and,
   4. Exempts public works projects conducted by public agencies from these requirements.
3. Requires the UC to:
   1. Include in its request for proposals a calculation which considers the criteria as specified in number 1) above; and,
   2. Use all known cost escalators in the calculation to project the future rate of growth of average per-employee total compensation costs.
4. Requires a bidder to certify in writing that the bidder has not been found liable for violation of compensation, work hours, or working conditions related provisions of the Penal Code, or Labor Code, as specified, or any Wage Order Issued by the Industrial Welfare Commission for specified amounts, within the prior five years.
5. Declares the records provided by the bidder/contractor to be subject to public records act laws, as specified and authorizes the UC to redact any confidential information, as specified, and to delay response until after a bid process is complete, if applicable.
6. Makes, beginning January 1, 2018, the $100,000 threshold for competitive bidding of contracts for goods, materials and services to be performed applicable to any renewal or extension of an existing contract if it involves an expenditure of $100,000 or more annually.

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 (PCC) 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 Assembly Appropriations Committee, UC estimates that its total annual spending on service contracts of the types that would be subject to the provisions of this bill is $345 million, with just over one half of this amount representing contracts at UC's 10 campuses and the remainder representing contracts at UC's five medical centers. Of this total, an estimated 60% ($207 million) constitutes labor costs. Assuming a 30% increase in costs related to providing parity in benefits and a 12.5% increase in costs related to wage parity, total annual costs would be $88 million. These costs will come from a variety of UC fund sources, including the State General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.

In addition to increased contract costs, UC will incur administrative costs of several hundred thousand dollars to calculate average per-employee compensation for every type of contract and to factor in all known cost escalators to project future per-employee costs. There will be additional administrative costs, likely in the millions of dollars over time, associated with revising contract bid specifications, maintaining information provided by prospective and successful bidders for potential Public Records Act requests, and performing additional bidding due to the bill’s restrictions on contract renewals or extensions

COMMENTS: Purpose of this measure. According to the author, "Between 2009 and 2014, job growth in contingent or contract employment has grown at more than nine times the rate of traditional employment, according to the Bureau of Labor Statistics. This trend has been especially evident at the University of California – the state's third largest employer – where, despite dramatic growth in both students and facilities, the number of directly employed service workers has actually declined during this period."

The author contends that this measure will ensure that the UC "evaluates the total employee compensation package of bids for contract work to ensure that employment that is contracted out to contingent workers does not undercut the value of existing university employees."

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% 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.

Joint Legislative Audit Committee (JLAC) actions. During the May 25, 2016 JLAC hearing, the Committee approved an audit request by Senator Ricardo Lara to, among others, have the California State Auditor conduct an audit of UC contracting policies and processes and comparisons of compensation and benefits of UC employees versus contract employees.

The State Auditor estimates that said audit will require approximately 3,240 hours of audit work. Upon completion of the audit, a report will be issued that presumably will have policy recommendations.

Arguments in support. The American Federation of State, County and Municipal Employees, AFL-CIO, contends that, "If enacted, this bill would help to stem the troubling and growing trend of depressed wages and labor abuse among contracted out workers, by requiring California's third-largest employer, the University of California, to hold contract labor firms accountable around compensation and treatment of workers."

Arguments in opposition. The UC contends that the UC's contract partners will be greatly impacted by this measure due to the prescriptive reporting requirements. Additionally, the UC states, "SB 959 significantly undermines the University's ability to achieve administrative cost savings that could be directed to the University's core missions of teaching, research, and public service."

Related legislation. SB 376 (Lara) of 2015, which was vetoed by the Governor, is very similar in nature to this bill.

Analysis Prepared by: Jeanice Warden / HIGHER ED. / (916) 319-3960 FN: 0004033

Date of Hearing: August 3, 2016

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez, Chair

SBPCA Bill Id:SB 959

Author:(Lara) – As Amended Ver:May 31, 2016

Urgency: No State Mandated Local Program: No Reimbursable: No

SUMMARY:

This bill, effective January 1, 2018, requires bidders on University of California (UC) contracts for specified types of personal services to certify that their employees' total compensation does not significantly undercut the total compensation of UC employees doing comparable work. Specifically, this bill:

1. Applies the cost standard described above to the following types of contracts: building maintenance, cleaning or custodial services, call centers services, clerical services, dining and food services, gardening, grounds keeping, and plant nursery services, laborer services, mailroom services, parking, shuttle bus, and transportation services, security services, storekeeper services, patient care technical employee services, patient billing services, medical transcribing services, patient escort services, or nursing assistance services.
2. Requires a bidder to certify the following:
   1. That its total employee compensation package, including fringe benefits, that is valued on a per-employee basis, does not materially undercut UC's total compensation for employees doing comparable work at the relevant campus, medical center, or laboratory by more than five percent.
   2. That the bidder has not been found liable for violation of compensation, work hours, or working conditions related provisions of the Penal Code, or Labor Code, as specified, or any Wage Order Issued by the Industrial Welfare Commission for specified amounts, within the prior five years.
3. Requires the bidder to provide the UC: a) spreadsheets showing all applicable compensation and benefits, as specified, for each position and employee supplied to the University; b) an organization chart showing the bidder’s supervisory structure; and, c) any applicable collective bargaining agreements and all employee handbooks applicable to the contracted employees.
4. Requires a successful bidder, once under contract, to notify the UC of any changes to the information provided within 30 days of the change, and provide UC copies of notices provided to employees in compliance with existing labor code provisions outlining the obligations of the employer prior to the employees beginning UC campus work.
5. Requires UC to include in its request for proposals, a calculation of the average per-employee value of total compensation for UC employees relevant to a particular contract, and to incorporate all known cost escalators for projecting the rate of growth of average per-employee compensation.
6. Declares the records provided by the bidder/contractor to be subject to Public Records Act laws and authorizes the UC to redact any confidential information and to delay responses to public records requests until after a bid process is complete, if applicable.
7. Stipulates that, effective January 1, 2018, the current requirement that UC service contracts—other than for personal or professional services—involving expenditures of $100,000 or more annually be awarded to the lowest responsible bidder, includes the renewal or extension of such contracts.

FISCAL EFFECT:

UC estimates that its total annual spending on service contracts of the types that would be subject to the provisions of this bill is $345 million, with just over one half of this amount representing contracts at UC's 10 campuses and the remainder representing contracts at UC's five medical centers. Of this total, an estimated 60% ($207 million) constitutes labor costs. Assuming a 30% increase in costs related to providing parity in benefits and a 12.5% increase in costs related to wage parity, total annual costs would be $88 million. These costs will come from a variety of UC fund sources, including the State General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.

In addition to increased contract costs, UC will incur administrative costs of several hundred thousand dollars to calculate average per-employee compensation for every type of contract and to factor in all known cost escalators to project future per-employee costs. There will be additional administrative costs, likely in the millions of dollars over time, associated with revising contract bid specifications, maintaining information provided by prospective and successful bidders for potential Public Records Act requests, and performing additional bidding due to the bill’s restrictions on contract renewals or extensions.

COMMENTS:

1. Purpose. According to the author, this bill "seeks to 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 further states such workers generally receive lower wages and less workplace protections, and that government must assume some of the burden of providing benefits and support to these employees.

In support, the American Federation of State, County, and Municipal Employees (AFSCME) contends that, "If enacted, this bill would help to stem the troubling and growing trend of depressed wages and labor abuse among contracted out workers, by requiring California's third-largest employer, the University of California, to hold contract labor firms accountable around compensation and treatment of workers."

1. Opposition. In July 2015, UC announced its Fair Wage/Fair Work plan, which will established the minimum wage for contract workers at $13 per hour starting October 2015, increasing to $15 per hour as of October 1, 2017. This plan also involves a monitoring and compliance program to ensure contractors are complying with UC policies and all federal, state, and local laws. Finally, the program includes annual compensation audits of all contracts and spot audits of selected contracts.

UC notes that it only contracts out for services when there is a need for special expertise or experience, for short-term or temporary staffing needs, for special services and equipment that are not available internally, or for services at a leased facility where the services are provided by the owner.

UC argues that, in addition to increasing costs, the bill will create administrative burdens, in part by requiring an analysis to determine per-employee compensation for every type of contract and factoring in all known cost escalators to project future per-employee costs. UC also asserts the bill will hinder its ability to make its contracting more efficient by using systemwide rather than site-specific contracts.

1. Prior Legislation. In 2015, SB 376 (Lara), which was very similar to this bill, though lacking some of the administrative requirements of SB 959, was vetoed.

Analysis Prepared by: Chuck Nicol / APPR. / (916) 319-2081

Date of Hearing: June 29, 2016

ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW

Cristina Garcia, Chair

SBPCA Bill Id:SB 959

Author:(Lara) – As Amended Ver:May 31, 2016

SENATE VOTE: 24-14

SUBJECT: University of California: contracts: bidding

SUMMARY: Modifies the requirements for qualifying as a lowest responsible bidder or best value awardee for contracts for specified types of service contracts at the University of California (UC). Specifically, this bill:

1. Establishes a number of new requirements for bidders, including:
   1. 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 per-employee basis that does not undercut, by more than five percent, the average per-employee value of total compensation for employees at the UC who perform comparable work at the relevant campus, medical center, or laboratory, where the proposed work will be performed;
   2. Applies these requirements specifically to contracts for building maintenance, cleaning, or custodial services, call center 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;
   3. Exempts the application of these requirements to employees who are mentally or physically handicapped, or both, who have been issued a license for employment at less than minimum wage by the Industrial Welfare Commission; and,
   4. Exempts public works projects conducted by public agencies from these requirements.
2. Requires the UC to:
   1. Include in its request for proposals a calculation which considers the criteria as specified in number 1) above; and,
   2. Use all known cost escalators in the calculation to project the future rate of growth of average per-employee total compensation costs.
3. Requires the bidder to provide the following to the UC:
   1. Spreadsheets showing all applicable compensation and benefits, as specified, for each position and employee supplied to the UC;
   2. An organization chart showing the bidder’s supervisory structure; and,
   3. Any applicable collective bargaining agreements and all employee handbooks applicable to the contracted employees.
4. Requires a bidder to certify in writing that the bidder has not been found liable for violation of compensation, work hours, or working conditions related provisions of the Penal Code, or Labor Code, as specified, or any Wage Order Issued by the Industrial Welfare Commission for specified amounts, within the prior five years.
5. Requires a successful bidder, once commencing work for the UC, to:
   1. Notify the UC of any changes to the information provided within 30 days of the change, as specified; and,
   2. Provide UC copies of notices provided to employees in compliance with existing labor code provisions outlining the obligations of the employer prior to the employees beginning UC campus work.
6. Declares the records provided by the bidder/contractor to be subject to public records act laws, as specified and authorizes the UC to redact any confidential information, as specified, and to delay response until after a bid process is complete, if applicable.
7. Makes, beginning January 1, 2018, the $100,000 threshold for competitive bidding of contracts for goods, materials and services to be performed applicable to any renewal or extension of an existing contract if it involves an expenditure of $100,000 or more annually.
8. Makes findings and declarations that the UC has squandered public resources via contracting out to for-profit private contractors that charge significant administrative overhead.

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 (PCC) 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, the UC estimates that this bill would increase contract costs at each campus and medical center resulting in costs in the high tens of millions due to its requirements that would likely drive increased salary and benefit costs for bidders to demonstrate that employees are compensated at a level not less than five percent of those employed by the UC who perform comparable work. Costs that would have more of a direct state cost pressure would likely be impacts to campus contracts, which comprise slightly more than half of this cost estimate (about $47 million). However, these costs are likely to be comprised of a variety of fund sources outside of UC’s core budget. Actual costs are unknown and would depend upon a number of factors, among them being, vendor employee compensation data as well as similar detailed data pertaining to UC employees to determine the difference in total compensation for UC employees for similar work.

Additionally, the UC also estimates significant administrative costs that are unknown, to comply with the bill’s requirements for activities that could fluctuate from year to year, but could be in the hundreds of thousands.

COMMENTS: According to the author, "Between 2009 and 2014, job growth in contingent or contract employment has grown at more than nine times the rate of traditional employment, according to the Bureau of Labor Statistics. This trend has been especially evident at the University of California—the state’s third largest employer—where, despite dramatic growth in both students and facilities, the number of directly employed service workers has actually declined during this period."

The author contends that this measure will ensure that the UC "evaluates the total employee compensation package of bids for contract work to ensure that employment that is contracted out to contingent workers does not undercut the value of existing university employees."

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," found that, in California, almost one-quarter of a million people worked in the temporary help services industry in 2010. The report notes 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.

SUPPORT: The American Federation of State, County and Municipal Employees, AFL-CIO, contends that, "If enacted, this bill would help to stem the troubling and growing trend of depressed wages and labor abuse among contracted out workers, by requiring California's third-largest employer, the University of California, to hold contract labor firms accountable around compensation and treatment of workers."

OPPOSITION: The UC contends that the UC's contract partners will be greatly impacted by this measure due to the prescriptive reporting requirements. Additionally, the UC states, "SB 959 significantly undermines the University's ability to achieve administrative cost savings that could be directed to the University's core missions of teaching, research, and public service."

PRIOR LEGISLATION: SB 376 (Lara), of 2015, which was vetoed by the Governor, is very similar in nature to this measure.

COMMITTEE CONCERNS: The author may wish to consider consolidating the significant list of compensation items that a bidder must provide in spreadsheet form to the UC along with a bid. A possible solution might be reducing the compensation categories to simply salary and wages, pensions, and benefits.

REGISTERED SUPPORT / OPPOSITION:

Support

American Federation of State, County and Municipal Employees, AFL-CIO

California Federation of Teachers

California Labor Federation

California Teamsters Public Affairs Council

Opposition

California Chamber of Commerce

Los Angeles Area Chamber of Commerce

Sacramento Metropolitan Chamber of Commerce

San Gabriel Valley Economic Partnership

Orange County Business Council

University of California

USCB, America, Inc.

Analysis Prepared by: William Herms / A. & A.R. / (916) 319-3600

Date of Hearing: June 21, 2016

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Jose Medina, Chair

SBPCA Bill Id:SB 959

Author:(Lara) – As Amended Ver:May 31, 2016

[Note: This bill is doubled 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: University of California: contracts: bidding.

SUMMARY: Modifies the requirements for qualifying as a lowest responsible bidder or best value awardee for contracts for specified types of service contracts at the University of California (UC) by requiring a bidder to certify in writing that its employees are compensated at a level that does not undercut, by more than five percent, the average per-employee value of total compensation for UC employees who perform comparable work, as specified; and, beginning January 1, 2018, makes these provisions applicable to any renewal or extension of an existing contract for goods, materials and services involving an expenditure of $100,000 or more annually. 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. Establishes a number of new requirements for bidders, including:
   1. 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 per-employee basis that does not undercut, by more than five percent, the average per-employee value of total compensation for employees at the UC who perform comparable work at the relevant campus, medical center, or laboratory, where the proposed work will be performed;
   2. Applies these requirements specifically to contracts for building maintenance, cleaning, or custodial services, call center 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;
   3. Exempts the application of these requirements to employees who are mentally or physically handicapped, or both, who have been issued a license for employment at less than minimum wage by the Industrial Welfare Commission; and,
   4. Exempts public works projects conducted by public agencies from these requirements.
3. Requires the UC to:
   1. Include in its request for proposals a calculation which considers the criteria as specified in number 1) above; and,
   2. Use all known cost escalators in the calculation to project the future rate of growth of average per-employee total compensation costs.
4. Requires a bidder to certify in writing that the bidder has not been found liable for violation of compensation, work hours, or working conditions related provisions of the Penal Code, or Labor Code, as specified, or any Wage Order Issued by the Industrial Welfare Commission for specified amounts, within the prior five years.
5. Requires the bidder to provide the following to the UC:
   1. Spreadsheets showing all applicable compensation and benefits, as specified, for each position and employee supplied to the University;
   2. An organization chart showing the bidder’s supervisory structure; and,
   3. Any applicable collective bargaining agreements and all employee handbooks applicable to the contracted employees.
6. Requires a successful bidder, once commencing work for the UC, to:
   1. Notify the UC of any changes to the information provided within 30 days of the change, as specified; and,
   2. Provide UC copies of notices provided to employees in compliance with existing labor code provisions outlining the obligations of the employer prior to the employees beginning UC campus work.
7. Declares the records provided by the bidder/contractor to be subject to public records act laws, as specified and authorizes the UC to redact any confidential information, as specified, and to delay response until after a bid process is complete, if applicable.
8. Makes, beginning January 1, 2018, the $100,000 threshold for competitive bidding of contracts for goods, materials and services to be performed applicable to any renewal or extension of an existing contract if it involves an expenditure of $100,000 or more annually.

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 (PCC) 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, the UC estimates that this bill would increase contract costs at each campus and medical center resulting in costs in the high tens of millions due to its requirements that would likely drive increased salary and benefit costs for bidders to demonstrate that employees are compensated at a level not less than five percent of those employed by the UC who perform comparable work. Costs that would have more of a direct state cost pressure would likely be impacts to campus contracts, which comprise slightly more than half of this cost estimate (about $47 million). However, these costs are likely to be comprised of a variety of fund sources outside of UC’s core budget. Actual costs are unknown and would depend upon a number of factors, among them being, vendor employee compensation data as well as similar detailed data pertaining to UC employees to determine the difference in total compensation for UC employees for similar work.

Additionally, the UC also estimates significant administrative costs that are unknown, to comply with the bill’s requirements for activities that could fluctuate from year to year, but could be in the hundreds of thousands.

COMMENTS: Purpose of this measure. According to the author, "Between 2009 and 2014, job growth in contingent or contract employment has grown at more than nine times the rate of traditional employment, according to the Bureau of Labor Statistics. This trend has been especially evident at the University of California—the state’s third largest employer—where, despite dramatic growth in both students and facilities, the number of directly employed service workers has actually declined during this period."

The author contends that this measure will ensure that the UC "evaluates the total employee compensation package of bids for contract work to ensure that employment that is contracted out to contingent workers does not undercut the value of existing university employees."

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.

Joint Legislative Audit Committee (JLAC) actions. During the May 25, 2016 JLAC hearing, the Committee approved an audit request by Senator Ricardo Lara to, among others, have the California State Auditor conduct an audit of UC contracting policies and processes and comparisons of compensation and benefits of UC employees versus contract employees.

The State Auditor estimates that said audit will require approximately 3,240 hours of audit work. Upon completion of the audit, a report will be issued that presumably will have policy recommendations.

Committee consideration. Knowing that an audit will be conducted as it pertains directly to the subject and contents of this measure, the Committee may wish to determine if it is prudent for this measure to be acted upon prior to the release of the audit findings.

Arguments in support. The American Federation of State, County and Municipal Employees, AFL-CIO, contends that, "If enacted, this bill would help to stem the troubling and growing trend of depressed wages and labor abuse among contracted out workers, by requiring California's third-largest employer, the University of California, to hold contract labor firms accountable around compensation and treatment of workers."

Arguments in opposition. The UC contends that the UC's contract partners will be greatly impacted by this measure due to the prescriptive reporting requirements. Additionally, the UC states, "SB 959 significantly undermines the University's ability to achieve administrative cost savings that could be directed to the University's core missions of teaching, research, and public service."

Related legislation. SB 376 (Lara), of 2015, which was vetoed by the Governor, is very similar in nature to this measure.

REGISTERED SUPPORT / OPPOSITION:

Support

American Federation of State, County and Municipal Employees, AFL-CIO

California Labor Federation

California Teamsters Public Affairs Council

Opposition

Association of California Cities – Orange County

California Chamber of Commerce

Chambers of Commerce Alliance, Ventura and Santa Barbara Counties

Orange County Business Council

University of California

USCB, America, Inc.

Analysis Prepared by: Jeanice Warden / HIGHER ED. / (916) 319-3960

 THIRD READING  

Bill No: SB 959

Author:

Amended: 5/31/16

Vote:

SENATE EDUCATION COMMITTEE: 7-2, 3/30/16

AYES: Liu, Block, Hancock, Leyva, Mendoza, Monning, Pan

NOES: Huff, Vidak

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/27/16

AYES: Lara, Beall, Hill, McGuire, Mendoza

NOES: Bates, Nielsen

SUBJECT:

SOURCE: Author

DIGEST: This bill modifies the requirements for qualifying as a lowest responsible bidder or best value awardee for contracts for specified types of service contracts at the University of California (UC) by requiring a bidder to certify in writing that its employees are compensated at a level that does not undercut, by more than five percent, the average per-employee value of total compensation for UC employees who perform comparable work, as specified, and beginning January 1, 2018, makes these provisions applicable to any renewal or extension of an existing contract for goods, materials and services involving an expenditure of $100,000 or more annually.

ANALYSIS:

Existing law:

1. Outlines the requirements and procedures for competitive bidding at the UC. Existing law outlines requirements and procedures, specifically for the acquisition of materials, goods and services. (Public Contract Code § 10500, et seq.)
2. 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 § 10507.7)
3. 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 §10507.8)
4. 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 § 10500.5)

This bill modifies the requirements for qualifying as a lowest responsible bidder or best value awardee for contracts for materials, goods, and services at the UC. Specifically, this bill:

1. Establishes a number of new requirements for bidders. Specifically, this bill:
   1. 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 per-employee basis that does not undercut, by more than five percent, the average per-employee value of total compensation for employees at the UC who perform comparable work at the relevant campus, medical center, or laboratory, where the proposed work will be performed. In addition, it:
      1. Applies these requirements specifically to contracts for building maintenance, cleaning, or custodial services, call center 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.
      2. Exempts the application of these requirements to employees who are mentally or physically handicapped, or both, who have been issued a license for employment at less than minimum wage by the Industrial Welfare Commission.
      3. Exempts public works projects conducted by public agencies from these requirements.
   2. Requires the UC to:
      1. Include in its request for proposals a calculation which considers the criteria outlined in 1) above.
      2. Use all known cost escalators in the calculation to project the future rate of growth of average per-employee total compensation costs.
   3. Requires a bidder to certify in writing that the bidder has not been found liable for violation of compensation, work hours, or working conditions related provisions of the Penal Code, or Labor Code, as specified, or any Wage Order Issued by the Industrial Welfare Commission for specified amounts, within the prior five years.
   4. Requires the bidder to provide the following to the UC:
      1. Spreadsheets showing all applicable compensation and benefits, as specified, for each position and employee supplied to the University.
      2. An organization chart showing the bidder’s supervisory structure.
      3. Any applicable collective bargaining agreements and all employee handbooks applicable to the contracted employees.
   5. Requires a successful bidder, once commencing work for the UC, to:
      1. Notify the UC of any changes to the information provided within 30 days of the change, as specified.
      2. Provide UC copies of notices provided to employees in compliance with existing labor code provisions outlining the obligations of the employer prior to the employees beginning UC campus work.
   6. Declares the records provided by the bidder/contractor to be subject to public records act laws, as specified and authorizes the UC to redact any confidential information, as specified, and to delay response until after a bid process is complete, if applicable.
2. Makes, beginning January 1, 2018, the $100,000 threshold for competitive bidding of contracts for goods, materials and services to be performed applicable to any renewal or extension of an existing contract if it involves an expenditure of $100,000 or more annually.
3. Makes findings and declarations that the UC has squandered public resources via contracting out to for-profit private contractors that charge significant administrative overhead.

Comments

1. Need for the bill. According to the author, this bill seeks to 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. This bill requires the UC, when evaluating bids for contract work, to evaluate the total employee compensation package and ensure that it does not undercut wages and benefits of existing university employees. According to the author, the UC serves as an anchor institution in the market in which it operates, and as a public institution, and the third-largest California employer, should adopt and promote policies that respect its employees and protect workers’ rights.
2. Related study. According to a 2012 study by the UC Berkeley Labor Center, Temporary Workers in California are Twice as Likely as Non-Temps to Live in Poverty: Problems with Temporary and Subcontracted Work in California, almost one-quarter of a million people worked in the temporary help services industry in California in 2010. These workers were slightly younger, more likely to be female, less likely to be white non-Hispanic, and less likely to have a high school diploma or GED than the average non-temp worker. These workers were also more susceptible to workplace illness and injury, earned less than their non-temp counterparts, and were less likely to get benefits. The report notes that lowered wages mean that these workers 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 and making it difficult to enforce other protections. The report also notes that these employment relationships create downward pressure on wages.
3. UC's Fair Wage/Fair Work plan. In July 2015, the UC adopted a Fair Wage/Fair Work Plan. Under the Plan, the UC has established a minimum level of pay for employees to ensure that all UC workers are provided a fair wage with a goal of reaching a minimum wage of $15 per hour on October 1, 2017. In addition, the UC reports that it is implementing annual compensation audits and interim audits, paid for by the contractor, to monitor wage and working conditions as well as compliance with federal, state, and UC workplace laws and policies for contracted employees working pursuant to contracts entered into or renewed after October 2015. The UC will also establish a phone hotline and central online system to report complaints directly to the Office of the President.

In light of the activities already planned as part of the University of California’s (UC) Fair Wage/Fair Work Plan, is this bill necessary?

1. Consequences? This bill increases the complexity of the bidding process for both the UC and potential bidders. It would likely result in an increase in UC’s costs for procuring services and could potentially limit the pool of qualified bidders. The Legislature may wish to consider:
   • • What would be the impact on smaller businesses (particularly those which are disadvantaged or minority business enterprises, women business enterprises and disabled veteran business enterprises) wishing to contract with the UC?
     • How would these provisions affect the efforts of the University to respond to recent directives that the UC minimize its administrative costs and operate more efficiently in order to more cost effectively meet the state’s teaching and research needs?

Prior Legislation

This bill is substantively similar to SB 376 (Lara, 2015) which was heard and passed by the Senate Education Committee in April 2015, by a vote of 7-2. SB 376 was subsequently vetoed by the Governor, whose message read, in pertinent part:

“It's worth noting that the University of California recently responded to criticisms of its wage and contracting practices with a plan to incrementally increase its minimum wage for both employees and contract workers, and a pledge to better oversee contracts generally.

The effort to provide increased compensation to those who work for UC - either directly or on a contract basis - is well-intentioned, but I'm not prepared to embrace the provisions of this bill.

I would caution the University, however, to provide a transparent accounting of its contracts and clearly demonstrate how the interests of all its lower paid workers are being protected.”

It is unclear whether the new provisions of this bill respond to the Governor’s message.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee, the UC estimates that this bill would increase contract costs at each campus and medical center totaling in the high tens of millions due to requirements that would likely drive increased salary and benefit costs for bidders. Actual costs are unknown and would depend upon a number of factors, among them being, vendor employee compensation data as well as similar detailed data pertaining to UC employees to determine the difference in total compensation for UC employees for similar work. The UC also estimates significant administrative costs to comply with this bill’s requirements for activities that could fluctuate from year to year, but could be in the mid to high hundreds of thousands initially.

SUPPORT: (Verified 5/27/16)

American Federation of State, County and Municipal Employees, Local 3299

OPPOSITION: (Verified 5/27/16)

None received

Prepared by:

5/31/16 21:31:39

**** END ****

SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 959 (Lara) - University of California: contracts: bidding

Bill Summary:

Beginning January 1, 2018, this bill modifies requirements for qualifying as a lowest responsible bidder or best value awardee for certain types of service contracts at the University of California (UC). Bidders are required to certify in writing that its employees are compensated at a level that does not undercut, by more than five percent, the average per-employee value of total compensation for UC employees who perform comparable work, and provide specified information to the UC when they submit bids. It also makes these provisions applicable to any renewal or extension of an existing contract for services involving an expenditure of $100,000 or more annually.

*********** ANALYSIS ADDENDUM – SUSPENSE FILE ***********

The following information is revised to reflect amendments

adopted by the committee on May 27, 2016

Fiscal Impact:

• The UC estimates that this bill would increase contract costs at each campus and medical center resulting in costs in the high tens of millions due to its requirements that would likely drive increased salary and benefit costs for bidders to demonstrate that employees are compensated at a level not less than five percent of those employed by the UC who perform comparable work. Costs that would have more of a direct state cost pressure would likely be impacts to campus contracts, which comprise slightly more than half of this cost estimate (about $47 million). However, these costs are likely to be comprised of a variety of fund sources outside of UC’s core budget. Actual costs are unknown and would depend upon a number of factors, among them being, vendor employee compensation data as well as similar detailed data pertaining to UC employees to determine the difference in total compensation for UC employees for similar work.
  
• The UC also estimates significant administrative costs that are unknown, to comply with the bill’s requirements for activities that could fluctuate from year to year, but could be in the hundreds of thousands.

Author Amendments:

Amend per author to reduce the information to be submitted to UC by bidders and contractors, as specified; requires bidders to certify that within the prior five years, instead of 10 years, the bidder has not been found liable for certain violations; and make other clarifying amendments.

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SENATE COMMITTEE ON APPROPRIATIONS

Senator Ricardo Lara, Chair

2015 - 2016 Regular Session

SB 959 (Lara) - University of California: contracts: bidding

This bill meets the criteria for referral to the Suspense File.

Bill Summary:

Beginning January 1, 2018, this bill modifies requirements for qualifying as a lowest responsible bidder or best value awardee for certain types of service contracts at the University of California (UC). Bidders are required to certify in writing that its employees are compensated at a level that does not undercut, by more than five percent, the average per-employee value of total compensation for UC employees who perform comparable work, and provide specified items to the UC when they submit bids. It also makes these provisions applicable to any renewal or extension of an existing contract for services involving an expenditure of $100,000 or more annually.

Fiscal Impact:

• The UC estimates that this bill would increase contract costs at each campus and medical center totaling in the high tens of millions due to its requirements that would likely drive increased salary and benefit costs for bidders to demonstrate that employees are compensated at a level not less than five percent of those employed by the UC who perform comparable work. Costs that would have more of a direct state impact would likely be impacts to campus contracts (though these costs are likely to be comprised of a variety of fund sources outside of UC’s core budget), as opposed to medical center contracts, which comprise slightly more than half of this cost estimate (about $47 million). Actual costs are unknown and would depend upon a number of factors, among them being, vendor employee compensation data as well as similar detailed data pertaining to UC employees to determine the difference in total compensation for UC employees for similar work. See Staff Comments
  
• The UC also estimates significant administrative costs to comply with the bill’s requirements for activities that could fluctuate from year to year, but could be in the mid to high hundreds of thousands initially. See Staff Comments

Background:

Existing law outlines the requirements and procedures for competitive bidding at the University of California, including those applicable to the acquisition of materials, goods and services. (Public Contract Code § 10500, et seq.)

Existing law 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 § 10507.7)

Existing law 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 §10507.8)

In July 2015, the UC adopted the Fair Wage Fair Work Plan. Under the Plan, the UC has established a minimum level of pay for employees to ensure that all UC workers are provided a fair wage with a goal of reaching a minimum wage of $15 per hour on October 1, 2017. In addition, the UC reports that it is implementing annual compensation audits and interim audits, paid for by contractors, to monitor wage and working conditions as well as compliance with federal, state, and UC workplace laws and policies for contracted employees working pursuant to contracts entered into or renewed after October 2015. The UC will also establish a phone hotline and central online system to report complaints directly to the Office of the President.

Proposed Law:

This bill sets forth certain requirements a bidder must fulfill to qualify as a lowest responsible bidder or best value awardee on a contract for certain types of services, including those such as building maintenance, cleaning or custodial services, and dining and food services. This bill requires that all the information provided by the bidder or contractor to the UC be public records and open to inspection upon request.

Beginning January 1, 2018, this bill:

Requires a bidder to certify that:

• The bid includes a total employee compensation package, including fringe benefits, that is valued on a per-employee basis that does not undercut by more than five percent that of a UC employee who performs comparable work at the campus, medical center, or laboratory. UC is required to include this calculation of average per-employee value of compensation in its request for proposals, and use all known cost escalators to project the future rate of growth of average per-employee total compensation costs.
• It has not been found liable for violation of compensation, work hours, working conditions, as specified, or any Wage Order issued by the Industrial Welfare Commission for specified amounts, within the prior ten years.

Requires a bidder to provide to the UC:

• Specified items when it submits its bid, including: (1) a spreadsheet showing, for each employee supplied to the UC all applicable compensation and benefits to be offered, as specified, and the anticipated hours to be worked on a daily and weekly basis; (2) an organizational chart showing the bidder’s supervisory structure for the work to be performed; (3) all employee handbooks or other policies applicable to the contracted workers; (4) projected total and itemized gross and net revenues and itemized expenses for each of the first three years of the proposed contract.

Requires successful bidders, once they commence work for the UC to:

• Notify the UC of any changes to all of the information required above within 30 days, as specified.
• Provide the UC with all notices provided to the contracted employees at the time they were hired, consistent with existing labor laws, before they begin work at the UC.
• Provide the UC with a monthly certified payroll report for all employees who performed work at the UC for the preceding month.
• Annually provide the UC with data showing compliance with state labor law regarding equal wages among genders, as specified, for each job classification performing work at any UC location.
• Annually provide the UC an audited statement prepared by a certified public accountant showing work performed and gross and net revenues.

Finally, this bill requires that beginning on January 1, 2018, the $100,000 threshold for competitive bidding of contracts for services is also applicable to any renewal or extension of an existing contract if it involves an expenditure of $100,000 or more annually.

Related Legislation:

SB 376 (Lara, 2015) is substantially similar to this bill. It was vetoed by the Governor.

Staff Comments:

The bill’s provisions become effective January 1, 2018 at which time the UC’s Fair Wage Fair Work plan is anticipated to be fully operational. It is reasonable to assume that the plan will close some of the salary gap that exists between contracted workers and UC employees. The incremental costs to achieve parity (within five percent) for wages beyond the UC minimum wage of $15 per hour would be attributable to this bill. The UC’s Fair Wage Fair Work Plan is not anticipated to decrease the gap of benefits received between contracted workers and UC employees.

Actual, and precise costs attributed to this bill are unknown. This is largely due to the lack of data available from UC vendors that comprise a total employee compensation package, including fringe benefits, for comparison to that of UC employees. In addition, this information would need to be broken down by position in each service category specified in this bill, and by campus, medical center, or laboratory. The UC has indicated that this level of data is not currently readily available for university employees and that to generate it, the UC would have to perform an extensive analysis of staff explained further below.

In absence of these data, assumptions have been made as a proxy to arrive at UC’s estimate of increased contract costs at each campus and medical center totaling in the high tens of millions, or approximately $88 million. This estimate is based upon a total systemwide service contract value that is attributed to the specified categories applicable to this bill as reported by each campus and medical center ($345 million). The estimate also discounts this base by 40 percent try to arrive at a total contract value attributed to salaries and benefits. According to the UC, random sampling of these contracts is currently underway to better inform this assumption. Assuming a 12.5 percent increase in salary costs in bids (after the implementation of the Fair Wage Fair Work Plan) and a 30 percent increase in costs due to benefit disparities, total potential increases in future contracts could reach $88 million. This estimate does not include contract costs for the three U.S. Department of Energy national laboratories, which have an operating budget of about $1 billion. For context, the medical centers have over $8 billion in operating revenue, out of a total funding level for the UC of over $28 billion from a variety of revenue sources.

Funding used to support these contracts likely comes from a variety of fund sources, including the state General Fund, student tuition payments, federal contracts and grants, private donations, and revenue from sales and services (including medical center revenue). Therefore, the direct state fiscal impact of this bill is difficult to identify. For example, two service categories that are specified in this bill include building maintenance and cleaning or custodial services. Though UC core funds (state General Fund, tuition and fees, and UC General Funds) support these functions, it is likely only for services provided on a UC campus. Similar services occurring at the medical centers, for example, are likely supported through the medical centers’ budget. Another category, “nursing assistant services” is likely to be supported by medical center revenues. However, it should be noted that academic functions taking place at the medical centers would likely have an effect on UC’s core budget. Therefore, UC’s estimate would not be appropriately be characterized as all direct state costs but UC’s core budget could be impacted by outside cost pressures.

This bill also drives significant administrative costs at the UC. The UC reports costs related to an evaluation of UC staff total compensation on a facility-by-facility basis to develop an average per-employee compensation package for each contract type, including required escalators. Other costs include revising bid specifications; maintaining all required documentation submitted by bidders, and increased bidding for contract renewals or extensions. Many of these costs are unknown but they could be in the mid to high hundreds of thousands.

Additional factors to note that could affect actual costs to implement this bill would include the potential impacts on the field of qualified bidders for these contracts. To the extent that providing the required documentation, certifications, monthly payroll, and a firm’s audited revenues and expenditures is a barrier to doing business with the UC, this could reduce the pool of qualified bidders from which UC is required to pick the lowest or best value bid. The bill’s provisions could also change or restrict the contracting behavior of the UC. These factors would ultimately affect the costs of this bill.

-- END --

SENATE COMMITTEE ON EDUCATION

Senator Carol Liu, Chair

2015 - 2016 Regular

Bill No:

Subject:

SUMMARY

This bill modifies the requirements for qualifying as a lowest responsible bidder or best value awardee for contracts for specified types of service contracts at the University of California (UC) by requiring a bidder to certify in writing that its employees are compensated at a level that does not undercut, by more than 5 percent, the average per-employee value of total compensation for UC employees who perform comparable work, as specified, and beginning January 1, 2018, makes these provisions applicable to any renewal or extension of an existing contract for goods, materials and services involving an expenditure of $100,000 or more annually.

BACKGROUND

Existing law outlines the requirements and procedures for competitive bidding at the University of California. Existing law outlines requirements and procedures, specifically for the acquisition of materials, goods and services.

(Public Contract Code § 10500, et seq.)

Existing law 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 § 10507.7)

Existing law 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 §10507.8)

Existing law 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 § 10500.5)

ANALYSIS

This bill 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, it:

1. Establishes a number of new requirements for bidders. Specifically it:
   1. 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 per-employee basis that does not undercut, by more than 5 percent, the average per-employee value of total compensation for employees at the UC who perform comparable work at the relevant campus, medical center, or laboratory, where the proposed work will be performed. In addition, it:
      1. Applies these requirements specifically to contracts for building maintenance, cleaning, or custodial services, call center 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.
      2. Exempts the application of these requirements to employees who are mentally or physically handicapped, or both, who have been issued a license for employment at less than minimum wage by the Industrial Welfare Commission.
      3. Exempts public works projects conducted by public agencies from these requirements.
   2. Requires the UC to:
      1. Include in its request for proposals a calculation which considers the criteria outlined in 1) above.
      2. Use all known cost escalators in the calculation to project the future rate of growth of average per-employee total compensation costs.

• 1. Requires a bidder to certify in writing that the bidder has not been found liable for violation of compensation, work hours, or working conditions related provisions of the Penal Code, or Labor Code, as specified, or any Wage Order Issued by the Industrial Welfare Commission for specified amounts, within the prior ten years.
  2. Establishes the notification of the University of California (UC) by the contractor of a finding of liability for violation of compensation, work hours, or working conditions related provisions of the Penal Code, or Labor Code, as specified, or any Wage Order issued by the Industrial Welfare Commission for specified amounts within the prior ten years as grounds for termination of the contract.
  3. Requires the bidder to provide the following to the UC:
     1. Spreadsheets showing all applicable compensation and benefits, as specified, for each position and employee supplied to the University and the anticipated hours to be worked on a daily and weekly basis.
     2. An organization chart showing the bidder’s supervisory structure.
     3. Any and all employee handbooks applicable to the contracted employees.
     4. Projections of gross and net revenues and itemized expenses for each of the first three years of the proposed contract.
  4. Requires a successful bidder , once commencing work for the UC, to:
     1. Notify the UC of any changes to the information provided within 30 days of the change, as specified.
     2. Provide UC copies of notices provided to employees in compliance with existing labor code provisions outlining the obligations of the employer prior to the employees beginning UC campus work.
     3. By the 15^th day of each month, provide UC with a monthly certified payroll report, as specified.
     4. Annually provide, by October 1, data showing compliance with wages, hours, and working conditions requirements of the Labor Code for each job classification working at any university location.
     5. Annually provide, by October 1, an audited statement prepared and signed by a Certified Public Accountant showing work performed and gross and net revenues and itemized expenses.
  5. Declares the records provided by the bidder/contractor to be subject to public records act laws, as specified and authorizes the UC to redact any confidential information, as specified, and to delay response until after a bid process is complete, if applicable.

1. Beginning January 1, 2018, makes the $100,000 threshold for competitive bidding of contracts for goods, materials and services to be performed applicable to any renewal or extension of an existing contract if it involves an expenditure of $100,000 or more annually.
2. Makes findings and declarations that the UC has squandered public resources via contracting out to for-profit private contractors that charge significant administrative overhead.
   

STAFF COMMENTS

1. Need for the bill. According to the author, this bill seeks to 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. This bill would require the UC, when evaluating bids for contract work, to evaluate the total employee compensation package and ensure that it does not undercut wages and benefits of existing university employees. According to the author, the UC serves as an anchor institution in the market in which it operates, and as a public institution, and the third-largest California employer, should adopt and promote policies that respect its employees and protect workers’ rights.
2. Related Study. According to a 2012 study by the UC Berkeley Labor Center, Temporary Workers in California are Twice as Likely as Non-Temps to Live in Poverty: Problems with Temporary and Subcontracted Work in California, almost one-quarter of a million people worked in the temporary help services industry in California in 2010. These workers were slightly younger, more likely to be female, less likely to be white non-Hispanic, and less likely to have a high school diploma or GED than the average non-temp worker. These workers were also more susceptible to workplace illness and injury, earned less than their non-temp counterparts, and were less likely to get benefits. The report notes that lowered wages mean that these workers 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 and making it difficult to enforce other protections. The report also notes that these employment relationships create downward pressure on wages.
3. UC's Fair Wage/Fair Work plan. In July 2015, the UC adopted a Fair Wage/Fair Work Plan. Under the Plan, the UC has established a minimum level of pay for employees to ensure that all UC workers are provided a fair wage with a goal of reaching a minimum wage of $15 per hour on October 1, 2017. In addition, the UC reports that it is implementing annual compensation audits and interim audits, paid for by the contractor, to monitor wage and working conditions as well as compliance with federal, state, and UC workplace laws and policies for contracted employees working pursuant to contracts entered into or renewed after October 2015. The UC will also establish a phone hotline and central online system to report complaints directly to the Office of the President.

In light of the activities already planned as part of the University of California’s (UC) Fair Wage/Fair Work Plan, is this bill necessary?

1. Consequences? This bill would increase the complexity of the bidding process for both the UC and potential bidders. It would likely result in an increase in UC’s costs for procuring services and could potentially limit the pool of qualified bidders. The Committee may wish to consider:

What would be the impact on smaller businesses (particularly those which are disadvantaged or minority business enterprises, women business enterprises and disabled veteran business enterprises) wishing to contract with the UC?

How would these provisions affect the efforts of the University to respond to recent directives that the UC minimize its administrative costs and operate more efficiently in order to more cost effectively meet the state’s teaching and research needs?

1. Prior Legislation. This bill is substantively similar to SB 376 (Lara, 2015) which was heard and passed by this Committee in April 2015, by a vote of 7-2. SB 376 was subsequently vetoed by the Governor, whose message read, in pertinent part:

“It's worth noting that the University of California recently

responded to criticisms of its wage and contracting practices

with a plan to incrementally increase its minimum wage for both employees and contract workers, and a pledge to better oversee

contracts generally.

The effort to provide increased compensation to those who work

for UC - either directly or on a contract basis - is well-intentioned,

but I'm not prepared to embrace the provisions of this bill.

I would caution the University, however, to provide a transparent

accounting of its contracts and clearly demonstrate how the

interests of all its lower paid workers are being protected.”

It is unclear whether the new provisions of this bill respond to the Governor’s message.

SUPPORT

American Federation of State County and Municipal Employees

California Federation of Teachers

California Labor Federation

California Teamsters Public Affairs Council

OPPOSITION

California Chamber of Commerce

University of California

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