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.

This bill, beginning January 1, 2019, would, for these purposes, require contracts for services involving an expenditure of $100,000 or more annually to include any amendments, renewals, or extensions of the contract that would result in an expenditure of $100,000 or more annually. The bill would prohibit amendment, renewal, or extension of an existing contract unless specified conditions are met.

The bill, beginning January 1, 2019, would, with certain exceptions, require a lowest responsible bidder or best value awardee on contracts for specified services to, among other requirements, certify in writing to the University of California (UC) that the bid includes, for all employees who work for more than 10 days at the university in any 12-month period under the contract, a total employee compensation package, including any fringe benefits and the compensation provided to employees of any of the bidders intermediaries or subcontractors, 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 any contractor providing specified services pursuant to one or more contracts totaling more than $100,000 annually, that has not already done so, to also provide this certification on or before January 1, 2022. The bill would make violation of this requirement subject to civil enforcement. The bill would require the UC to include in its request for proposals or other contract solicitations 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, beginning January 1, 2019, would require the bidder to provide written certification that it has not been found liable under specified criminal statutes or wage orders of the Industrial Welfare Commission, as specified.

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.

This bill, beginning January 1, 2019, would, for these purposes, require contracts for services involving an expenditure of $100,000 or more annually to include any amendments, renewals, or extensions of the contract that would result in an expenditure of $100,000 or more annually. The bill would prohibit amendment, renewal, or extension of an existing contract unless specified conditions are met.

The bill, beginning January 1, 2019, would, with certain exceptions, require a lowest responsible bidder or best value awardee on contracts for specified services to, among other requirements, certify in writing to the University of California (UC) that the bid includes includes, for all employees who work for more than 10 days at the university in any 12-month period under the contract, a total employee compensation package, including any fringe benefits and the compensation provided to employees of any of the bidders intermediaries or subcontractors, 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 any contractor providing specified services pursuant to one or more contracts totaling more than $100,000 annually, that has not already done so, to also provide this certification on or before January 1, 2022. The bill would make violation of this requirement subject to civil enforcement. The bill would require the UC to include in its request for proposals or other contract solicitations 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, beginning January 1, 2019, would require the bidder to provide written certification that it has not been found liable under specified criminal statutes or wage orders of the Industrial Welfare Commission, as specified.

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.

This bill, beginning January 1, 2019, would, for these purposes, require contracts for services involving an expenditure of $100,000 or more annually to include any renewals amendments, renewals, or extensions of the contract that would result in an expenditure of $100,000 or more annually. The bill would prohibit amendment, renewal, or extension of an existing contract unless specified conditions are met.

The bill, beginning January 1, 2019, would, with certain exceptions, require a lowest responsible bidder or best value awardee on contracts for specified services to, among other requirements, certify in writing to the University of California (UC) that the bid includes a total employee compensation package package, including any fringe benefits and the compensation provided to employees of any of the bidders intermediaries or subcontractors, 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 any contractor providing specified services pursuant to one or more contracts totaling more than $100,000 annually, that has not already done so, to also provide this certification on or before January 1, 2022. The bill would make violation of this requirement subject to civil enforcement. The bill would require the UC to include in its request for proposals or other contract solicitations 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, beginning January 1, 2019, would require the bidder to provide written certification that it has not been found liable under specified criminal statutes or wage orders of the Industrial Welfare Commission, as specified.

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.

This bill, beginning January 1, 2019, 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.

The bill, beginning January 1, 2019, would, with certain exceptions, require a lowest responsible bidder or best value awardee on contracts for specified services to, among other requirements, 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, beginning January 1, 2019, would require the bidder to provide written certification that it has not been found liable under specified criminal statutes or wage orders of the Industrial Welfare Commission, as specified.

 VETO  

Bill No: SB 574

Author:

:

Vote: 7

SENATE EDUCATION COMMITTEE: 4-2, 4/5/17

AYES: Galgiani, Leyva, Mendoza, Pan

NOES: Wilk, Vidak

NO VOTE RECORDED: Allen

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/25/17

AYES: Lara, Beall, Bradford, Hill, Wiener

NOES: Bates, Nielsen

SENATE FLOOR: 26-13, 5/31/17

AYES: Atkins, Beall, Bradford, Cannella, De León, Dodd, Galgiani, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leyva, McGuire, Mendoza, Mitchell, Monning, Newman, Pan, Portantino, Roth, Skinner, Stern, Wieckowski, Wiener

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

NO VOTE RECORDED: Allen

SENATE FLOOR: 26-11, 9/15/17

AYES: Atkins, Beall, Bradford, Cannella, De León, Dodd, Galgiani, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leyva, McGuire, Mendoza, Mitchell, Monning, Newman, Pan, Portantino, Roth, Skinner, Stern, Wieckowski, Wiener

NOES: Anderson, Bates, Fuller, Glazer, Moorlach, Morrell, Nguyen, Nielsen, Stone, Vidak, Wilk

NO VOTE RECORDED: Allen, Berryhill, Gaines

ASSEMBLY FLOOR: 50-26, 9/14/17 - 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 materials, goods, and services at the University of California (UC).

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 UC. (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, it:

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 and compensation provided to employees of any of the bidder’s intermediaries or subcontractors, 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 patient billing services, medical transcribing services, patient escort services, or nursing assistant services.
      2. Requires any contractor providing specified services pursuant to one or more contracts totaling more than $100,000 annually that has not already done so, to comply with these requirements on or before January 1, 2022.
      3. Makes violation of these requirements subject to civil enforcement.
      4. 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.
      5. Exempts public works projects conducted by public agencies from these requirements.
      6. Exempts a bidder’s employees who work for less than 10 days at the university in any 12-month period under the contract.
      7. Exempts temporary employees who work for the bidder; its intermediaries or subcontractors, and are assigned to work at the UC for 10 days or less in any 12-month period from these requirements.
   2. Requires the UC to:
      1. Include in its request for proposals or other contract solicitations 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 record 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 the $100,000 threshold for competitive bidding contracts for goods, materials and services to be performed applicable to any amendments, renewal or extension of an existing contract including any expansion of the scope of work or location where the work is to be performed beyond the specific duties and work locations identified in the existing contract, if the amendment renewal, or extension or contract expansion involves an expenditure of $100,000 or more annually.
3. Prohibits amendment, renewal, or extension of an existing contract unless specified conditions are met.
4. Becomes operative on January 1, 2019.
5. States legislative findings and declarations relative a recent report by the State Auditor regarding employment contracts at the UC.

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. Related audit request. A request was made by the author’s office to the Joint Legislative Audit Committee to investigate specified employment contracts at the UC. That audit was released in August and the author incorporated amendments related to that report. Specifically, the audit recommended that the Legislature "specify the conditions under which the university may amend contracts without competition." This bill limits when contract extensions can be used. Specifically, it states that an amendment, renewal, or extension cannot be used to circumvent the competitive bidding process. It allows amendments, renewals, and extensions if there is a statutory exemption, the UC Board of Regents approve an exception based on specified requirements, or the original contract included language providing for amendments, renewals, or extensions that meet specified conditions
4. 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.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Assembly Appropriations Committee:

1. The UC estimates this bill will increase total annual costs by $88 million. These costs will come from a variety of UC fund sources, including the General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.
2. 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 ($185.6 million) and the remainder representing contracts at UC's five medical centers ($160.5 million). Of this total, an estimated 60% ($207 million) constitutes labor costs. Assuming a 30% increase in costs related to providing parity in benefits ($62.1 million) and a 12.5% increase in costs related to wage parity ($25.9 million), total annual costs would be $88 million.
3. The UC also estimates costs of $500,000 - $700,000 to comply with this bill’s administrative requirements.

SUPPORT: (Verified 9/13/17)

AFSCME

California Employment Lawyers Association

California Immigrant Policy Center

California Labor Federation

Jobs with Justice San Francisco

OPPOSITION: (Verified 9/13/17)

California Chamber of Commerce

University of California

USCB, America Inc.

GOVERNOR'S VETO MESSAGE:

I am returning Senate Bill 574 without my signature.

This bill seeks to equalize, or at least greatly minimize, the wage and benefit disparity between employees of the University of California (UC) and its contracted workers in specific job categories. This is the third time this policy, with some modification, has been passed by the Legislature.

After twice vetoing prior attempts, I am tempted to sign this measure, for no other reason than it is a well-intentioned bill that seeks to improve the financial security of contracted workers, or, alternatively, expand direct employment at the UC for lower wage workers. As the UC prides itself on being an agent of social mobility for students, it might follow that UC could similarly be an agent of social mobility for lower-wage workers at its campuses.

Good intentions, however, aren't always enough. The mechanism to create this social change locks in cumbersome and overly costly contracting rules that provide little flexibility, regardless of circumstance. This will not serve the university or the state well.

In the best of worlds, the UC would make greater efforts to control its cost structure and find the means to better compensate lower wage workers, both employed and contracted-so that fewer would be concerned about housing, hunger and healthcare. Though UC has made some attempts in this regard, much work remains, including holding flat executive compensation and benefits that near many hundreds of thousands of dollars and more, far beyond what the average Californian would think reasonable for an employee of a public university.

What the state requires of the university's contracting policy should be more carefully considered, thoughtfully debated and weighed against other high value programs of expenditure. The State Auditor's recent report made some useful recommendations on contracting practices, which the UC can act on now. Other actions to improve UC's policies can be considered when the UC's total budget is considered by the state.

ASSEMBLY FLOOR: 50-26, 9/14/17

AYES: Aguiar-Curry, Arambula, Berman, Bloom, Bocanegra, Bonta, Burke, Caballero, Calderon, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Eggman, Friedman, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Holden, Irwin, Jones-Sawyer, Kalra, Levine, Limón, Low, McCarty, Medina, Mullin, Muratsuchi, O'Donnell, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Wood, Rendon

NOES: Acosta, Travis Allen, Baker, Bigelow, Brough, Chávez, Chen, Choi, Cunningham, Dahle, Flora, Fong, Gallagher, Harper, Kiley, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte, Patterson, Ridley-Thomas, Steinorth, Voepel, Waldron

NO VOTE RECORDED: Frazier, Grayson, Nazarian

Prepared by:

1/2/18 9:41:41

**** END ****

 UNFINISHED BUSINESS  

Bill No: SB 574

Author: Lara (D), et al.

:

Vote:

SENATE EDUCATION COMMITTEE: 4-2, 4/5/17

AYES: Galgiani, Leyva, Mendoza, Pan

NOES: Wilk, Vidak

NO VOTE RECORDED: Allen

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/25/17

AYES: Lara, Beall, Bradford, Hill, Wiener

NOES: Bates, Nielsen

SENATE FLOOR: 26-13, 5/31/17

AYES: Atkins, Beall, Bradford, Cannella, De León, Dodd, Galgiani, Hernandez, Hertzberg, Hill, Hueso, Jackson, Lara, Leyva, McGuire, Mendoza, Mitchell, Monning, Newman, Pan, Portantino, Roth, Skinner, Stern, Wieckowski, Wiener

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

NO VOTE RECORDED: Allen

ASSEMBLY FLOOR: 50-26, 9/14/17 - 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 materials, goods, and services at the University of California (UC).

Assembly Amendments

exempt from the bill’s provisions certain temporary employees who work for the bidder and a bidder’s employees who work for less than 10 days at the UC in any 12-month period under the contract. The amendments also add legislative findings relative a report by the State Auditor, include intermediaries and subcontractors in the certification requirement, require that by 2022 contractors providing services of $100,000 or more to meet certification requirement, clarify circumstance for which a contract amendment, extension would be subject to competitive bidding, and prohibit amendment, renewal, or extension of an existing contract unless certain conditions are met.

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 UC. (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, it:

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 and compensation provided to employees of any of the bidder’s intermediaries or subcontractors, 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 patient billing services, medical transcribing services, patient escort services, or nursing assistant services.
      2. Requires any contractor providing specified services pursuant to one or more contracts totaling more than $100,000 annually that has not already done so, to comply with these requirements on or before January 1, 2022.
      3. Makes violation of these requirements subject to civil enforcement.
      4. 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.
      5. Exempts public works projects conducted by public agencies from these requirements.
      6. Exempts a bidder’s employees who work for less than 10 days at the university in any 12-month period under the contract.
      7. Exempts temporary employees who work for the bidder; its intermediaries or subcontractors, and are assigned to work at the UC for 10 days or less in any 12-month period from these requirements.
   2. Requires the UC to:
      1. Include in its request for proposals or other contract solicitations 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 record 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 the $100,000 threshold for competitive bidding contracts for goods, materials and services to be performed applicable to any amendments, renewal or extension of an existing contract including any expansion of the scope of work or location where the work is to be performed beyond the specific duties and work locations identified in the existing contract, if the amendment renewal, or extension or contract expansion involves an expenditure of $100,000 or more annually.
3. Prohibits amendment, renewal, or extension of an existing contract unless specified conditions are met.
4. Becomes operative on January 1, 2019.
5. States legislative findings and declarations relative a recent report by the State Auditor regarding employment contracts at the UC.

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. Related audit request. A request was made by the author’s office to the Joint Legislative Audit Committee to investigate specified employment contracts at the UC. That audit was released in August and the author incorporated amendments related to that report. Specifically, the audit recommended that the Legislature "specify the conditions under which the university may amend contracts without competition." This bill limits when contract extensions can be used. Specifically, it states that an amendment, renewal, or extension cannot be used to circumvent the competitive bidding process. It allows amendments, renewals, and extensions if there is a statutory exemption, the UC Board of Regents approve an exception based on specified requirements, or the original contract included language providing for amendments, renewals, or extensions that meet specified conditions
4. 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.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Assembly Appropriations Committee:

1. The UC estimates this bill will increase total annual costs by $88 million. These costs will come from a variety of UC fund sources, including the General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.
2. 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 ($185.6 million) and the remainder representing contracts at UC's five medical centers ($160.5 million). Of this total, an estimated 60% ($207 million) constitutes labor costs. Assuming a 30% increase in costs related to providing parity in benefits ($62.1 million) and a 12.5% increase in costs related to wage parity ($25.9 million), total annual costs would be $88 million.
3. The UC also estimates costs of $500,000 - $700,000 to comply with this bill’s administrative requirements.

SUPPORT: (Verified 9/13/17)

AFSCME

California Employment Lawyers Association

California Immigrant Policy Center

California Labor Federation

Jobs with Justice San Francisco

OPPOSITION: (Verified 9/13/17)

California Chamber of Commerce

University of California

USCB, America Inc.

ASSEMBLY FLOOR: 50-26, 9/14/17

AYES: Aguiar-Curry, Arambula, Berman, Bloom, Bocanegra, Bonta, Burke, Caballero, Calderon, Cervantes, Chau, Chiu, Chu, Cooley, Cooper, Dababneh, Daly, Eggman, Friedman, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez Fletcher, Gray, Holden, Irwin, Jones-Sawyer, Kalra, Levine, Limón, Low, McCarty, Medina, Mullin, Muratsuchi, O'Donnell, Quirk, Quirk-Silva, Reyes, Rodriguez, Rubio, Salas, Santiago, Mark Stone, Thurmond, Ting, Weber, Wood, Rendon

NOES: Acosta, Travis Allen, Baker, Bigelow, Brough, Chávez, Chen, Choi, Cunningham, Dahle, Flora, Fong, Gallagher, Harper, Kiley, Lackey, Maienschein, Mathis, Mayes, Melendez, Obernolte, Patterson, Ridley-Thomas, Steinorth, Voepel, Waldron

NO VOTE RECORDED: Frazier, Grayson, Nazarian

Prepared by:

9/15/17 9:20:37

**** END ****

SENATE THIRD READING

STR Bill Id:SB 574

Author:(Lara)

As Amended Ver:September 8, 2017

Majority vote

SENATE VOTE: 26-13

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

1. Requires 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 at a campus, medical center, or laboratory.
2. Applies 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, transportation services, security services, storekeeper services, truck driving services, patient care technical employee services, patient billing services, medical transcribing services, patient escort services, and nursing assistant services.
3. Exempts a bidder's employee who works for 10 days or less at the University in a 12-month period from the requirements of this bill.
4. Exempts a bidder's temporary employee, intermediary, or subcontractor who is assigned to work at the University for 10 days or less in a 12-month period from the requirements of this bill.
5. 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.
6. Restricts when contract extensions can be used.
7. Requires UC to include in its request for proposals a calculation of the average per-employee value of total compensation for employees who perform comparable work at the relevant campus, medical center or laboratory, and specifies that the calculation uses known cost escalators to project future compensation amounts.
8. Requires a bidder to certify in writing that it has not been found liable for violations of compensation, work hours, or working conditions related to provisions of the Penal Code, or Labor Code, as specified, or any wage order issued by the Industrial Welfare Commission (IWC) for specified amounts, within the prior five years.
9. Makes the records provided by the bidder or contractor subject to public records act laws, as specified and authorizes the UC to redact any confidential information, and to delay response until after a bid process is complete, if applicable.
10. 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 IWC.
11. Exempts public works projects conducted by public agencies from these requirements.
12. Becomes operative on January 1, 2019.

EXISTING LAW:

1. Specifies the requirements and procedures for competitive bidding at UC.
2. Requires 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.
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 UC.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. The UC estimates this measure will increase total annual costs by $88 million. These costs will come from a variety of UC fund sources, including the General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.

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 ($185.6 million) and the remainder representing contracts at UC's five medical centers ($160.5 million). Of this total, an estimated 60% ($207 million) constitutes labor costs. Assuming a 30% increase in costs related to providing parity in benefits ($62.1 million) and a 12.5% increase in costs related to wage parity ($25.9 million), total annual costs would be $88 million.

1. The UC also estimates costs of $500,000 - $700,000 to comply with the bill’s administrative requirements.

COMMENTS: This bill requires a bidder for certain types of contracts to certify that its employees are compensated in line with UC employees who perform similar work. Specifically, the gap for contracted workers cannot be more than five percent less than the average per-employee value of total compensation for UC employees who perform comparable work at a campus, medical center, or laboratory. This bill also subjects a bidder's intermediaries and subcontractors to this requirement.

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. . . These arrangements are bad for workers, who receive lower wages and less workplace protections, bad for taxpayers as government shoulders the burden of providing benefits and support to these employees, and bad for conscientious employers who are placed at a competitive disadvantage in the market."

A 2012 UC Berkeley Labor Center report, titled, "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 temporary and subcontracted employees are twice as likely as non-temporary employees to live in poverty, receive food stamps, and be on Medicaid. It also concludes that temporary and subcontracted employees earned roughly 18 percent less than equivalent non-temporary employees of the same age, gender, and ability.

The sponsor of this bill, American Federation of State, County and Municipal Employees, AFL-CIO (AFSCME), states that it will "help to stem the troubling and growing trend of depressed wages and labor abuse among contracted out workers."

UC opposes this bill, stating it will increase costs by more than $88 million per year, create administrative burdens, limit small bidders to compete for UC contracts, and undercut UC's efforts to streamline operations and make contracting more efficient. According to UC, it "only contracts out in instances where 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."

In 2015, UC adopted the Fair Wage/Fair Work Plan, which phased in a minimum hourly wage for both UC employees and contract workers. Currently, the wage is $14 per hour and is scheduled to reach $15 per hour later this year.

The Governor has vetoed bills similar to this one over the past two years. In the veto message of SB 376 (Lara) of 2015, the Governor referenced the Fair Wage/Fair Work Plan and stated that while the bill's goal to increase compensation was "well-intentioned," he was "not prepared to embrace the provisions of this bill."

SB 959 (Lara) of 2016 was similar to this bill. In that veto message, the Governor stated that before moving forward with a bill, the author should wait for the results of an audit he requested about UC contracting practices.

That audit was released in August, which was after this bill passed this committee, and the author incorporated amendments related to that report. Specifically, the audit recommended that the Legislature "specify the conditions under which the university may amend contracts without competition."

This bill limits when contract extensions can be used. Specifically, it states that an amendment, renewal, or extension cannot be used to circumvent the competitive bidding process. It allows amendments, renewals, and extensions if there is a statutory exemption, the UC Board of Regents approve an exception based on specified requirements, or the original contract included language providing for amendments, renewals, or extensions that meet specified conditions.

Analysis Prepared by: Scott Herbstman / A. & A.R. / (916) 319-3600 FN: 0002105

SENATE THIRD READING

STR Bill Id:SB 574

Author:(Lara)

As Amended Ver:September 5, 2017

Majority vote

SENATE VOTE: 26-13

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

1. Requires 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 at a campus, medical center, or laboratory.
2. Applies 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, transportation services, security services, storekeeper services, truck driving services, patient care technical employee services, patient billing services, medical transcribing services, patient escort services, and nursing assistant services.
3. 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.
4. Restricts when contract extensions can be used.
5. Requires UC to include in its request for proposals a calculation of the average per-employee value of total compensation for employees who perform comparable work at the relevant campus, medical center or laboratory, and specifies that the calculation uses known cost escalators to project future compensation amounts.
6. Requires a bidder to certify in writing that it has not been found liable for violations of compensation, work hours, or working conditions related to provisions of the Penal Code, or Labor Code, as specified, or any wage order issued by the Industrial Welfare Commission (IWC) for specified amounts, within the prior five years.
7. Makes the records provided by the bidder or contractor subject to public records act laws, as specified and authorizes the UC to redact any confidential information, and to delay response until after a bid process is complete, if applicable.
8. 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 IWC.
9. Exempts public works projects conducted by public agencies from these requirements.
10. Becomes operative on January 1, 2019.

EXISTING LAW:

1. Specifies the requirements and procedures for competitive bidding at UC.
2. Requires 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.
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 UC.

FISCAL EFFECT: According to the Assembly Appropriations Committee:

1. The UC estimates this measure will increase total annual costs by $88 million. These costs will come from a variety of UC fund sources, including the General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.

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 ($185.6 million) and the remainder representing contracts at UC's five medical centers ($160.5 million). Of this total, an estimated 60% ($207 million) constitutes labor costs. Assuming a 30% increase in costs related to providing parity in benefits ($62.1 million) and a 12.5% increase in costs related to wage parity ($25.9 million), total annual costs would be $88 million.

1. The UC also estimates costs of $500,000 - $700,000 to comply with the bill's administrative requirements.

COMMENTS: This bill requires a bidder for certain types of contracts to certify that its employees are compensated in line with UC employees who perform similar work. Specifically, the gap for contracted workers cannot be more than 5% less than the average per-employee value of total compensation for UC employees who perform comparable work at a campus, medical center, or laboratory. This bill also subjects a bidder's intermediaries and subcontractors to this requirement.

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. . . These arrangements are bad for workers, who receive lower wages and less workplace protections, bad for taxpayers as government shoulders the burden of providing benefits and support to these employees, and bad for conscientious employers who are placed at a competitive disadvantage in the market."

A 2012 UC Berkeley Labor Center report, titled, "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 temporary and subcontracted employees are twice as likely as non-temporary employees to live in poverty, receive food stamps, and be on Medicaid. It also concludes that temporary and subcontracted employees earned roughly 18% less than equivalent non-temporary employees of the same age, gender, and ability.

The sponsor of this bill, American Federation of State, County and Municipal Employees, AFL-CIO (AFSCME), states that it will "help to stem the troubling and growing trend of depressed wages and labor abuse among contracted out workers."

UC opposes this bill, stating it will increase costs by more than $88 million per year, create administrative burdens, limit small bidders to compete for UC contracts, and undercut UC's efforts to streamline operations and make contracting more efficient. According to UC, it "only contracts out in instances where 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."

In 2015, UC adopted the Fair Wage/Fair Work Plan, which phased in a minimum hourly wage for both UC employees and contract workers. Currently, the wage is $14 per hour and is scheduled to reach $15 per hour later this year.

The Governor has vetoed bills similar to this one over the past two years. In the veto message of SB 376 (Lara) of 2015, the Governor referenced the Fair Wage/Fair Work Plan and stated that while the bill's goal to increase compensation was "well-intentioned," he was "not prepared to embrace the provisions of this bill."

SB 959 (Lara) of 2016 was similar to this bill. In that veto message, the Governor stated that before moving forward with a bill, the author should wait for the results of an audit he requested about UC contracting practices.

That audit was released in August, which was after this bill passed this committee, and the author incorporated amendments related to that report. Specifically, the audit recommended that the Legislature "specify the conditions under which the university may amend contracts without competition."

This bill limits when contract extensions can be used. Specifically, it states that an amendment, renewal, or extension cannot be used to circumvent the competitive bidding process. It allows amendments, renewals, and extensions if there is a statutory exemption, the UC Board of Regents approve an exception based on specified requirements, or the original contract included language providing for amendments, renewals, or extensions that meet specified conditions.

Analysis Prepared by: Scott Herbstman / A. & A.R. / (916) 319-3600 FN: 0001685

Date of Hearing: August 23, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

SBPCA Bill Id:SB 574

Author:(Lara) – As Introduced Ver:February 17, 2017

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

SUMMARY:

This bill, beginning January 1, 2019, 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. The bill also makes these provisions applicable to any renewal or extension of an existing contract for services involving an annual expenditure of $100,000 or more.

Fiscal Impact:

1. The UC estimates this measure will increase total annual costs by $88 million. These costs will come from a variety of UC fund sources, including the General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.

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 ($185.6 million) and the remainder representing contracts at UC's five medical centers ($160.5 million). Of this total, an estimated 60% ($207 million) constitutes labor costs. Assuming a 30% increase in costs related to providing parity in benefits ($62.1 million) and a 12.5% increase in costs related to wage parity ($25.9 million), total annual costs would be $88 million.

1. The UC also estimates costs of $500,000 - $700,000 to comply with the bill’s administrative requirements.

COMMENTS:

1. Purpose. 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."

1. Background. Existing law outlines the requirements and procedures for competitive bidding at UC, including those applicable to the acquisition of materials, goods and services. Existing law requires UC to let any contract involving an annual expenditure of $100,000 or more for goods and materials, or for services to be performed (other than personal or professional services) to the lowest responsible bidder. Existing law also authorizes 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 UC.

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.

1. Joint Legislative Audit Committee (JLAC) actions. During the May 25, 2016 JLAC hearing, the Committee approved an audit request by Senator Ricardo Lara to 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, in addition to other activities.

According to the author, the State Auditor estimates that the audit will be completed this month (August, 2017). Upon completion of the audit, a report will be issued that presumably will have policy recommendations. The Committee may wish to consider if it is prudent for this measure to be acted upon prior to the release of the audit findings.

1. Arguments in Support. The sponsor of this bill, American Federation of State, County and Municipal Employees, AFL-CIO (AFSCME), states that it will "help to stem the troubling and growing trend of depressed wages and labor abuse among contracted out workers."
2. Arguments in Opposition. UC opposes this bill, stating it will increase costs by more than $88 million per year, create administrative burdens, limit small bidders to compete for UC contracts, and undercut UC's efforts to streamline operations and make contracting more efficient. According to UC, it "only contracts out in instances where 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."
3. Prior Legislation. This bill is nearly identical to SB 959 (Lara), of the 2015-16 Legislation Session, which was vetoed by the Governor. The veto message stated in part, "…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."

This bill is also similar to SB 376 (Lara), of 2015-16 Legislation Session, which was also vetoed by the Governor. In the veto message, the Governor referenced the Fair Wage/Fair Work Plan and stated that while the bill's goal to increase compensation was "well-intentioned," he was "not prepared to embrace the provisions of this bill."

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: July 11, 2017

ASSEMBLY COMMITTEE ON HIGHER EDUCATION

Jose Medina, Chair

SBPCA Bill Id:SB 574

Author:(Lara) – As Introduced Ver:February 17, 2017

SENATE VOTE: 26-13

SUBJECT: University of California: contracts: bidding

SUMMARY: Modifies the requirements to qualify as a lowest responsible bidder or best value awardee for certain types of contracts at the University of California. Specifically, this bill:

1. Requires 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 at a campus, medical center, or laboratory.
2. Applies 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, transportation services, security services, storekeeper services, truck driving services, patient care technical employee services, patient billing services, medical transcribing services, patient escort services, and nursing assistant services.
3. 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.
4. Requires UC to include in its request for proposals a calculation of the average per-employee value of total compensation for employees who perform comparable work at the relevant campus, medical center or laboratory, and specifies that the calculation uses known cost escalators to project future compensation amounts.
5. Requires a bidder to certify in writing that it has not been found liable for violations of compensation, work hours, or working conditions related to provisions of the Penal Code, or Labor Code, as specified, or any wage order issued by the Industrial Welfare Commission (IWC) for specified amounts, within the prior five years.
6. Makes the records provided by the bidder or contractor subject to public records act laws, as specified and authorizes the UC to redact any confidential information, and to delay response until after a bid process is complete, if applicable.
7. 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 IWC.
8. Exempts public works projects conducted by public agencies from these requirements.
9. Becomes operative on January 1, 2019.

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:

1. UC estimates this measure will increase total annual costs by $88 million. These costs will come from a variety of UC fund sources, including the General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.
2. UC also estimates costs of $500,000 - $700,000 to comply with the bill’s administrative requirements.

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

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.

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.

According to the author, the State Auditor estimates that said audit will require approximately 3,240 hours of audit work, and be completed in August, 2017. 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 574 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. Therefore, while we appreciate and embrace the intention of the bill, as seen through our proactive efforts to improve the wages and employee protections available to contacted workers, we must continue to steadfastly oppose this measure and the outcomes it would create."

Related legislation. SB 959 (Lara), of 2016, which was vetoed by the Governor, is very similar in nature to this measure.

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 Employment Lawyers Association

California Immigrant Policy Center

Jobs with Justice San Francisco

Los Angeles Alliance for a New Economy

Orange County Communities Organized for Responsible Development

Tenants Together

United Automobile Workers, Local 2864

Opposition

California Chamber of Commerce

University of California

USCB, America, Inc.

Analysis Prepared by: Kevin Powers / HIGHER ED. / (916) 319-3960

Date of Hearing: June 28, 2017

ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW

Susan Talamantes Eggman, Chair

SBPCA Bill Id:SB 574

Author:(Lara) – As Introduced Ver:February 17, 2017

SENATE VOTE: 26-13

SUBJECT: University of California: contracts: bidding

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

1. Requires 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 at a campus, medical center, or laboratory.
2. Applies 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, transportation services, security services, storekeeper services, truck driving services, patient care technical employee services, patient billing services, medical transcribing services, patient escort services, and nursing assistant services.
3. 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.
4. Requires UC to include in its request for proposals a calculation of the average per-employee value of total compensation for employees who perform comparable work at the relevant campus, medical center or laboratory, and specifies that the calculation uses known cost escalators to project future compensation amounts.
5. Requires a bidder to certify in writing that it has not been found liable for violations of compensation, work hours, or working conditions related to provisions of the Penal Code, or Labor Code, as specified, or any wage order issued by the Industrial Welfare Commission (IWC) for specified amounts, within the prior five years.
6. Makes the records provided by the bidder or contractor subject to public records act laws, as specified and authorizes the UC to redact any confidential information, and to delay response until after a bid process is complete, if applicable.
7. 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 IWC.
8. Exempts public works projects conducted by public agencies from these requirements.
9. Becomes operative on January 1, 2019.

EXISTING LAW:

1. Specifies the requirements and procedures for competitive bidding at UC.
2. Requires 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.
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 UC.

FISCAL EFFECT: According to the Senate Appropriations Committee:

1. UC estimates this measure will increase total annual costs by $88 million. These costs will come from a variety of UC fund sources, including the General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.
2. UC also estimates costs of $500,000 - $700,000 to comply with the bill’s administrative requirements.

COMMENTS: This bill requires a bidder for certain types of contracts to certify that its employees are compensated in line with UC employees who perform similar work. Specifically, the gap for contracted workers cannot be more than five percent less than the average per-employee value of total compensation for UC employees who perform comparable work at a campus, medical center, or laboratory.

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. . . These arrangements are bad for workers, who receive lower wages and less workplace protections, bad for taxpayers as government shoulders the burden of providing benefits and support to these employees, and bad for conscientious employers who are placed at a competitive disadvantage in the market."

A 2012 UC Berkeley Labor Center report, titled, "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 temporary and subcontracted employees are twice as likely as non-temporary employees to live in poverty, receive food stamps, and be on Medicaid. It also concludes that temporary and subcontracted employees earned roughly 18 percent less than equivalent non-temporary employees of the same age, gender, and ability.

The sponsor of this bill, American Federation of State, County and Municipal Employees, AFL-CIO (AFSCME), states that it will "help to stem the troubling and growing trend of depressed wages and labor abuse among contracted out workers."

UC opposes this bill, stating it will increase costs by more than $88 million per year, create administrative burdens, limit small bidders to compete for UC contracts, and undercut UC's efforts to streamline operations and make contracting more efficient. According to UC, it "only contracts out in instances where 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."

In 2015, UC adopted the Fair Wage/Fair Work Plan, which phased in a minimum hourly wage for both UC employees and contract workers. Currently, the wage is $14 per hour and is scheduled to reach $15 per hour later this year.

The Governor has vetoed bills similar to this one over the past two years. In the veto message of SB 376 (Lara) of 2015, the Governor referenced the Fair Wage/Fair Work Plan and stated that while the bill's goal to increase compensation was "well-intentioned," he was "not prepared to embrace the provisions of this bill."

SB 959 (Lara) of 2016 was nearly identical to SB 574. In that veto message, the Governor stated that before moving forward with a bill, the author should wait for the results of an audit he requested about UC contracting practices. According to the veto message, "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."

The audit has not yet been issued, but is estimated to be released in August 2017. According to the author's office, the author intends to incorporate recommendations from the audit into the provisions of this bill.

DOUBLE REFERRAL: Should this bill pass this committee, it will be referred to the Assembly Higher Education Committee.

REGISTERED SUPPORT / OPPOSITION:

Support

AFSCME (sponsor)
California Immigrant Policy Center
California Labor Federation, AFL-CIO

Opposition

California Chamber of Commerce
Chambers of Commerce Alliance of Ventura and Santa Barbara Counties

UC
USCB America Inc.

Analysis Prepared by: Scott Herbstman / A. & A.R. / (916) 319-3600

 THIRD READING  

Bill No: SB 574

Author:

:

Vote:

SENATE EDUCATION COMMITTEE: 4-2, 4/5/17

AYES: Galgiani, Leyva, Mendoza, Pan

NOES: Wilk, Vidak

NO VOTE RECORDED: Allen

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/25/17

AYES: Lara, Beall, Bradford, Hill, Wiener

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 employee who perform comparable work, as specified, and beginning January 1, 2019, 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, it:

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 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 record 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, 2019, the $100,000 threshold for competitive bidding 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.

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. Related audit request. A request was made by the author’s office to the Joint Legislative Audit Committee to investigate specified employment contracts at the UC. The analysis from the State Auditor is estimated to be completed June 2017. According to the author’s office it is their intent to incorporate recommendations from that analysis into the provisions of this bill.
4. 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.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee:

• The UC estimates this bill will increase total annual costs by $88 million. These costs will come from a variety of UC fund sources, including the General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.
• The UC also estimates costs of $500,000 - $700,000 to comply with this bill’s administrative requirements.

SUPPORT: (Verified 5/25/17)

AFSCME

California Employment Lawyers Association

California Immigrant Policy Center

California Labor Federation

Jobs with Justice San Francisco

OPPOSITION: (Verified 5/30/17)

California Chamber of Commerce

University of California

USCB, America Inc.

Prepared by:

5/30/17 11:49:04

**** END ****

 THIRD READING  

Bill No: SB 574

Author:

:

Vote:

SENATE EDUCATION COMMITTEE: 4-2, 4/5/17

AYES: Galgiani, Leyva, Mendoza, Pan

NOES: Wilk, Vidak

NO VOTE RECORDED: Allen

SENATE APPROPRIATIONS COMMITTEE: 5-2, 5/25/17

AYES: Lara, Beall, Bradford, Hill, Wiener

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 employee who perform comparable work, as specified, and beginning January 1, 2019, 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, it:

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 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 record 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, 2019, the $100,000 threshold for competitive bidding 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.

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. Related audit request. A request was made by the author’s office to the Joint Legislative Audit Committee to investigate specified employment contracts at the UC. The analysis from the State Auditor is estimated to be completed June 2017. According to the author’s office it is their intent to incorporate recommendations from that analysis into the provisions of this bill.
4. 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.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

According to the Senate Appropriations Committee:

• The UC estimates this bill will increase total annual costs by $88 million. These costs will come from a variety of UC fund sources, including the General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.
• The UC also estimates costs of $500,000 - $700,000 to comply with this bill’s administrative requirements.

SUPPORT: (Verified 5/25/17)

AFSCME

California Employment Lawyers Association

California Immigrant Policy Center

California Labor Federation

Jobs with Justice San Francisco

OPPOSITION: (Verified 5/25/17)

University of California

USCB, America Inc.

Prepared by:

5/27/17 18:17:19

**** END ****

SENATE COMMITTEE ON

Senator Ricardo Lara, Chair

2017 - 2018 Regular Session

SB 574 (Lara) - University of California: contracts: bidding

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

Bill Summary:

Beginning January 1, 2019, 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. The bill 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 this measure will increase total annual costs by $88 million. These costs will come from a variety of UC fund sources, including the General Fund, federal funds, auxiliary funds, and enterprise funds, such as funds from the medical centers.
• The UC also estimates costs of $500,000 - $700,000 to comply with the bill’s administrative requirements.

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, effective January 1, 2019, requires bidders on 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. 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 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 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. It also exempts public works projects conducted by public agencies from these requirements.
3. Requires the UC to include in its request for proposals a calculation which considers specific criteria and 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 record 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, 2019, the $100,000 threshold for competitive bidding 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.

Related Legislation:

This bill is nearly identical to SB 959 (Lara, 2016) which was vetoed by the Governor.

Staff Comments:

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 ($185.6 million) and the remainder representing contracts at UC's five medical centers ($160.5 million). Of this total, an estimated 60% ($207 million) constitutes labor costs. Assuming a 30% increase in costs related to providing parity in benefits ($62.1 million) and a 12.5% increase in costs related to wage parity ($25.9 million), total annual costs would be $88 million. These costs will likely 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.

UC also estimates that the bill drives significant administrative costs of approximately $500,000 to $700,000 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. These costs would be attributable to activities such as performing an overall evaluation of UC staff total remuneration on a facility-by-facility basis, and building a total remuneration measurement tool. There will be additional administrative costs that are difficult to quantify but 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.

-- END --

SENATE COMMITTEE ON EDUCATION

Senator Benjamin Allen, Chair

2017 - 2018 Regular

Bill No: Hearing Date: April 5, 2017

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 contacts 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 employee who perform comparable work, as specified, and beginning January 1, 2019, 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:

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)

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 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 University of California (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 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.

• • 1. 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 five years.

• 1. Declares the record 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. Makes, beginning January 1, 2019, the $100,000 threshold for competitive bidding 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.

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 requires the University of California (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. Related audit request. A request was made by the author’s office to the Joint Legislative Audit Committee to investigate specified employment contracts at the University of California. The analysis from the State Auditor is estimated to be completed June 2017. According to the author’s office it is the intent to incorporate recommendations from that analysis into the provisions of this bill.
4. 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?
5. 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.

SB 959 (Lara, 2016) nearly identical to this bill was heard and passed by this Committee in March 2016, by a vote of 7-2. SB 959 was subsequently vetoed by the Governor, whose message read, in pertinent part:

“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.”

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.”

SUPPORT

American Federation of State, County and Municipal Employees (AFSCME)

California Employment Lawyers Association

California Immigrant Policy Center

California Labor Federation

Jobs with Justice San Francisco

OPPOSITION

University of California

USCB, America Inc.

-- END --