Bid Thresholds Raised For 2019

January 2019
Number 4

According to the California Department of Education Office of Financial Accountability and Information Services, pursuant to Public Contract Code section 20111(a), the bid threshold for K-12 school districts’ purchases of equipment, materials, supplies and services (except construction services) has been adjusted to $92,600, effective January 1, 2019. The notice may be viewed here.

The California Community Colleges Chancellor’s Office is expected to announce a similar adjustment to the bid threshold for community college districts’ purchases of equipment, materials, supplies and services (except construction services), pursuant to Public Contracts Code section 20651(a), sometime in the next few days. Once released, that information will be available here.

The bid limit for construction projects remains at $15,000.

The bid thresholds for cities, counties and special districts are not affected by the bid limits discussed above.

On a related note, the Legislature increased the bid limits under the California Uniform Public Construction Cost Accounting Act (CUPCCAA), effective January 1, 2019. (See 2018 Client News Brief No. 47) The increase in the bid limits affects school districts, cities, counties and all other public entities that have adopted CUPCCAA.

For more information on the new bid limits or bidding in general, please contact the author of this Client News Brief or an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Ruth E. Mendyk

Partner

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

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Changes To Skilled And Trained Workforce Requirements For Public Works Projects

January 2019
Number 2

Recent legislation modifies the skilled and trained workforce requirement for certain public works projects, shifting much of the burden for compliance to subcontractors. The new law also authorizes the California Labor Commissioner to investigate suspected violations of the statute and impose civil penalties in specified circumstances.

Background

In recent years, contractors have been required to utilize a “skilled and trained workforce” for “design-build” and “lease-leaseback” public works projects (see 2015 Client News Brief No. 8;2015 Client News Brief No. 71; and 2016 Client News Brief No. 63.) These requirements do not apply to publicly bid projects. Also, the skilled and trained workforce requirements may not apply if the public entity has entered into a project labor agreement covering the project.

These skilled and trained workforce requirements include two elements. First, all of the workers performing work in designated apprenticeable occupations must have “at least as many hours of on-the-job experience as would be required to graduate from an apprenticeship program…;.” Second, a minimum percentage of that workforce must be graduates of an apprenticeable program for the applicable occupation. This minimum threshold was originally set at 30% but is set to increase to 60% by 2020 for some trades. Other trades, including bricklayers, carpenters, drywall installers, plasterers, roofers, and stone masons, will remain at 30%.

Under current law, a contractor is required to provide monthly reports to the project owner that demonstrate compliance with these skilled and trained workforce requirements. In the event the contractor fails to provide the report or the report does not demonstrate compliance with the percentage requirements, the project owner must withhold all further payments until the contractor provides a plan to achieve substantial compliance. As a result, noncompliance by one subcontractor, for even a small portion of work, has had the potential to hold up payment to the contractor for all of the work on the project.

Assembly Bill 3018

Effective January 1, 2019, Assembly Bill (AB) 3018 amends Public Contract Code sections 2601 and 2602, and adds new section 2603, shifting some of the responsibility for skilled and trained workforce compliance to subcontractors. If the general contractor fails to comply with the monthly report requirements as a result of one noncompliant subcontractor, the project owner is required withhold 150% of the value of the monthly billing for that subcontractor only, until that subcontractor demonstrates a plan to achieve substantial compliance, or until the subcontractor is substituted out in accordance with applicable law. The contractor is permitted (but not required) to withhold payment from the subcontractor. However, now the project owner will be permitted to pay the contractor for the other work on the project performed by the contractor or by other subcontractors.

AB 3018 also gives the Labor Commissioner authority to investigate suspected violations of the skilled and trained workforce requirements and impose a separate civil penalty up to $5,000 per month on non-compliant contractors. In situations where the Labor Commissioner finds that violations of the skilled and trained workforce requirements are willful, the contractor or subcontractor may be temporarily disqualified from bidding on public works projects.

Takeaways

These changes to the skilled and trained workforce requirements shift the consequence of noncompliance to the responsible party. As a result, AB 3018 may make design-build and lease-leaseback projects more attractive for prospective general contractors. However, the increased burden on subcontractors to demonstrate compliance and the Labor Commissioner’s oversight may deter subcontractors from participating in such projects. Public entities in regions of the state where there are a limited number of graduates from apprenticeship programs should carefully consider these changes before proceeding with a delivery method subject to skilled and trained workforce requirements.

If you have any questions about the skilled and trained workforce requirements, please contact the authors of this Client News Brief or an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Claudia P. Weaver

Partner

Shawn A. VanWagenen

Senior Counsel

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

New Law Updates Bidding Preferences for Various Public Agencies

November 2018
Number 75

The Legislature has significantly expanded local agencies’ ability to use a small business preferences on a public works projects, and has expanded the use of preferences for small businesses, disabled veterans businesses and social enterprises in some counties. This new law seems to indicate the Legislature is responding to the desire of local agencies to support local businesses.

Assembly Bill (AB) 2762, signed by Governor Jerry Brown, increases the small business preference from five percent to seven percent for all local agencies, including counties, cities, school districts, and other districts. The bill limits the value of a preference to a maximum of $150,000 on any contract, no matter the value of that contract. The small business preference authorizes a local agency, in facilitating contract awards to small businesses, to provide for a small business preference in construction, the procurement of goods, or the delivery of services.

AB 2762 also authorizes local agencies in the counties of Alameda, Contra Costa, Lake, Los Angeles, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma, to adopt preferences for disabled veteran businesses and social enterprises, and provides for the preferences to be a maximum of seven percent for an individual preference and up to fifteen percent for a single bid having two or more preferences. In these counties, an agency’s ability to use a small business preference is not different from agencies outside those counties.

This new law defines a social enterprise to include a nonprofit or for-profit business whose primary purpose is to benefit the economic, environmental, or social health of the community and which uses the methods and disciplines of business and the power of the marketplace to advance its social, environmental, and human justice agendas. The business must also have been in operation for at least one year providing transitional or permanent employment to a transitional workforce or providing social, environmental, or human justice services.

Under AB 2762, each local agency within the specified counties that chooses to utilize a disabled veteran business or social enterprise preference is authorized to define a disabled veteran business and social enterprise and to define their eligibility for the purposes of these preferences and goals. The statute granting authority in certain counties to utilize preferences is set to expire in 2024. However, the statute permitting small business preferences by all local agencies in the state has no expiration date.

To help local agencies meet these preferences, the new law permits a prime contractor, with the approval of the local agency, and subject to meeting specified conditions, to substitute one subcontractor for another, if doing so will help meet the preference adopted by the agency. This provision seems to create a scenario where a subcontractor could be substituted solely in the interest of meeting the agency’s adopted preference, but the new law explicitly states that subcontractors are still afforded all the protections of the Subletting and Subcontracting Fair Practices Act.

Takeaways

AB 2762 demonstrates a greater interest by the Legislature in allowing public agencies to adopt preferences for certain types of businesses. Agencies wishing to adopt such preferences should first review their existing policies and bidding practices for any needed updates to comply with the new law.

For more information on AB 2762, or preferences in bidding generally, including for assistance in drafting policies and bid documents to implement preferences, please contact the authors of this Client News Brief or an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Devon B. Lincoln

Partner

Alyse A. Pacheco

Associate

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

New Law Indefinitely Extends Community College Use of Best Value Process in Bidding

November 2018
Number 74

An expiring law allowing special bidding procedures for community college districts has been amended and extended. Although competitive bidding is the default rule for procurement of personal property and non-construction related services by community college districts and other public agencies, under Public Contract Code section 20651.7, a community college district is allowed to award bids on the basis of “best value,” if the district determines that it can expect “long-term savings through the use of life-cycle cost methodology, the use of more sustainable goods and materials, and reduced administrative costs.” This allows community college districts to use factors other than price to determine the lowest responsible bidder for contracts that are competitively bid.

To utilize this method for awarding contracts, a community college district is required to establish policies and procedures for determining “best value,” and in doing so is required to consider certain factors like pricing and service levels. Community college districts are also permitted to consider a number of additional factors, including the economic benefits to the local community and job creation and retention. This alternative method was set to expire on January 1, 2019. However, Assembly Bill (AB) 3186, signed by Governor Jerry Brown, extends the requirement indefinitely to community college districts, as well as to the University of California. AB 3186 also deletes the requirement that the use of best value procurement be reported by the district to the Legislative Analyst, which then would report to the Legislature.

For more information on this bill or on best value procurement generally, please contact the authors of this Client News Brief or an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Devon B. Lincoln

Partner

Alyse A. Pacheco

Associate

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

Mandatory Prequalification on Certain School District Projects is Here to Stay

November 2018
Number 73

California has extended a school district prequalification requirement that was nearing sunset. Prequalification of general contractors and mechanical, electrical, and plumbing engineers on certain school district projects has been mandatory since January 1, 2015. Specifically, under Public Contract Code section 20111.6, prequalification is required on all lease-leaseback projects and on other school district public works projects when all three of the following factors are met:

(1) the project will entail a projected expenditure of $1,000,000 or more;
(2) the school district has an average daily attendance of at least 2,500; and
(3) the school district intends to use state bond funds, either immediately or by potentially seeking reimbursement from state bond funds in the future.

Prequalification requires that a prospective bidder submit a prequalification questionnaire and financial statement, under oath, as part of the bidding process and requires each prospective bidder to submit a bid by completing and executing a standardized proposal form. This requirement was set to expire on January 1, 2019 (see 2015 Client News Brief No. 51). However, AB 2031, signed by Governor Jerry Brown, extends the requirement indefinitely.

For more information on this bill, or for assistance with the prequalification process, please contact the authors of this Client News Brief or an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Devon B. Lincoln

Partner

Alyse A. Pacheco

Associate

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

Legislature Clarifies CEQA Lead Agency’s Scope of Consideration in Authoring EIR

November 2018
Number 71

The California Legislature has amended the California Environmental Quality Act (CEQA) in an effort to clarify a lead agency’s ability to consider both the broad benefits of a project and the negative impacts of denying the project when evaluating environmental impacts.

Under existing law, CEQA requires state and local agencies to assess the environmental impacts of projects they undertake. Unless an exception applies, the lead agency on the project must prepare one of three types of environmental review documents: a negative declaration, a mitigated negative declaration, or an environmental impact report (EIR). If the project will not have any significant effects on the environment or those effects can be mitigated to an insignificant level, a negative or mitigated negative declaration can be prepared. However, if the lead agency determines the project will have a significant environmental impact that cannot be mitigated, an EIR must be prepared. In preparing an EIR or mitigated negative declaration, the lead agency must identify each expected environmental impact and identify mitigation measures for those impacts. In addition, the lead agency must analyze and provide reasonable alternatives to the project, including the option of cancelling the project (known as the “no project alternative”).

If mitigation is not feasible for a given effect, the project is not necessarily prohibited. The CEQA guidelines provide that mitigation is not necessary if the lead agency determines, with support from substantial evidence in the record, that the “specific economic, legal, social, technological, or other benefits of a proposed project outweigh the unavoidable adverse environmental effects.” This is known as a “statement of overriding consideration.”

Assembly Bill (AB) 2782 adds a section to existing CEQA statutes that permits a lead agency authoring an EIR to:

“consider specific economic, legal, social, technological, or other benefits, including regionwide or statewide environmental benefits, of a proposed project and the negative impacts of denying the project. Any benefits or negative impacts considered pursuant to this section shall be based on substantial evidence in light of the whole record.”

The new language confirms that lead agencies may broadly consider all benefits of a project as well as any negative environmental impacts of denying the project. For example, canceling a bus lane improvement project could represent a missed opportunity to reduce greenhouse gas emissions as commuters drive their cars instead.

Senate and Assembly committee analysis points out that the language of AB 2782 allowing the lead agency to assess the broad benefits of a project is already reflected in the “statement of overriding consideration” section of the current CEQA guidelines. Similarly, the ability to consider the negative impacts of denying the project already exists in the “no project alternative” analysis. Thus, AB 2782 merely re-states and confirms a lead agency’s scope of consideration when preparing an EIR.

If you have questions about AB 2782 or CEQA issues in general, please contact the authors of this Client News Brief or an attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Anne L. Collins

Partner

Jordan R. Fong

Associate

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.

New Law Could Reduce Public School Energy Costs

November 2018
Number 69

A new law aims to reduce the high costs public schools pay for energy. Throughout California, K-12 schools are spending a significant portion of their general fund-nearly $700 million-just to keep the lights on. This amount is nearly equal to what public schools dedicate to books and supplies for students. Assembly Bill (AB) 2068 seeks to reduce energy costs in the future by requiring public utilities to evaluate and report the feasibility and economic impacts of establishing discounted utility rates for public K-12 schools.

Electrical and gas corporations (public utilities), in conjunction with the California Public Utilities Commission (CPUC), establish the amount a utility can collect from its customers to cover anticipated costs and reasonable profit. Once this amount is established, the CPUC and utility then create customer “classes” and rates for each class. This division into separate classes and rates reflects a recognition that different general categories of customers place different demands upon the electrical system and therefore it is appropriate to charge users differently. Public schools have generally been placed in a “nonresidential” or “commercial” class rate, despite the fact that public schools have electricity use patterns that differ from the other users placed in their same class. For example, schools typically experience a significant reduction in electricity demand in the mid-afternoon through the next morning and during the summer months, while electricity demand for typical commercial users would not be subject to school day and school year fluctuation patterns.

AB 2068 will require public utilities to evaluate the feasibility and economic impacts of establishing a utility rate class specific to public schools that would reflect a discount from the current rate structure. Public utilities are required to submit their findings to the CPUC by no later than January 1, 2020, which will then be forwarded to the California Legislature.

While AB 2068 does not offer immediate relief to public schools, it at least demonstrates the Legislature’s awareness of the issue and may provide a path to reduced energy costs in the future. In the meantime, schools may still pursue other options for increasing energy efficiency, like taking advantage of remaining Proposition 39 funding or the recently enacted Clean Energy Job Creation Program for energy efficiency projects. (For further discussion of Proposition 39 or the Clean Energy Job Creation Program, see Client News Brief No. 42.)

If you have any questions about AB 2068, or any questions about current options for increasing energy efficiency, please contact the authors of this Client News Brief or attorney at one of our eight offices located statewide. You can also visit our website, follow us on Facebook or Twitter or download our Client News Brief App.

Written by:

Devon B. Lincoln

Partner

Travis E. Cochran

Associate

©2017 Lozano Smith

As the information contained herein is necessarily general, its application to a particular set of facts and circumstances may vary. For this reason, this News Brief does not constitute legal advice. We recommend that you consult with your counsel prior to acting on the information contained herein.