HomeMy WebLinkAbout25- Administration CITY OF SAN BERNARDINO REQUEST FOR COUNCIL ACTION
From: Fred Wilson,City Administrator Subject: Resolution opposing Proposition
r 0 224, an initiative constitutional
Dept: Administration s €� "' � amendment concerning state-funded
design and engineering services .
Yid��s� � vs elf
Date: April 22 , 1998
Synopsis of Previous Council action:
4/13/98 - Proposition 224 was discussed by the Legislative Review
Committee, and referred to the Mayor and Council .
Recommended motion:
Adopt resolution
Signature
Contact person: Fred Wilson Phone: 5122
Supporting data attached: Yes Ward: All
FUNDING REQUIREMENTS: Amount: N/A
Source: (Acct. No.)
(Acct. Description)
Finance:
Council Notes:
SJy g�
75-0262 Agenda Item No. —
STAFF REPORT
Background
At the April 13 meeting of the Legislative Review Committee, Proposition 224 was discussed.
The Committee asked that this matter be referred to the full Council for discussion and possible
action.
Proposition 224
Proposition 224 will be on the state-wide ballot in June, 1998, titled the "State-Funded Design
and Engineering Services. Initiative Constitutional Amendment". Proponents refer to it as the
"Government Cost Savings and Taxpayer Protection Amendment".
According to the official summary prepared by the California Attorney General, this initative
would:
- Prohibit contracting where performance of work by civil service employees is less
costly, unless there is an urgent need for a contract;
- Prohibit contracts which the State Controller or awarding agency determines are
against the public interest, health, safety, or where the quality of work would be
lower than civil service work;
- Require contractors to indemnify the state in suits related to performance of
contracts; and
- Require defined competitive bidding of state-funded design and engineering
contracts over$50,000, unless a delay from bidding would endanger public health
or safety.
The full text of Proposition 224, and a comprehensive analysis prepared by the State Legislative
Analyst, are attached (Attachments A and B).
Potential Impacts Proposition 224
The League of California Cities, California Chambers of Commerce, Howard Jarvis Taxpayers
Association, California School Boards Association, and numerous other organizations are
opposed to Proposition 224. Their concerns center primarily on the new bid process established
by the Proposition, which would compare the cost of contracting to the cost of using state
employees for certain construction-related services. As the Legislative Analyst noted:
"Generally, the service could be contracted out if the Controller's analysis
indicated that the contract was less costly than using state employees. On the
other hand, the work would have to be done by state employees if the analysis
showed they could do it at a lower cost."
This cost comparison process would not take into account the indirect costs (administration,
overhead, etc.) incurred by the state. As a result, it appears that this bid process is structured
so that it favors the use of state employees over private contractors. The degree to which state
employees would be favored would depend largely upon how the State Controller and ultimately
the courts interpret the proposition.
All local governments, including the City, would be impacted by this new process, according
to the Legislative Analyst:
"Historically, the state has provided significant funding to local governments for
various types of facilities -- K-12 schools, local roads, community colleges, jails,
and parks. Under the proposition, a local government would have to use the new
process if it uses state funds to pay a private firm for any part of a construction-
related service."
If this proposition is passed, it will likely result in increased costs for the City's construction
projects that are funded by the state or by state-controlled funds, such as Gas Tax. Projects
might also be delayed.
Recommendations
It is recommended that the Mayor and Council adopt the resolution of opposition to Proposition
224.
Attachment A
Proposition 224
State-Funded Design and Engineering Services.
Proposition 224
Initiative Constitutional Amendment.
FP
Proposition 224 - Full Text of the Proposed Law
This initiative measure is submitted to the people in accordance with the provisions of Article II,Section 8 of
the Constitution.
This initiative measure expressly amends the Constitution by adding a section thereto;therefore,new
provisions proposed to be added are printed in italic type to indicate that they are new.
PROPOSED AMENDMENT TO ARTICLE VII
SECTION 1.TITLE
This measure shall be known and may be cited as the Government Cost Savings and Taxpayer Protection
Amendment.
SECTION 2.PURPOSE AND INTENT
It is the intent of the People of the State of California in enacting this measure that engineering,architectural,
and similar services provided by the State and certain other entities be furnished at the lowest cost to
taxpayers,consistent with quality,health,safety,and the public interest;that contracts for such services be
awarded through a competitive bidding process,free of undue political influence;and that contractors be
held fully responsible for the performance of their contracts.
SECTION 3.REQUIREMENTS FOR CONTRACTS FOR ENGINEERING,ARCHITECTURAL,AND
SIMILAR SERVICES
Section 12 is added to Article VII of the Constitution,to read:
SEC. 12. (a) This section shall apply to contracts for engineering, architectural, landscape architectural,
surveying, environmental, or engineering geology services awarded by the State of California or by any
state agency to any public or private entity.As used in this section, "state agency"means every state office,
officer, agency, department, division, bureau, board, and commission but does not include the University
of California, the California State University and Colleges, and local public entities. "State agency"also
includes a state agency acting jointly with another state agency or with a local public entity.As used in this
section, "local public entity"means any city, county, city and county, including a chartered city or county,
public or municipal corporation, school district, special district, authority, or other public entity formed
for the local performance of governmental and proprietary functions within limited boundaries. "Local
public entity"also includes two or more local public entities acting jointly.
(b) This section shall also apply to contracts for services specified in subdivision(a)awarded by private
entities or local public entities when the contract awarded by the public or private entity involves
expenditure of state funds or involves a program,project,facility, or public work for which the State or any
state agency has or will have ownership, liability, or responsibility for construction, operation, or
maintenance.As used in this section, "state funds"means all money appropriated by the Legislature for
expenditure by the State or a state agency and all money included in special funds that the State or a state
agency controls.
(c)Prior to the award of any contract covered by this section, the Controller shall prepare and verify an
analysis of the cost of performing the work using state civil service employees and the cost of the contract.
In comparing costs, the cost of performing the work using state civil service employees shall include only
the additional direct costs to the State to provide the same services as the contractor, and the cost of the
contract shall include all anticipated contract costs and all costs to be incurred by the State, state agencies,
and the contracting entity for the bidding, evaluation, and contract award process and for inspecting,
supervising, verging, monitoring and overseeing the contract.
(d) The contract shall not be awarded if either of the following conditions is met: (1)the Controller's
analysis concludes that state civil service employees can perform the work at less cost than the cost of the
contract, unless the services are of such an urgent nature that public interest, health, or safety requires
award of the contract; or(2)the Controller or the contracting entity concludes that the contract would not
be in the public interest, would have an adverse impact on public health or safety, or would result in lower
quality work than if state civil service employees performed the services.
(e)Except for contracts for which a delay resulting from the competitive bidding process would endanger
public health or safety, every contract, including amendments, covered by this section that exceeds fifty
thousand dollars($50,000), adjusted annually to reflect changes in the appropriate consumer price index
as determined by the Controller, shall be awarded through a publicized competitive bidding process
involving sealed bids. Each contract shall be awarded to the lowest quaked bidder.If the contract cost
based on the lowest qualified bid exceeds the anticipated contract costs the Controller estimated pursuant
to subdivision(c), the Controller shall prepare and verb a revised analysis using the contract bid cost,
and that revised analysis shall be used in applying subdivision(d).
(f)For every contract covered by this section, the contractor shall assume full responsibility and liability
for its performance of the contract and shall defend, indemnify, and hold the State, the contracting entity,
and their agents and employees harmless from any legal action resulting from the performance of the
contract.
(g) This section shall not be applied in a manner that will result in the loss of federal funding to the
contracting entity for contracts for services.
SECTION 4. SEVERABILITY
If any provision of this amendment or its application to any person or circumstance is held invalid,that
invalidity shall not affect other provisions or applications of the amendment which can be given effect
without the invalid provision or application,and to this end the provisions of this amendment are severable.
SECTION 5.APPLICABILITY OF CURRENT LAW
Nothing in this amendment shall expand or restrict the State's constitutional authority,as determined by
decisions of the California Supreme Court and California Courts of Appeal in effect on the effective date of
this amendment,to enter into contracts with private or public entities.
SECTION 6.RELATIONSHIP TO OTHER MEASURES
To the extent that any other measure on the same subject shall be on the ballot at the same election,it is the
intent of the voters that this measure be deemed,to the maximum extent possible,not to be in conflict with
such other measure,but rather that this measure should be harmonized with the other measure.
Proposition 224 1 Analysis
Attachment B
Text of Proposed Law Proposition 224
State-Funded Design and Engineering Services.
Initiative Constitutional Amendment.
ug
Analysis by the Legislative Analyst
Background
Under California law,services provided by state agencies generally must be performed by state civil service
employees.These services cover a broad range of activities--such as clerical support,building maintenance
and security,and legal services.In some cases,however,the state may contract with private firms to obtain
services.Such contracting is allowed,for example,if services needed by the state are:(1)of a temporary
nature,(2)not available within the civil service,or(3)of a highly specialized or technical nature.Unlike the
state,local governments are not subject to constitutional restrictions on contracting for services.
The state and local governments frequently contract with private firms for construction-related services,
which include architecture,engineering,and environmental impact studies.State and local governments enter
into these contracts through a process of advertising for the service,selecting the firm that is determined to
be best qualified,and negotiating a contract with that firm.Neither the state nor local governments
competitively bid for these services.By comparison,competitive bidding generally is used to acquire goods
and for construction of projects.
Proposal
This proposition,a constitutional amendment,requires public entities to use a new process prior to awarding
a contract for the following construction-related services:engineering,architecture,landscape architecture,
surveying,environmental studies,and geologic studies.(The proposition would not affect contracting out for
other types of services.)The new process would apply to:
• All state agencies,except the University of California and the California State University.
• Many local governments and private entities(see below).
What Is Involved in This New Contracting Process?
The Cost Comparison.Under the process established by the proposition,the State Controller would be
required to prepare an analysis for each proposed contract and compare the following:
• The cost of contracting with a private firm for the services.This would include the anticipated
amount a private firm would charge to provide the services plus the cost to bid,award,administer,
and monitor the contract.
• The"additional direct costs" if state employees provide the same services.
Generally,the service could be contracted out if the Controller's analysis indicated that the contract was less
costly than using state employees.On the other hand,the work would have to be done by state employees if
the analysis showed they could do it at lower cost.
Competitive Bidding.As noted earlier,public entities currently negotiate contract terms for
construction-related services.This proposition requires that such contracts costing more than$50,000 be
competitively bid to select the lowest qualified bidder.Competitive bidding would not have to be used if it
would delay a project and the delay would endanger public health or safety.
What Contracts Are Covered Under the Proposition?
Direct Contracting by the State. State agencies would have to use this new process if they wanted to
contract for construction-related services.In recent years,state agencies have averaged about$150 million
annually in spending on these types of contracts.This amount varies annually depending on the state's level
of construction activity.
Contracts Awarded by Local Governments and Private Entities.Local governments and private entities
would also have to use this new process in the following situations:
• State Funding of Services for Local Government or Private Projects.Historically,the state has
provided significant funding to local governments for various types of facilities--K-12 schools,local
roads,community colleges,jails,and parks.Under the proposition,a local government would have
to use the new process if it uses state funds to pay a private firm for any part of a construction-related
service.
• State Ownership,Liability,or Responsibility for a Project.In many cases,the state assumes
ownership,liability,or responsibility for construction,operation,or maintenance of a local project.
This is the case,for example,with regard to the building of K-12 and community college buildings
and many locally funded highway projects.
Fiscal Effect
The potential fiscal effects of this proposition on the state and local governments are discussed below.
Impact on the Cost of Providing Services
The fiscal impact would depend in large part on the determination of which cost factors to use in comparing
the cost of contracting out a service with the"additional direct cost" of the state providing the service.The
cost of contracting for a service would be determined from the bid submitted by the private firm.On the
other hand,because the term "additional direct costs" is not defined in the proposition,the Controller would
have to determine which cost factors associated with using state employees should be included in order to
prepare the required analyses.
What Are "Additional Direct Costs?"Because the proposition does not define"additional direct cost"there
is not a clear answer to this question.Figure 1 lists some of the cost factors the Controller would need to
review to determine if they should be counted as additional direct costs.
Cost Analysis on Contract-by-Contract Basis. A cost analysis would be required on each individual
contract basis.Thus,a cost analysis may not reflect the accumulation of administrative costs if the state
workforce increases to meet workload demand.For example,additional clerical and managerial positions or
additional office space for state employees may not be needed for any one contract,but could be needed if
work on many projects were assigned to state employees rather than private firms.
Fiscal Effect Depends on Cost Comparisons. The impact of the proposition on state and local costs would
depend on the extent to which the cost analyses include all state costs associated with providing these
services using state employees.For example:
• If more of the costs associated with using state employees are included in the analyses,it is more
likely that they would provide an"apples-to-apples" comparison of total costs.In this case,the
proposition could result in savings.This is because public entities would no longer contract in
situations where it is more costly.These savings,however,probably would not be significant.
• On the other hand,if fewer of the state's costs are counted as"additional direct costs,"the analyses
would not reflect a true"apples-to-apples" comparison of total costs.In this case,the proposition
could result in costs.This is because state employees would be used to perform work where
contracting would have been less costly.
Because of the uncertainties discussed above,it is difficult to predict the fiscal effect of this proposition.
However,a strict interpretation of additional direct costs(for example,only those identified in Figure 1 as
"likely to be counted")could result in significant costs to state and local governments.
Figure 1
What Cost Factors Might Be Counted As "Additional Direct Costs?"
Cost Factors Likely to Be Counted
• Salaries and benefits of additional state employees needed to perform a service.
• Office space,furniture,equipment,and travel expenses for the additional employees.
Cost Factors Likely Not to Be Counted
• State agency overhead costs("top management').
• Other state agency overhead costs--such as payroll,accounting,and personnel functions.
May or May Not Be Counted
• Hiring and training costs for any additional state employees needed to perform a service.
• Increased construction costs due to project delays caused by time needed to hire and train additional
state employees.
• Costs of maintaining excess state staff if workload declines.
Other Fiscal Impacts
The proposition would have other fiscal effects on the state and local governments.For instance,the
Controller would have costs to perform the required cost analyses.These costs would depend on the number
of requests from state agencies and local governments.We estimate the Controller would have both one-time
costs of probably less than$500,000 and ongoing costs of up to$2 million annually.
The proposition would affect the state and local governments in other ways.For example,it would take time
to develop and implement the new process for evaluating contracts.This would lead to one-time delays in
certain public sector construction projects,resulting in possible added inflation-related costs for those
projects.
Text of Proposed Law I Proposition 224 1 Argument in Favor
RESOLUTION NO. D��U
1 A RESOLUTION OF THE CITY OF SAN BERNARDINO OPPOSING
PROPOSITION 224, AN INITIATIVE CONSTITUTIONAL AMENDMENT
2 CONCERNING STATE-FUNDED DESIGN AND ENGINEERING SERVICES.
3 WHEREAS, State, regional, and local governments are currently allowed the flexibility
4 to contract with private firms, on a competitive basis, to design important capital improvement
projects; and
5
WHEREAS, This process allows government the essential flexibility to use private firms
6 to deliver projects on time and cost effectively; and
7 WHEREAS, Proposition 224 changes this process and would require governments to use
8 the state bureaucracy to design roads, parks, hospitals, and other critical structures; and
9 WHEREAS, This proposed initiative would limit local control, increase costs, and cause
10 project delays for cities such as San Bernardino.
11 THEREFORE, BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL
OF THE CITY OF SAN BERNARDINO AS FOLLOWS:
12
SECTION 1. The Mayor and Common Council of the City of San Bernardino
13
14 oppose Proposition 224.
15 SECTION 2. The City Administrator is directed to send copies of this resolution
16 to the League of California Cities, area legislative representatives, and other parties that may
17 request such copies.
18
19
20
21
22
23
24
25
26
27 April 23, 1998 1
28
A RESOLUTION OF THE CITY OF SAN BERNARDINO OPPOSING
1 PROPOSITION 2249 AN INITIATIVE CONSTITUTIONAL AMENDMENT
2 CONCERNING STATE-FUNDED DESIGN AND ENGINEERING SERVICES.
3 I HEREBY CERTIFY that the foregoing resolution was duly adopted by the Mayor and
4 Common Council of the City of San Bernardino at a meeting thereof, held on the
5 day of , 1998, by the following vote, to wit:
6 Council Members AYES NAYS ABSTAIN ABSENT
7
ESTRADA — — — —
8
9 LIEN — — — —
10 ARIAS — — — —
11 SCHNETZ — — — —
12 DEVLIN — — — —
13 ANDERSON — — — —
14
MILLER — — — —
15
16
17 City Clerk
18
The foregoing resolution is hereby approved this day of
19 11998.
20
21 JUDITH VALLES, Mayor
City of San Bernardino
22 Approved as to form and
23 legal content:
24 James F. Penman,
City Attorney
25 ;?
By:
26
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28 April 23, 1998 2
MAY-01-98 FRI 03:57 PM BLANNING & BAKER FAX N0, 3225609 P. 01
PR
OPOSITION 224, THE COMPETITIVE BIDDING INITIATIVE
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT state civil service emp oyees ssa ncru es on ypnepaddng the
al work ucosts
AS FOLLOWS: o e s a e v e a same services as a con rac or,an e
GOVERNMENT COST SAVINGS AND TAXPAYER o e con s ianticipated con re costs and ell costs to
be Incurred by the state s to a s
PROTECTION AMENDMENT biddinn evaluation and contract award process and ror Inspecting,
supervisma verifying montlonna and overseeing the con ract..
SECTION 1. TITLE
(d)The contract shall not be awarded if either of the following
This measure shall be known and may be cited as the conditions is met,(1)the Controller's analysis concludes that state civil
Government Cost Savings and Taxpayer Protection Amendment. contract unllessetheaserrvices are of such less
an urgent natutre cost at public
SECTION 2. PURPOSE AND INTENT interest, health, or safety requires award of the contract; or (2) the
Controller or the contracting entity concludes that the contract would not
It is the intent of the people of the State of California in be in the public interest,would have an adverse impact on public health
or safety,or would result in lower quality work than if slate civil service
enacting this measure (hat engineering, architectural, and similar employees performed the services.
services provided by the state and certain other entities be furnished at
tmysrs,consistent with quality,health,safety,and (e) Except for contracts for which a delay resulting from the
the public interest;that contracts for such services be awarded through competitive bidding process would endanger public health or safety
arrapeyw,a,6lddh►gproeess,free of undue political influence;and that every contract, including amendments, covered by this section that
tbrttrl �flX resprxtsible for the performance of their exceeds fits thousand ousanddollars ($50,000L adjusted annually to reflect
contracts. changes to the appropriate consumer price index as determined by the
Controller,shall be awarded through a publicized competitive bidding
THEREFORE, THE PEOPLE OF THE STATE OF rocess involvin sealed bids. Each contract shall be awarded to the
CALIFORNIA DO ENACT AS FOLLOWS: wes gua►i id bid er. a contract cost based on the I alined
bid exceeds the anticipated contract costs the Controller estimate
SECTION 3. REQUIREMENTS FOR CONTRACTS FOR —pursuant to subsection (c), the Controller shall prepare and verify a
ENGINEERING, ARCHITECTURAL AND revised analysis using the contract bid cost, and that revised analysis
SIMILAR SERVICES shall be used in applying subsection(d).
{f)For every contract covered by this section,U>1�Lr;�L
Article VII, section 12 is hereby added to the California shalt assume full res onsi""' and liabili for its performance of the
Constitution to read: contract a s all de nd,Indemnify,and hold the state,the contracting
(a) This section shall apply to contracts for engineering, entity, and their agents and employees harmless from any legal action
architectural, landscape architectural, surveying, environmental, or
resulting from the performance of the contract.
engineering geology services awarded by the state of California or by (g)This section shall not be applied in a manner that will result
any stale agency to any public or private entity. As used in this section, in the loss of federal funding to the contracting entity for contracts for
"slWA49eI means every state office, officer, agency,department, services
division, bureau, board, and commission but tow
Universi of Ca6fomia the California Stale University and Cci!I sand SECTION 4. SEVERABILITY
pt s. 'State agency a so includes a state en actin
jointly On another slate agency or with a local public entity. As used in If an provision of this Amendment or its application to any
this section,"local public entity"means any city,county,city and 6655—n Ty—, e�or circumS anee is held invalid,that invalidity shall not affect other
inc u rn a cF"a3rMrt?>tolt9 or county, public or municipal corporation, provisions or applications of the Amendment which can be given effect
school district,special district,authority,or other public entity formed for provisions
the invalid
rlrl d provision or application,and to this and the provisions
the local performance of governmental and proprietary functions within
limited boundaries. "Local public entity'also Includes two or more local of this Amendment are severable.
public entities acting jointly. SECTION 5. APPLICABILITY OF CURRENT LAW
(b) This section shall yolso aaaly to contracts for services Nothing in this Amendment shall expand or restrict the state's
specified In subsection (a) awarded by private entities or local public
entities when the contract awarded b the public or rivale enti involves
constitutional eme Court and California Courts of A v al n e ect on the a e�ctivle
expenditure o slate funds or Involves a r ram, rol ii as or Pr
u r wor or r t e s a e or an s to a enc has or will have a of this mendmen to enter into contracts wr prrva a or PUNIC
owners r , ra r r y, or res nsibilrry for construction, operation, or —in►be�—
maintenance. As used in this section, "state funds"means all money
appropriated by the Legislature for expenditure by the state or a state SECTION 6. RELATIONSHIP TO OTHER MEASURES
agency and all money included in special funds that the state or a state To the extent that any other measure on the same subject shall
agency controls. be on the ballot at the same election,it is the Intent of the voters that this
(c)Prior to the award of any contract covered by this section, measure be deemed, to the maximum tentthps measure thou a be
the Controller shall prepare and verify an analysis of the cost of conflict with such other measure,but rather that
performing the work using state civil service employees and the cost of harmonized with the other measure.
�2�
QUESTIONS AND ANSWERS o
About Iz
PROP. 224
THE COMPETITIVE BIDDING INITIATIVE
1. What is Proposition 224, the Competitive Bidding Initiative".
Officially titled the Government Cost Savings and'Taxpayer Protection
Amendment, it is a proposed constitutional amendment on the June ballot.
The Initiative would require competitive bidding among
qualified firms and an impartial cost analysis when the state
awards contracts for engineering and related services, such as freeway design and
construction inspection, in excess of$50,000. It would also require contractors to be
6 responsible and liable for their performance of the contract. If approved by the
_ voters, it will stop the waste of$100 million tax dollars per year,dramatically improve
the quality and safety of state freeways and highways,and break the link between
campaign contributions and Governor Wilson,who award no-bid contracts to his
contributors.
2. Aren't all state contracts competitively bid now?
Ilnfortunatcly,no. Construction contracts are competitively bid. Contracts for services such as
construction inspection are not, which is the major reason for the Initiative. There is a need to reform the
current system of awarding huge overpriced,no-bid contracts to campaign contributors.
3. How does the process work now?
Not very well. Currently,private firms,whether qualified or not, submit proposals. Numerous interviews
are conducted. After a firm is selected,then and only then is price discussed. This expensive,
cumbersome,bureaucratic process takes an average of nine months, By comparison,competitive
bidding among qualified firms only takes two montlis and the contracting process costs $16,000 less per
contract.
4. Does the state get a good price under the current system?
�a— No. Based on unrefuted data from the Legislative Analyst's office each year, contracting
�o out without competitive bidding costs more than twice as much as having state
employees do the same work. Competitive bidding could save even more money than
!� (hat. Since 1990,Caltrans no-bid contracts alone have wasted more than$700 million
_ which could have been used to strengthen all the bridges in the state before tltc Northridge
.� earthquake in Los Angeles destroyed seven of them,plus there would have been money
left over to help rebuild the Bay Bridge.
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5. Does the current system result in selecting the most qualified firm?
Experience has proven otherwise. In 1995,the Wilson Administration awarded eight bridge seismic
retrofit(earthquake strengthening) design contracts of$4 million each to eight different firths, regardless
V-1� of who was most qualified. Under the competitive bidding requirements of Prop 224,those
\J. -' firms would have competed against each other,saving the taxpayers millions. The next year,
fifteen contracts for construction inspection were awarded to fifteen different firms. Once again,
the contracts cost twice as much as they should have, In some cases, the current systettt even
allows construction subcontractors to hire their own inspectors, which has had disastrous
results in San Diego, Los Angeles and elsewhere. Prop. 224 will prevent this extremely
dangerous practice, (For more details, See Question T)
6. What do the contractors do with these huge excess profits?
A small percentage of the profits --about$3.5 million in recent years--is
reinvested through campaign contributions,primarily to Governor Wilson and
other Republicans. The rest of the money is retained for fat
salaries and profits. For example,many of the presidents and
other top officials of the consulting firms which receive
overpriced, no-bid contracts tnakc salaries in excess of$1
million per year,funded through tax dollars wasted on overpriced, no-bid contracts!
7. Now will Prop.224 improve freeway and highway safety?
The most graphic example is the Interstate 8/805 interchange in San Diego. �---
There,a contractor was allowed to give a no-bid contract to a consulting firm to `
inspect the contractor's work on a bridge earthquake strengthening projectl Not
surprisingly,the result was more than 10,000 defective welds, costing millions of
dollars to replace and triggering a still-ongoing investigation by the FRI. The
Initiative would prevent contractors from awarding inspection contracts and would
prohibit all no-bid contracts. Unfortunately,recent investigations have uncovered
dozens of bridges with similar welding defects in Los Angeles and other areas of the = �:
state.
The Los Angeles MTA subway is another graphic example of literally billions of dollars being wasted
through no-bid contracts to politically influential contractors, resulting in disgracefully defective design,
construction, and construction inspection. The result has included cutoff of federal funds,collapsing
streets,criminal convictions,and probable termination of the most expensive subway project in history.
The Northridge earthquake is yet another example. Seven bridges which had not yet been seismically
retrofitted due to lack of available funds collapsed, All the experts agreed that if the bridges had been
retrofitted, they would not have collapsed. Why weren't funds available sooner? Because they had been
wasted on overpriced, no-bid contracts to companies which make campaign contributions to the political
decision-makers!
Under Prop 224, not only would no-bid contracts be prohibited,but if a contractor made a mistake,the
contractor, not the taxpayer, would be required to pay for fixing the problem.
Page-2-
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WHAT THE OPPOSITION SAYS
8. The opponents claim that Prop.224 would apply to thousands of local agency projects,causing a
gigantic bottleneck at the State Controller's office,which must perform the cost analyser. Is this
true?
No. State Controller Kathleen Connell,the state's Chief Financial Officer who would have the
responsibility under the Initiative to conduct the cost analyses,recently instructed her legal staff to
analyze the application of Proposition 224. They concluded that it would apply to 200
to 300 contracts per year awarded by various state agcncics and no more than half a -1
dozen local agencies. This is an easily manageable task and would not create any
delay or bottleneck, To the contrary, as competitive bidding can be done faster than the
current no-bid contract award system, it is the current process which creates delays.
9. The opponents claim that the Initiative would establish an unfair cost comparison between public
agencies and the private sector. Is this true?
No. Prop. 224 requires that the Controller determine the lowest cost alternative for the taxpayers,so an
unfair analysis would be unconstitutional. A similar cost comparison procedure has been contained in
state law(although rarely used)since 1982 without any complaints(Government Code Section 191.30(a)).
10. Opponents claim that Prop.224 would require contractors to be responsible for the state's
mistakes. Is this true?
This is one of their more ridiculous allegations. The Initiative clearly states in Section 3(f)that
contractors are only responsible for the performance of the contract. It is the contractors who
perform the contracts,not state employees.
----------- ---------
If you have other questions or would like additional information or clarification,please call Taxpayers For
Competitive Bidding at(916)446-0496.
Page-3-
cn a An4q;7;79 'ON V44 NANdA � nN 1 uifl wu l I;nn Now 96-02-add
MAY-01-98 FRI 03;58 PM BLANNING & BAKER FAX N0. 3225609 P. 04
State of California Iczodatire Budget Committee
M E M O R A N D U M
Date June 18. 1996
To Chris !amen, Curt Miller, Tom Sheehy, Danny Alvarez
From : Michael Cunningham
Subject : Error in Caltrans' Proposition 192 Finance Letter(conference issue)
On Saturday, we indicated to the Conference Committee that Caltrans' Finance Utter
prop-o=3 an additional $32.9 million for Phase 2 seismic mtrofn, due to the higher cost of
consultant engineers. We have since discovered an error in the Finance Lener that under-
atated the support cost of Caltrans' proposed Phase 2 rettotit program. 77urs, the Fntance
�T..� Leter shvidd have shown a $47 mi:fion increase for Phase 2, rather thmt ,637.9 million.
The Finance Letter action reflected in issue 103a(agenda page: 69) removes support for
Phase 2, as proposed in the Governor's Budget, from State Highway Account and federal
funds. Specifically, the action deletra $71 million for 857 personnel-year equivalents.
composed of S53 million for 729 state staff and $19 million for 129 consultants.
In a corresponding off-budget action, the Fimmee Letter restores $57 per. nnel-year
equivalents and $104 million in Proposition 192 funds. However, Caltrarts used incorrect
vests for both state staff and consultant staff. Using the correct numbers as ideatified by
Caltrarrs gives:
706 consultants @ $151,000 = $107 million
X149 state staff (&D 73,000 i l rttillion
857 focal 118 million
71us, compared to the Governor's Budget amount of$71 million. the Finance Litter
Should have reflected a $47 million increase_ However, becsute Phase 2 will be funded Born
cominuously 2ppropriated Proposition 192 funds, no legislative action is necessary to correct
this miscalculation.
COST EFFECTIVENESS
OF USING CONSULTANTS
FOR HIGHWAY ENGINEERING
Report by A. Alan Post
Ee&uaLy 19994
A.Alan Post analyzed studies conducted in California and other states comparing costs of contracting with private
consulting firms to perform freeway and highway design versus utilizing civil service engineers in state highway
departments. His conclusions from the enclosed report are summarized below.
SUMMARY OF FINDINGS & CONCLUSIONS
1. "The LAO (California Legislative Analyst's Office) concluded that each
person-year of engineering work costs $124,000 if contracted with a
private engineering firm. By comparison, a Caltrans engineer who
undertakes the same work is estimated to cost the state $75,500 for a
person-year. The differences in cost arrived at by the LAO are too
substantial to be ignored. It seems clear that the in-house costs are
substantially lower."
2. "Private contractor costs exceed in-house costs in other states. In no case
was in-house engineering determined to be more expensive. In most
cases, it was found to be significantly less so."
3. (Based on studies in California and other states) "Quality of work
generally was believed to be equal. The fact that some states use contract
services extensively is more a matter of political policy."
Mr. Post was the Legislative Analyst for the,State of California for 27 years and is universally recognized as an
expert in analyzing government budgets and the costs of state government programs and proposals. Fle currently
serves as the co-chair of the California Citizens Budget Commission and is a member of the National Advisory
Council, Institute of Government Studies, University of California, Berkeley; the Senate Advisory Commission on
Cost Control in State Government;and the Advisory Committee on Policy Analysis for California Education,among
numerous other functions and qualifications.
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MAY-01-98 FR( 03:57 PM BLANN[NG & BAKER FAX N0, 3225609 P. 02
� f
June 12. 15C-E
NOTICE
STATE OF CALIFORNIA
BUSINESS, TRANSPORTATION AND HOUSING AGENCY
REQUEST FOR QUALIFICATIONS NO, 59Y473
Pursuant to the authonty set out in Streets and Highways Code Section t80.a, et seq.,and Government Code 19130 b(10), the
Secretary of Business.Transportation and Housing Agency hereby solicits Statements of Qualifications from qualified firms that
will lead to contracts to provide staff for inspection,monitoring, testing.field engtneenng and support services for construction
contracts involving State-owned highway structures at various locations on the State highway system within the State of
California. The Secretary is expecting to award a sufficient number of separate on-call consultant contracts to assist Cattrans
in the delivery of the seismic retrofit of bridges on the Stale highway system. Contract amounts will range from 53 million to$6
million each. The number of contracts for each amount will depend upon the availability of qualified personnel and State
needs.
Request for Qualifications for
a) Provide staff and Structure Representatives for inspection,administration,monitoring, testing,and field engineering
services for construction contracts involving structures on the State highway system.
b) Consultants will be selected for these contracts by means of a'On"tep'selection process(Requests for
Qualifications followed by interview). The Request for Qualification requirements are described on pages(2)through
c) The contract duration(s)will be for 3 years. The total number of contracts to be awarded has not been determined but
is estimated to be about 15 or 20. The workload will vary,but it is anticipated that approximately 400 Person Years of
effort will be utilized in the first year. The majority of the worts will be accomplished in the first 1a months.
d) Special Instructions-See attachment A.
Additional copies of this Request for Qualifications package and U.S.General Services Administration Standard Form SF255
are obtainable from:
M ilin n Street Address:
Department of Transportation Department of Transocnation
Contracts Office Ccntracts Office
P.O. Box 160106 1727 30th Street
Sacramento,CA 95816-0106 Sacramento,CA 95816
Telephone: (916)227-6090
Ten(10)copies(unless otherwise indicated in the special instructions)of the Statement of Qualifications containing all the
information required in the Request for Qualifications shall be submitted. FAX copies will not be accepted. Four separate
ranked lists of consultants will be established for contracts with maximum values for each list as follows:
List 1 $3 million
List 2 $4 million
List 3 $5 million
List 4 $6 million
A single Statement of Qualifications shall be submitted. No more than one contract will be awarded to any consultant. The
Statement of Qualifications should be entitled'Structure Construction Support"and must indicate the lists for which you wish
to be considered. This information,together with the deadline for submittal July 8, 1996 at 2:15 P.M.must be shown clearly on
the outside of the envelope in which the Statement of Qualifications is submitted and marked"DO NOT OPEN UNTIL DUE
DATE"
Page 1 of 6
April 11998
YES ON PROP. 224
PARTIAL LIST OF ENDORSING ORGANIZATIONS
L"-QR
Amalgamated Transit Union- State Conference
American Federation of Government Employees, AFL-CIO
California Federation of Teachers (and local affiliates)
California School Employees Association
California State Employees Association(and other SEIU Locals)
Engineers &Scientists of California
Federation of Retired Union Members
International Federation of Professional and Technical Engincers (IFPTE)
IUOE Stationary Engineers, Local 39, AFL-CIO
Marine Engineers Beneficial Association(MEBA), Dist. 1-PCD
Professional Engineers in California Government
Public Employee Department, AFL-CIO
SEIU State Council
Southern California Teamster Retiree Association
Teamster Retirees Association
Transport Workers Union, California State Conference
UAW Local 506
Union of American Physicians& Dentists
United Auto Workers (UAW) Local 506 Retiree Chapter
FRO IONA ,
California Association of Professional Scientists
Council of Engineers &Scientists Organizations
Engincers and Architects Association
�UBLIC HEALTH & SAFETY
• Association of Los Angeles Deputy Sheriffs
• California Correctional Peace Officers' Association(CCPOA)
e California Organization of Police and Sheriffs(COPS)
e California Professional Firefighters
• California Union of Safety Employees (CAUSE)
.CDF Firefighters
. Sacramento County Deputy Sheriffs Association
O H R
Black Advocates in State Service
Congress of California Seniors
California Concrete
California Legislative Council for Older Americans
• California Mobilehome Resource& Action Association(CMRAA)
•California Small Business Owners' Alliance
Commission on Older Americans
s Hispanic Contractors Association
Vallejo/Benicia Republican Assembly
Whitsett Construction
Various legislators and local elected officials
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KATHLEEN ATHL CONNEI.L
(Controller of the JShtte of(11tllifornin
December 19, 1997
Elizabeth G. Hilt,Legislative Analyst post-it" ransmi memo 7671 rotpoge�►
From
Legislative Analyst's Office
925 L Street, Suite 1000 co.
Sacramento, CA 95814 ,ttal
p Phone 11 l� Foe M —
Dear Ms. Hill:
The State Controller's Office (SCO)was reque sted by the Legislative Analyst's Office
(LAO) to analyze the fiscal impacts of the "Government Cost Savings and Taxpayer
Protection Amendment" (amendment). The fiscal impacts addressed in this analysis
pertain only to those of the SCO in administering what was identified in the amendment.
In making our analysis it was difficult to obtain a reasonable estimate of the number of
contacts aid entities that would need to be"prepared" and "verified" under this
amendment. Please also not.- that this amendment is applicable for all contracts, not just
those over 550,000. In an analysis prepared by the Professional Engineers in Califomia
Government(PECG) in 1995, it was estimated that 13 state agencies had 83 contracts that
would need to be reviewed. Qur own estimation is that there could be as many as 20 state
and local eovcmments with an aggregate of_ o at would a un er
this amendment t enac e
Due to the complexities of the entities involved, the SCO believes that an estimate-of at
least$450,000 would be needed annually for the ongoing operations associated with the
amendment. In addition, in the first year of operations a one-time expenditure of at least
an additional 5900,000 would be required. This funding would allow the office to hire at
least 15 qualified staff. We would envision that up to three staff would work at each of
the 20 entities for three months in reviewine both the agency's cost allocation plan and the
contracts to be awarded by the agency. Included in the$900,000 is an expense of
$225,000 for the purchase of computers, software, cubicles, filing cabinets, workspace
furniture, phones, and other capital outlay items. In addition, operating expenses such as
rent, travel, and supplies would be necessary in the amount oFS45,000. After the first
year of the program,we believe an analysis should be conducted to determine how much
the initial staffing of 15 could be reduced. Our estimate is that we could reduce the
number of staff after the first year to approximately six.
O SACRAMENTO 300 Capitol Mall, Suite 1850,Sacramento,CA 95814 (916)445-2636
❑Mailing Ad'Ms: P.O. 13 ox 942850,Sacramento.CA 94250
0 LOS ANGELES 600 Corporate Pointe,Suite 1150.Culver City.CA 90230(310)342.5678
t n t an4c»p 'M uH d NaNUR ' ON I NNd-18 WV 60:60 NOW 96-OZ-80
Elizabeth G. Hill -2- December 19, 1997
Please note that these estimates are dependent on the respective government entity having
a cost allocation plan that has been prepared in accordance with the federal government's
Office of Management and Budget at the time the amendment becomes law. Failure by
these entities to have a cost allocation plan available could result in substantial delays in
our "verification" of these contracts. to addition, these cost allocation plans would need
to identify the overhead rates for each of the divisions, sections, or units that could be
potentially issuing requests for proposals for contracting services covered by the
amendment.
Currently, the Controues Office has a section that reviews all S 3 county and county and
city cost plans an behalf of the federal govcmmenVs Department of Health and Human
Services. Staff for this work would require similar education, training, and experience in
the application of cost allocation principles.
If you have any questions concerning this analysis, or would like to meet with us,please
feel free to contact William G. Ashby, Chief of the Division of Accounting and
Reporting, at(916)327-4144.
Sincerely,
KATHLEEN CONNELL
State Controller
KC:I-L�IS:wga
;in ., Anoc?x 'nM uH a MgVUA M I NNUIR WV 01 :60 NOW 96-OZ-add