By Matthew (Matt) Hilliard, Bay Area Regional Compliance Manager. -
As a Regional Compliance Manager (RCM) for the Construction Industry Force Account Council (CIFAC), I always need to be quick to react to any public agency that might present a situation where they are in direct violation of the California Public Contract Code (PCC).
The Town Council of the Town of Woodside was set to award a contract for a project to paint the exterior of the Town Hall, Independence Hall, and Community Museum, which would cost approximately $69,000 thereby exceeding their bid threshold.
On June 4, 2020, I received the notification from the Town that the agenda was posted. Like all other agenda notifications, I opened the link to see if any new construction projects were noted. The painting project was mentioned in the consent calendar and I quickly looked for a staff report that accompanies the agenda item. The staff report gives in-depth information related to the project. In this case, the Public Works Director mentioned that the Town had solicited bids from several painting contractors for the project. This information to the trained ear means that the competitive bidding process was not followed. The Town of Woodside participates in the California Uniform Construction Cost Accounting Act, which dictates that any public project their agency wants to perform over $60,000 must be advertised for competitive bids. My next step was to review the information that relates to the agency’s procurement process in its municipal code. I noticed that the Town’s code in regards to the informal and formal bidding procedures bid threshold amounts was incorrectly stated. If the Town had referred to its own incorrect bid thresholds, it might have led them to believe that they could solicit bids without advertising. Lastly, the contractor that the Town wanted to award the contract to was not registered with the Department of Industrial Relations, which is a prerequisite for licensed contractors who want to perform work for California’s public agencies.
Realizing that all these compounded violations would prove to the Town that they were obligated to pull this item from the agenda and advertise this project for bids, I quickly composed an email communication to inform the Town Manager that they had not followed the proper bidding procedure. Mind you, the discovery period and the action of writing the communication to the agency in this investigation all happened within a few hours.
On June 5, 2020, I received a communication from the Public Works Director that the agenda item will be pulled and that the Town will properly bid the project. Fast action was required in order to have the item pulled from the consent agenda because meeting agendas only need to be posted for the public view within 72-hours before the meeting. The Town staff will also correct the informal and formal bid thresholds in their municipal code to reflect the proper amounts.
CIFAC urges our partners, members, and the public, to inform us if you come across a public agency that posts agenda items that may not have been properly bid, and we will rapidly respond to keep them in compliance with the laws.
By Richard Marks, Northern Regional Compliance Manager. -
CIFAC's mission is to ensure that State and local governments comply with the Public Contract Code to promote job opportunities, fair bidding, and transparency.
One avenue to achieve this goal is through partners out in the field who report possible violations to CIFAC Regional Compliance Managers for investigation. However, sometimes a report can come from a community member. Such was the case recently when a concerned tax watchdog citizen contacted me regarding a Northern California City Council Agenda item to approve a contract award for a grind out and paving project. The contract was to be awarded based on a reduction in overall work and cost from the original lowest bid submitted. The citizen wanted to know if the City needed to readvertise the project considering the substantial changes requested.
I was able to locate and review documentation showing that the project was advertised correctly for the solicitation of competitive bids and that the lowest bid received was $609,000. A staff report included with the council meeting agenda indicated that due to the COVID-19 shelter-in-place and business closure restrictions mandated by local health authorities, there was a decrease in projected revenues received, specifically gas tax revenues. The report went on to state that the shortfall of revenue had a direct impact on the availability of funds for needed road projects.
As this situation was unforeseen at the time bids were solicited, staff recommendation was to approve the award of the contract to the lowest bidder and then have the City Engineer work with the contractor on a unit price adjustment to fit the scope of work to a lesser amount of funding available of $348,186.
With regard to the bidding process for public works projects, it is CIFAC's position that the legislative intent regarding Public Contract Code §1100 is clear when it states that one purpose of the code is to provide all qualified bidders with a fair opportunity to enter the bidding process, thereby stimulating competition in a manner conducive to sound fiscal practices. And while Public Contract Code 20103.8 does allow for additives and deductives to be contained within a contract, thereby allowing an agency some flexibility to respond to budgetary concerns, the contract included no such a provision.
I contacted the City's Special Projects Manager and shared CIFAC's concerns regarding the proposed changes to the contract. I explained our position that since the original Request For Proposal did not contain any provision for deductions based on funding availability, this would violate the Public Contract Code. Further, since the change is substantial in the scope of work, it does not allow for a fair opportunity for other contractors to reconsider their bids based on the new work that would be required. I, therefore, recommended that the project needed to be readvertised for competitive bidding. The Special Project Manager agreed with CIFAC's reasoning and decided to support the idea that the project be rebid with a reduced scope of work to match their decreased budget availability. After listening to our position during public comments, the City Council decided unanimously to reject all bids and readvertise the project.
I also received a call from a City staff employee who asked me, "Is CIFAC coming across this very much in other cities and counties where COVID-19 related revenue reductions are affecting public works projects and bidding process?" To find out if this was just an isolated incident, I contacted CIFAC Regional Compliance Managers from different areas of the state and received information that many localities were experiencing the same situation. A comment received from a Southern California Compliance Manager was, "Some of the effects of COVID-19 will be silent, meaning that some agencies will just be postponing putting out projects for bidding right now. The downward loss of City revenue from local taxes and gas tax for transportation projects will be affected. However, there is still some funding earmarked to spend, and that will happen for the balance on the 2020 year, some tied to grants, matching funds, federal funding, SB-1, etc. Those projects will be completed, but going forward, agencies will be revising their budgets for the 2021 year, so I don't believe that we will see the real effects of the COVID-19 until 2021!"
I am currently tracking projects in my area to determine how many public works projects are scaled back in scope or eliminated directly affected by COVID-19 related funding shortages. According to an April 20, 2020 article in the San Jose Mercury News, California lost 11,600 construction jobs due to COVID-19 state and county health compliance restrictions in March of 2020.
Even though this economic downturn will bounce throughout each community's economy, CIFAC's watchful eye will continue to hold agencies accountable, such as this one in Northern California, to provide fair and transparent bidding opportunities for our partners.
By Raquel White, Central Regional Compliance Manager. -
Emergencies are serious, unexpected, and often dangerous situations requiring immediate action. We never know when, how, or where that emergency will occur so we must take the necessary precautions to prepare ourselves.
In the case of an emergency, a public agency pursuant to a four-fifths vote of its governing body, may repair or replace a public facility, take any directly related and immediate action required by that emergency and procure the necessary equipment, services, and supplies for those purposes, without giving notice for bids to let contracts. A recent CIFAC investigation discovered unrelated repairs were added to an emergency declaration at the Capitola Wharf.
On February 13, 2020, the City Council declared an emergency as a result of broken pilings on the Capitola Wharf that occurred in January 2020. High surfs damaged two pilings located underneath the boat hoist which compromised the stability of the wharf. An assessment by the Public Works staff and Marine Engineers determined immediate action was necessary to prevent the hoist from falling into the bay. The council encouraged staff to include work from the larger wharf rehabilitation project scheduled next year. This gave me a reason for pause and prompted me to take a closer look at the emergency declaration details.
In addition to the two pilings that failed, the staff added a third piling to the emergency declaration. I notified the Public Works Director of my concerns surrounding the third piling and how in my opinion, it was unrelated to the emergency declaration. I also attended the City of Capitola Council meeting on March 12, 2020, and expressed CIFAC’s concerns about the third piling. The Public Works Director explained that the third piling located on the western side of the wharf broke several years ago, was not directly related to the emergency, and can be repaired in the wharf rehabilitation project scheduled next year. In response to CIFAC’s concerns, staff deleted the third piling from the emergency declaration scope of work. As a result of CIFAC’s involvement, the third piling will be competitively bid with the wharf rehabilitation project.
There is no denying that an emergency occurred that required immediate action. The City appropriately acted by declaring an emergency by a four-fifth votes and reviewing the action at subsequent regularly scheduled meetings to continue work under the emergency declaration pursuant to Public Contract Code section 22050.
Work intended for future projects unrelated to an emergency must be competitively bid, not added to an emergency declaration. Whether intentional or unintentional, agencies will try to add additional work that has nothing to do with an actual emergency to avoid competitively bidding the work. As Regional Compliance Managers we are actively working to increase job opportunities, maintain a level playing field, and ensure public works project are competitively bid.
By Anthony (Tony) Morelli, Southwestern Regional Compliance Manager. -
Piggyback contracting is a commonly used procurement method utilized by Public Agencies, Schools, and Community College Districts. The procurement process allows an agency to obtain equipment, materials, supplies and other personal property using a different agency’s prior contractual agreement.
The typical situation goes like this: Agency A issues a Request for Proposal/Bid and the contract is awarded to the chosen vendor. Agency B decides that they need the same or a similar item so rather than issuing their own Request for Proposal/Bid, they decide to forego the process and instead utilize the previously awarded one with the previously negotiated pricing. This contract may be located anywhere in California, does not need to be recently awarded, nor does it need to be issued by the same type of agency.
As the process evolved over the years, it was misinterpreted by some agencies who included components of construction projects using the piggyback contracting procurement process.
Recently, I investigated several school district projects that were not competitively bid. During these investigations, I found that these projects were procured through piggyback contracts from other agencies. The Public Contract Code section that pertains to school district piggyback contracting only allows it on equipment, materials, supplies and personal property.
California’s Public Contract Code (PCC) Section 20118 clearly defines its use as:
“The governing board of any school district, without advertising for bids, if the board has determined it to be in the best interests of the district, may authorize by contract, lease, requisition, or purchase order, any public corporation or agency, including any county, city, town, or district, to: Lease data-processing equipment, purchase materials, supplies, equipment, automotive vehicles, tractors, and other personal property for the district in the manner in which the public corporation or agency is authorized by law to make the leases or purchases from a vendor”
The PCC’s legal statue does not specifically address construction. Since it is silent concerning construction, many agencies just take the position that the procurement of construction-related materials and projects are allowed.
Well, the short answer is, it depends. If an agency is purchasing roofing material and supplies for a roofing project directly from a vendor via a piggyback contract and they intend to bid-out the installation portion, then that is allowed. However, if they attempt to award the entire roofing project including the materials and installation via the piggyback contracting process to the same contractor acquired through another agency’s contract, then technically no, CIFAC believes that an agency cannot legally use the piggyback process to award a contract directly to a specific contractor in this manner, based on the intended language of PCC Section 20118.
In the past, CIFAC has encountered school districts who were intending to award new or remodeled playground projects using piggyback contracting. Projects that included new playground equipment, site preparation; grading, concrete flatwork, installation of the playground equipment, and poured-in-place rubberized matting. These districts planned to use the very same contractor who previously performed the work for another agency, from whom they intended to piggyback on.
When CIFAC has challenged these districts, advising them that they cannot use the piggyback process in this manner, CIFAC has in many cases received push-back from the district’s legal counsel, citing that they are purchasing equipment, materials and supplies and that any work performed is considered incidental to the purchase of said equipment, materials, etc., per the piggyback procurement process.
In researching the legislative intent with the possibility of seeking to amend the language of PCC Section 20118 to specifically include the words; “excluding construction” CIFAC discovered a January 2006 legal opinion from California’s then Attorney General (AG), Bill Lockyer, who reviewed the legal position of a School District utilizing the piggyback contracting process to acquire a factory-built modular building and components for installation on a permanent foundation. [89 Ops. Cal. Atty. Gen 1 (2006)]
The AG’s opinion concluded: “A school district may not, without advertising for bids, contract with another public agency to acquire factory-built modular building components for the installation on a permanent foundation”
Recently CIFAC asked the Commissioner’s at the California Uniform Construction Cost Accounting Act (CUCCAA) for clarification concerning a school district’s use of piggyback contracting.
CIFAC Question #1: Concerning public works playground reconstruction projects; CIFAC specifically asked if school districts could utilized the piggyback contracting method to procure the product/material and contractor in this manner.
Answer: Choosing to concur with the 2006 State AG’s opinion, the CUCCAA Commissioners stated: “While school districts can piggyback their orders, as noted by the California Attorney General [89 Ops. Cal. Atty. Gen 1 (2006)], that authority is limited to contracts for personal, and not, real property”.
CIFAC Question #2: Regarding districts that are signatory to CUCCAA: Can a District separate all related costs (material, equipment and supplies) from the construction/installation process?
Answer: Agencies subject to the Act are required to follow the uniform construction cost accounting procedures as indicated in the CUCCAA manual, which indicates that all cost elements; personnel/labor, materials, supplies and subcontracts, equipment and overhead associated with the project must be reported at the project level. Agencies may procure these elements separately; however, the cost of each element would be combined to determine the total cost of a public project, and the appropriate contracting procedure to use as outlined in PCC Section 22032 of the Act.
Projects of this nature are considered “permanently” affixed to real property and do not fit into the “personal property” classification as outlined in PCC Section 20118.
Agencies can use the piggyback process to procure equipment, materials, and supplies and if they used agency employees/staff to install the equipment, they could do so only if the entire project cost which includes equipment, labor, materials, supplies and other miscellaneous expenses does not exceed the agency’s bidding threshold.
With that said, if the combined cost or estimated cost of the project exceeds their respective thresholds, then the installation/construction portion would have to be bid-out, and the agency could not self-perform any portion of the project with their own forces.
Additionally, for agencies signatory to CUCCAA, they cannot separate the components or segments of a project for the purpose of evading the legal thresholds. All costs and/or estimates for the entire project determine the CUCCAA dollar threshold that the project should be procured or bid-out at, in order to comply with PCC Section 22032.
Armed with these facts and determinations, CIFAC will be able to justify its position when challenging agencies in the future on the improper use of piggyback contracts.
By Patricia (Patti) Rascon, Southern Regional Compliance Manager. -
One of the most critical aspects of the role of a CIFAC Regional Compliance Manager (RCM) is often reading copious documents related to the scope of work for a project. While the task can be mind numbing at times, our attention to detail determines how the RCM will proceed with an investigation.
The story begins with a Riverside County City that is signatory to the California Uniform Construction Cost Accounting Act (CUCCAA). They were embarking on a half-million-dollar sports park restroom expansion and renovation project. The project scope included the demolition of the existing facility and its replacement with eight unisex single-stall restrooms, a large concession facility, and a dedicated storage area.
While perusing City Council meeting agendas, I came across this agenda item, which appeared to be routine. As a member of a National Purchasing Cooperative, the City intended to utilize that process to procure for the design, fabrication, and installation of a pre-fabricated building. As I dug deeper into the project documentation, I found a different picture. A picture that showed city crews using force account!
ATTENTION TO DETAIL: the scope of work referenced a list of components that the City was to perform with their own forces. Items included the demolition of the existing building, excavation of the utility trenches for placement of the pre-fabricated structure, underground piping for plumbing and electrical, connection of utility piping, flushing of water lines, and pulling wire and the tie off on the electrical panel.
While the benefits of CUCCAA are many, Public Contract Code section 22032 (c) requires public projects of more than two hundred thousand dollars to be let to contract by formal bidding procedure. Additionally, since the project's total cost exceeds CUCCAA's $60,000 threshold, the City cannot self-perform any portion of the project's scope of work.
Based on the information uncovered, CIFAC sought clarification by contacting city staff to express our concerns and object to any use of force account on this project. After educating them on the Public Contract Code requirements, the City assured us that all the components of the project would be bid!
WIN-WIN, CIFAC successfully influenced the agency and the project! Our attention to detail further solidifies our mission to ensure a level playing field and fair bidding opportunities for the construction industry.
By Justin Bochmann, Midstate Regional Compliance Manager. -
A recent CIFAC investigation and influence of the Tuolumne Utilities District (TUD) has led to a win for not only public works contractors, but the public agency as well.
As specialists in all areas of the California Public Contract Code (PCC), CIFAC Regional Compliance Manager's (RCM’s) look beyond violations of advertising requirements and force account usage. The PCC covers nearly every aspect of how a project is to be procured, awarded, and contracted.
In March 2020, TUD issued an Invitation for Bid (IFB) for the Phoenix Lake Restoration & Preservation project. Given its large size and associated price tag, this project drew in contractors from all over California. CIFAC was contacted because the IFB lacked many details in regard to how the lowest responsive bid would be determined. This was of much concern to contractors, as their bidding techniques may be adjusted to meet the additive item requirements. In the absence of a pre-determined base bid, the bid requirements can be open to interpretation, causing much confusion for contractors, and have the potential of subjective favoritism by the public agency.
Because of this, CIFAC began an investigation to determine if the project documents complied with PCC §20103.8, an area of the PCC which outlines how a project must be awarded when additive or deductive items are in play. After a thorough investigation, CIFAC was able to determine that language in the IFB did not specifically indicate which individual items were included as part of the base bid. This greatly increases the probability of bid protests and introduces exposure to potential litigation for the public agency.
After notifying the Board of Directors and management staff of the concerns and violations, TUD initially struggled to admit wrongdoing on their part. It was learned that their intention was to obtain as much work as possible within their budget. The problem, however, is that PCC §20103.8(c) requires a public agency to specifically identify items which will be included in the base contract and to publicly disclose the funding amount for which the contract will be awarded up to, if additive items will be considered. Funding for this project was another subject of confusion for contractors. The solicitation indicated an engineer’s estimate of nearly $8,000,000, which grossly exceeded the TUD’s unspecified budget of approximately $4,250,000.
Through CIFAC’s approach of educating the Board members and management staff, TUD ultimately decided it was in their best interest to clean up the IFB language and competitively re-bid this project. CIFAC offered their resources and expertise to ensure TUD did not violate PCC statutes and also provided recommendations of how to rectify the situation.
CIFAC’s mission of attaining a level playing field and fair bidding opportunities for public works contractors is of utmost importance. This case is an example of how we are able to go beyond traditional measures of preventing illegal force account usage and help promote better public agency practices in other areas of public contracting as well.