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.