Construction Industry Force Account Council

Promoting Transparency Through Public Agency Compliance

Lease Leaseback: This Foe May Be A New Friend

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By Michelle Pickens, Executive Director

A new law brings fairness to “lease leaseback” contracting. For many compliance agents and contractors in California, the mere mention of a “lease leaseback” school construction project spurred verbal groans and eyeball rolls. The negative perception surrounding this contracting method was in large part due to school districts abusing its use to circumvent the Public Contract Code competitive bidding statutes via a California Education Code exemption.

For more than sixty years, districts were allowed to lease school property to a developer for a dollar annually and allow the developer to construct and modernize facilities, which the school would regain ownership upon completion. This may not sound like a bad deal initially, until you find out that there was no advertising of the project, no transparency, no price competition, no subcontractor protections………. Need I go on? For the few contractors getting these jobs, that may not be a problem. But in the big picture it means most contractors were left in the dark about the upcoming projects. Not to mention the fact that our economy is based on free enterprise and competition. The whole basis of the Public Contract Code is to ensure a level playing field for contractors, stimulate price competition through bidding, require transparency that prevents favoritism, fraud or corruption in the awarding of contracts and as a protection to the public against misuse of public funds.

Let’s fast forward to Jan. 1, 2017. CIFAC partners carried assembly bill 2316, with collaboration from Michelle Tucker, CIFAC’s Central Regional Compliance Manager, which amended the Education Code to now require a competitive solicitation process should a district choose to use this contracting method. This process now includes the adoption and publishing of required procedures and guidelines by the school district, the advertisement of a Request for Proposal, prequalification of contractors, proposals to be submitted in a sealed envelope, with each proposal scored based on a best value system, and finally, subcontractor protections must be built into the contract.

This is a true win-win situation for the Industry and the public. This legislation created an improved method of procurement that is both fair and impartial. CIFAC and partners are committed to holding agencies accountable for their actions and working to increase job opportunities for the Industry.

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