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HomeMy WebLinkAbout03.b. Review draft Position Paper to adopt the Uniform Public Construction Cost Accounting Act (UPCCAA) Page 1 of 28 Item 3.b. CENTRAL SAN BOARD OF DIRECTORS I _ POSITION PAPER DRAFT MEETING DATE: JANUARY30, 2018 SUBJECT: REVIEW DRAFT POSITION PAPER TO ADOPT RESOLUTION AND ORDINANCE FOR CENTRAL SAN TO ADOPT THE UNIFORM PUBLIC CONSTRUCTION COSTACCOUNTING ACT (UPCCAA), AND DELEGATE TO THE GENERAL MANAGER THE AUTHORITY TO AWARD CONTRACTS UP TO THE INFORMAL BID LIMIT SPECIFIED BYTHE UPCCAA SUBMITTED BY: INITIATING DEPARTMENT: PHILIP R. LEIBER, DIRECTOR OF FINANCE ADMINISTRATION-FINANCE AND ADMINISTRATION STEPHANI E KI NG, PURCHASI NG AND MATERIALS MANAGER REVIEWED BY: EDGAR LOPEZ, CAPITAL PROJECTS MANAGER JEAN-MARC PETIT, DIRECTOR OF ENGINEERING AND TECHNICAL SERVICES ANN SASAKI, DEPUTY GENERAL MANAGER ROGER S. BAILEY, GENERAL MANAGER ISSUE The Uniform Public Construction Cost Accounting Act (UPCCAA) is legislation enacted by the State in 1983 to help promote uniformity of the cost accounting standards, and bidding procedures on construction work performed or contracted by public entities in the state. It has been adopted by over 1,000 California local governmental agencies, including 300 special districts. BACKGROUND Sanitary districts are presently required to follow formal bidding procedures for"District Projects" with a value in excess of$15,000. The UPCCAA provides certain higher bid limits for entities that adopt it through a formal resolution of their governing body. The comparison of current Central San procedures to the UPCCAA for public project work, which includes labor, equipment and materials, is as follows: Current Central San Procedures UPCCAA No specific bidding Less than $3,500 $45,000 or less requirements January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 22 of 51 Page 2 of 28 Informal bidding $3,500 to $15,000 $45,001 to $175,000 Formal bidding More than $15,000 More than $175,000 Under the UPCCAA, no specific bidding requirements would apply for public projects $45,000 or less. These may be performed by Central San's force account, by negotiated contract, or by purchase order. Also, public projects in an amount of$175,000 or less could use the informal bidding procedures set forth in the UPCCAA. Adoption of the UPCCAA by Central San has the potential to significantly reduce the administrative costs of bidding by eliminating cumbersome paperwork relative to advertising and filing of reports, and allow for faster procurement, while still retaining a competitive process and containing project costs. Previous Assessments of UPCCAA at Central San Central San has previously made two preliminary assessments of whether adopting the UPCCAA would be of interest to the District. Based on the 2006 analysis, Central San opted not to participate in the program. Several factors were cited in this decision, with the overall conclusion that the benefits did not appear to outweigh the costs (including additional staff time on accounting procedures, bidding procedures and project management duties). Benefits were considered limited given the relatively few number of projects in the range of$15,000 to $175,000, and Central San's practice of grouping smaller projects together for bidding purposes. A"white paper" was prepared in 2014 comparing current policies and procedures to those under the UPCCAA, and recommended next steps if there was interest in further evaluation. As a result, Central San contracted with a consultant to more thoroughly explore the advantages and disadvantages of adopting the UPCCAA. The consultant has recommended that Central San adopt the UPCCAA on a pilot program basis for one year to assess if the benefits of the alternative bidding procedures make contracting for projects under$175,000 simpler and faster, with similar or lower contract costs than if the formal bidding procedures were used. A copy of the Consultant's Report is included as Attachment 3. Staff believes that adopting the UPCCAA will help streamline the bidding process to make it more efficient, especially since more work is expected with the capital improvement program that has been proposed, which has doubled the capital improvement budget in the next several years and into the foreseeable future. Potential Other Benefits There continue to be projects that staff believes require a high level of administrative work in bidding requirements that potentially could be avoided through the adoption of the UPCCAA. Two such situations when this arises are: 1. Operation departments' planned maintenance work, when in excess of$15,000, may actually be legally interpreted as repair work, which is a public works project as defined by statute. 2. Work or equipment that is incorporated in a prospective capital improvement budget project, and where a system or equipment may prematurely experience failure and/or where equipment requires pre-purchase by Central San, and so is unexpectedly segmented from the project by Capital Projects. Under these circumstances, Purchasing must direct questions to District Counsel on behalf of the departments so that counsel might determine: 1. if the work and/or purchases should be classified as a public works project, requiring Central San to follow the formal public contract code bidding process along with other related District procedures; January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 23 of 51 Page 3 of 28 or 2. If some other workaround to the prescribed formal bidding requirements is viable. It has not been possible for Purchasing to codify these exceptions to streamline this process. Operations departments appropriately seek to use expedited procedures to address their needs, yet the proposed procurement process may not meet District purchasing procedures or legal bidding requirements. This can create bottlenecks affecting the timeliness of needed work. With the size of the capital improvement budget projected to increase significantly in the years ahead, Central San is likely to face more of these bottlenecks. These delays could be overcoming through staff additions, or through process improvements. Adoption of the UPCCAA is viewed as a key process improvement that can help address these potential bottlenecks. Central San staff considered the net benefits of adopting the UPCCAA at this time through the following steps: 1. Reviewed past analysis performed by Central San during 2006 and 2014; 2. Retained a consultant to advise Central San on the program and issues regarding implementation. The consultant's report recommended adopting the UPCCAA on a pilot basis for a period of time to determine if the advantages outweighed the disadvantages. 3. Discussed the UPCCAA advantages and disadvantages with staff and District Counsel; Court Ruling - Ross Valley Sanitary District During the evaluation of the UPCCAA performed by the consultant, another factor arose that potentially mitigated the attractiveness of the UPCCAA for sanitary districts. A court ruling in 2016 involving the Ross Valley Sanitary District held that the statute requiring competitive bidding for sanitary district projects exceeding $15,000 does not apply when the district engages its own work force to perform the work. Adopting the UPCCAA would eliminate some of the benefits of this current favorable ruling to Sanitary Districts, restricting use of District forces for projects over$45,000. Advantages/Disadvantages of Adopting the UPCCAA Factors weighing for and against the program are summarized here: 1. Adopt the UPCCAA program: Advantages • Increase threshold for bidding public project work from $15,000 to $45,000 • Streamlined bidding process for public project work from $45,000 to $175,000 (both limits are periodically increased by statute)with award to lowest responsible bidder. Advantages of the streamlined bidding process cited by agencies who have adopted the UPCCAA include: • Expedited contracting for small projects. • Potentially, a faster award process. • Improved timeliness of project completion. • Simplified administration. • Elimination of considerable red tape and cumbersome paperwork relative to advertising and filing of reports. • With respect to the advertising/notification process for work subject to informal bidding, the UPCCAA allows agencies to (1) maintain a bidder's list by type of work; (2) notice particular construction trade journals; or(3) do both. January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 24 of 51 Page 4 of 28 Disadvantages • Lose the current ability(through Ross Valley decision)to perform work with in-house staff without regard to project size. 2. Do not adopt the UPCCAA program Advantages • Allows District staff to perform public project work without dollar limits, for as long as the court decision in the Ross Valley decision stands. Disadvantages • The Ross Valley decision benefits may in the future be limited through legislation. After significant internal discussion and consideration, staff presently believes that the benefits of adopting the UPCCAA may exceed the advantages of the status quo. Purchasing receives an estimated 20 to 40 high priority/rush requests per year related to repairs that exceed the current$15,000 threshold, but are below the $45,000 threshold available with adoption of the UPCCAA. Accordingly, this type of work could be completed quicker, and more cost effectively under the UPCCAA through avoided administrative staff time costs. Staff administrative time savings involve: • Staff (and District Counsel)would not have to determine if projects in the range of $15,000 to $45,000 are or are not a "District Project" requiring formal bidding. • Staff (and District Counsel)would not have to determine work-arounds for meeting the formal bid requirements for procurements in this range that are not typical construction projects performed by a general contractor(and administered by Capital Projects). With respect to the status quo benefit, Central San is not presently staffed to take advantage of the current ability(from the Ross Valley decision)to perform significant work through force-account resources. Consultant Recommendation to Adopt UPCCAA on Pilot Basis The consultant that advised Central San on the UPCCAA during 2016/2017 advised Central San to consider adopting the UPCCAA on a pilot basis for a one-year period in order to determine if the advantages exceed the benefits of the status quo allowances for unlimited force account work. This would be helpful in gaining a full understanding of the advantages of the "informal bidding process" for projects in the range of $45,000 to $175,000. Central San could proceed with testing the UPCCAA by adopting the attached proposed resolution and ordinance , which could subsequently be terminated by the Board if, after a suitable pilot phase (one to two years, commencing after staff has the internal procedures in place), the benefits of the UPCCAA do not appear worthwhile. As noted by the consultant: "Since adopting the UPCCAA is voluntary, it is not an irrevocable decision; if at the end of the pilot program the District has not experienced the potential benefits, it can discontinue the UPCCAA provisions and return to the current policies..." Staff would prepare an assessment after at least one year of operations with the UPCCAA to document the number of projects that benefited from the changed process, as well as any significant issues encountered in the administration of the program. If that assessment concluded that Central San has not benefitted from adoption of the UPCCAA, then it could be terminated (through Board action), and there January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 25 of 51 Page 5 of 28 would be a reversion back to existing practices. Attachment 4 sets forth the steps that would need to be taken to implement and/or rescind the UPCCAA. ALTERNATIVES/CONSIDERATIONS The primary consideration is whether or not to adopt the UPCCAA. Additional alternatives include: • Adopt a change to the General Manager's authority to align contract award authority with the $175,000 limit for informal bid awards. Presently, the General Manager can award contracts for public works/district projects below$100,000. To further streamline the contracting process, the Board could also delegate the authority to award public works/District Projects up to the informal bid limit in the UPCCAA (presently$175,000). If granted this authority, to ensure transparency, a quarterly report of such awards would be presented to the Board. FINANCIAL IMPACTS Once the program is in place and the procedures set forth, there could be a reduction in cost for processing small projects underthe UPCCAA. However, there will be some additional costs in setting up and getting the program to become operational. COMMITTEE RECOMMENDATION On January 30, 2018, the Administration Committee recommended Board adoption of the attached proposed resolution and ordinance to adopt Uniform Public Construction Cost Accounting Act, and delegate to the General Manager the authority to award contracts up to the informal bid limit specified by that Act. RECOMMENDED BOARD ACTION Adopt the proposed resolution and ordinance (Attachments 1 and 2, respectively)for Central San to adopt the Uniform Public Construction Cost Accounting Act, and delegate to the General Manager the authority to award contracts up to the informal bid limit specified by that Act. GOAL THREE:Be a Fiscally Sound and Effective Water Sector Utility Strategy 2- Manage Costs GOAL FIVE:Maintain a Reliable Infrastructure Strategy 2- Facilitate Long-term Capital Renewal and Replacement, Strategy 3- Protect District Personnel and Assets from Threats and Emergencies GOAL SIX: Embrace Technology, Innovation and Environmental Sustainability Strategy 2- Evaluate Business Processes and Optimize Business Operations ATTACHMENTS: 1. UPCCAA Proposed Resolution 2. UPCCAA Proposed Ordinance 3. UPCCAA Consultant Report 4. UPCCAA Implementation Steps January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 26 of 51 Page 6 of 28 January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 27 of 51 Page 7 of 28 PRELIMINARY DRAFT RESOLUTION NO. 2018-XXX A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT ELECTING TO BECOME SUBJECT TO ALTERNATIVE BIDDING AND UNIFORM PUBLIC CONSTRUCTION COST ACCOUNTING PROCEDURES WHEREAS, prior to the passage of Assembly Bill No. 1666, Chapter 1054, Statutes of 1983, which added Chapter 2, commencing with Section 22000, to Part 3 of Division 2 of the Public Contract Code, existing law did not provide a uniform cost accounting standard for construction work performed or contracted by local public agencies; and WHEREAS, Public Contract Code Section 22000 et seq., the Uniform Public Construction Cost Accounting Act (Act), establishes such a uniform cost accounting standard; and WHEREAS, the Commission established under the Act has developed uniform public construction cost accounting procedures for implementation by local public agencies in the performance of or in the contracting for construction of public projects; and WHEREAS, the Act provides for alternative bidding procedures for construction projects that have the potential to significantly reduce the administrative costs of bidding and allow for faster project completion, while still retaining a competitive process and containing project costs. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Central Contra Costa Sanitary District (Central San) as follows: THAT.... it hereby elects under Public Contract Code Section 22030 to become subject to the uniform public construction cost accounting procedures set forth in the Act and to the Commission's policies and procedures manual and cost accounting review procedures, as they may each from time to time be amended, and directs that the Secretary of the District notify the State Controller forthwith of this election. PASSED AND ADOPTED this (day) of (month) 2018, by the Board of Directors of Central San by the following vote: AYES: Members: NOES: Members: ABSENT: Members: James A. Nejedly President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 28 of 51 Page 8 of 28 PRELIMINARY DRAFT COUNTERSIGNED: Donna M. Anderson Provisional Secretary of the District Central Contra Costa Sanitary District County of Contra Costa, State of California Approved as to form: Kenton L. Alm, Esq. Counsel for the District January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 29 of 51 Page 9 of 28 PRELIMINARY DRAFT ORDINANCE NO. XX AN ORDINANCE OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT ESTABLISHING INFORMAL BIDDING PROCEDURES UNDER THE UNIFORM PUBLIC CONSTRUCTION COSTACCOUNTING ACT WHEREAS, the Uniform Public Construction Cost Accounting Act (Act) provides for informal bidding procedures for construction projects that have the potential to significantly reduce the administrative costs of bidding and allow for faster project completion, while still retaining a competitive process and containing project costs; and WHEREAS, the District has elected to become subject to the uniform public construction cost accounting procedures under the Act, thereby allowing it to adopt informal bidding procedures for construction projects. NOW, THEREFORE, the Board of Directors of the Central Contra Costa Sanitary District (Central San) does ordain as follows: 1. Informal Bid Procedures Construction projects ("Public Projects" as defined by the Act) and in accordance with the limits listed in Section 22032 of the Public Contract Code, may be let to contract by informal procedures as set forth in Section 22032, et seq., of the Public Contract Code. 2. Notice Inviting Informal Bids Where a construction project is to be performed, which is subject to the provisions of this Ordinance, a notice inviting informal bids shall be mailed, emailed or faxed to all construction trade journals as specified by the California Uniform Construction Cost Accounting Commission in accordance with Section 22036 of the Public Contract Code. However, if the product or service is proprietary in nature such that it can be obtained only from a certain contractor or contractors, the notice inviting informal bids may be sent exclusively to such contractor or contractors. 3. Award of Contracts The District General Manager, Deputy General Manager, Purchasing and Materials Manager, and Director of Engineering and Technical Services are each authorized to award informal construction contracts. 4. XXXXXXX This ordinance shall be a general regulation of the District and shall be published once in the Contra Costa Times and the San Ramon Valley Times, newspapers. of general January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 30 of 51 Page 10 of 28 Ordinance No. Page 2 of 2 Central Contra Costa Sanitary District circulation within the District, and shall be effective on the eighth calendar day following such publication. PASSED AND ADOPTED by the Board of Directors of Central San on the XVI day of 2018, by the following vote: AYES: Members: NOES: Members: ABSTAIN: Members: James A. Nejedly President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California Donna M. Anderson Provisional Secretary of the District Central Contra Costa Sanitary District County of Contra Costa, State of California Approved as to form: Kenton L. Alm, Esq. Counsel for the District January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 31 of 51 Page 11 of 28 Central Contra Costa Sanitary District Uniform Public Construction Cost Accounting Act Review March 2017 William C. Statler Fiscal Policy■Financial Planning■Analysis■Training■Organizational Review January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 32 of 51 Page 12 of 28 TABLE OF • REPORT PURPOSE 1 SUMMARY OF FINDINGS AND RECOMMENDATIONS 1 BACKGROUND 2 Previous District Analysis of the Uniform Public Construction Cost Accounting Act 2 Current State Law 3 Impact of Recent Appellate Court Descison 3 UPCCAA Adoption in 1983 4 FINDINGS AND RECOMMENDATIONS 5 Current Procedures Versus UPCCAA 5 Adoption by Other Agencies 5 Summary of Advantages and Disdvantages 6 Recommendations 7 IMPLEMENTATION 7 Formal Actions 7 New Procedures 7 Board Involvement in the Formal Bid Process 10 Assessing the Pilot Program 10 SUMMARY 11 APPENDIX A. Sample Resolution B. Sample Ordinance C. Trade Journals D. Sample Cost Accounting Worksheet January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 33 of 51 Page 13 of 28 124 Cerro Romauldo Avenue San Luis Obispo, CA 93405 • 805.544.5838 ■ Cell: 805.459.6326 bstatler@pacbell.net www.bstatier.com William C. Statler Fiscal Policy ■ Financial Planning ■ Analysis ■ Training ■ Organizational Review Central Contra Costa County Sanitary District Uniform Public Construction Cost Accounting Act Review REPORT PURPOSE The purpose of this report is to explore more deeply the advantages and disadvantages of adopting the Uniform Public Construction Cost Accounting Act(UPCCAA)policies and proceduresin: • Contracting for construction projects by using the alternative bidding procedures allowed under the UPCCAA. • Making greater use of in-house staff("force account") in performing construction work. SUMMARY OF FINDINGS AND RECOMMENDATIONS Findings • Use of Alternative Bidding Procedures for Simpler,Lower-Cost Projects. For construction contract work, the District currently must use formal bidding procedures for any construction contracts greater than $15,000. However,under the UPCCAA, the District can use informal bidding procedures for construction contracts of$45,001 to $175,000 (with no specific requirements for projects of$45,000 or less). For simpler, lower-cost projects, this has the potential to significantly reduce the administrative costs of bidding and allow for faster project completion,while still retaining a competitive process and containing project costs. In fact,because the process is simpler for contractors too, it has the potential to reduce construction costs as well. As discussed below, while the UPCCAA also provides greater flexibility in performing work with in-house staff, most agencies that have adopted the UPCCAA did so for the greater flexibility in contacting for lower-cost, simpler projects—not greater use of in- house staff for construction work. • Use of In-House Staff in Performing Even Smaller Projects. For most local government agencies in California, the use of"force account" (completing projects using in-house January 30, 2018 Regular ADMIN Committee Meeting Agen& Packet- Page 34 of 51 Page 14 of 28 Uniform Public Construction Cost Accounting Act Review staff, materials and equipment) is limited to $5,000 to $15,000 (depending on the agency type and applicable Public Contract Code provisions). The District's current policy limits the use of force account to construction work of$15,000 or less. For most agencies, the UPCCAA typically provides greater flexibility in using in-house staff as the use of force account is allowed up to $45,000. However,based on the circumstances unique to sanitary districts and a recent, unexpected State appeal court ruling, the District is currently allowed to do an unlimited amount of construction work with in-house staff. Accordingly, if the District decides to adopt procedures under the UPCCAA, it will be limited to in-house work of$45,000. (This includes staffing costs, materials, equipment use and indirect costs.) In short, the District will benefit under the alternative bidding procedures from simpler contracting but due to unique circumstances for sanitary districts, it will have more restrictions on the use of in-house forces ($45,000 versus unlimited). However, keep in mind that until the recent appeal court decision—which was a surprise— the conventional wisdom was that the District was limited to $15,000 for in-house work. As such, rather than being a limitation, the $45,000 limit is an easing of constraints compared with current policies. Recommendation I recommend that the District adopt the UPCCAA on a pilot program basis for one year to assess if the alternative bidding procedures make contracting for projects of$175,000 or less, simpler and faster, with similar or lower contract costs, than if formal bidding procedures were used; and if the $45,000 force account limit poses undue administrative burdens in complying with the Act's cost accounting requirements. Adopting the UPCCAA is not an irrevocable decision: if at the end of the pilot program the District has not experienced the potential benefits, it can discontinue using the UPCCAA provisions and return to its current policies (with the potential of amending current policies and allowing unlimited use of force account in performing projects). BACKGROUND Previous District Analysis of the UPCCAA The District has previously made two preliminary assessments of whether adopting construction project contracting policies under the UPCCAA makes sense: • Analysis prepared in December 2006, which recommended against adopting the policies and procedures set forth in the UPCCAA. • "White Paper"prepared in May 2014 that again reviewed the District's current policies and procedures; those under the UPCCAA; preliminary assessment of January 30, 2018 Regular ADMIN Committee Meeting Agen�a Packet- Page 35 of 51 Page 15 of 28 Uniform Public Construction Cost Accounting Act Review advantages and disadvantages; and recommended"next steps" if there was interest in further evaluating this issue. As a result of the May 2014 review, the District contracted with William C. Statler to further explore the advantages and disadvantages of adopting the UPCCAA in more efficiently and effectively completing construction projects. The workscope included reviewing current District policies, analyzing UPCCAA requirements and interviewing key staff. Current State Law Public Contract Code (PCC) 20800 sets forth the contracting requirements for construction projects for sanitary districts. It defines as "District Projects:" "any construction, reconstruction, alteration, enlargement, renewal, or replacement of sewer facilities which the district is authorized to do, including, but not limited to, the furnishing of supplies or materials for any such work. " Under these provisions, formal bidding is required for all projects of$15,000 or more (with some exceptions, such as emergency work.) For many local agencies, the restriction on formal bidding is even greater: for example, for cities, the limit is $5,000 (an amount that has not changed in over 80 years). And until recently, it was the conventional wisdom that this section also limited the use of "force account" (in-house staff)to projects of$15,000 or less (which is the District's current policy). However, as discussed below, this is no longer the case based on a recent appellate court decision (which has gone uncontested): the District may now perform an unlimited amount of construction work with in-house staff. Impact of Recent Appellate Court Decision There are over 70 Articles in Section 21000 of the Public Contract Code setting forth construction project bidding and force account procedures depending on the type of agency (counties, cities, schools and a wide range of special districts). While the language is the same or similar for most local agencies in the various Articles, there are subtle differences in some cases. Until an appellate ruling in January 2016 (and passage of time since then for any contesting appeals), the conventional wisdom was that use of in-house resources to complete construction work was limited to $15,000 (except in limited circumstances, such as emergencies). However, in the appellate court ruling in Construction Industry Force Account Council, Inc. v. Ross Valley Sanitary District(http://www.courts.ca.gov/o/opinions/archive/A139069.PDF), the court found that sanitary districts, based on the language in PCC 20800, are not limited in the amount of construction work that can be performed in-house. Again, this ruling was unexpected, and is based on language that appears to be applicable only to sanitary districts. For virtually all other types of local government agencies in California, the conventional wisdom regarding limits on the use of in-house staff remains in place. January 30, 2018 Regular ADMIN Committee Meeting Agen& Packet- Page 36 of 51 Page 16 of 28 Uniform Public Construction Cost Accounting Act Review UPCCAA Adoption in 1983 The UPCCAA (PCC 22000)was adopted in 1983 in order to provide local government agencies greater flexibility in using in-house use staff in completing construction projects and in using"alternative bidding procedures" for less complex, lower cost projects, summarized as follows: • Alternative Billing Procedures. There are no specific bidding procedures for construction projects of$45,000 or less (they can be let by negotiated contract or purchase order); and informal bidding procedures may be use for projects of$175,000 or less. (Projects greater than $175,000 require formal bidding procedures.) • Use of In-House Staff. If the agency adopts the UPCCAA cost accounting provisions, it may use in-house staff for projects of$45,000 or less. Administration. The UPCCAA creates the California Uniform Construction Cost Accounting Commission,which is responsible for administering the Act and preparing an implementation procedures manual. The 14-member Commission includes thirteen members appointed by the State Controller(seven members representing the public sector such as counties, cities, school districts and special districts; and six members representing the private sector, such as contractors and unions), with one designated member from the Contractors' State License Board. Every five years, the Commission is responsible for considering whether there have been material changes in public construction costs and making recommendations to the State Controller regarding adjustments to the bidding procedure monetary limits. Several increases have been made to the monetary limits since its adoption. For example, the threshold in 1983 when the UPCCAA was adopted was $25,000 for informal bidding procedures and $100,000 for formal bids. Definition of Construction Projects. The UPCCAA defines construction projects ("Public Projects") slightly differently than the PCC 20800, which the District currently operates under: "Public project"means any of the following: (1) Construction, reconstruction, erection, alteration, renovation, improvement, demolition, and repair work involving any publicly owned, leased, or operated facility. (2)Painting or repainting of any publicly owned, leased, or operated facility. (3)In the case of a publicly owned utility system, 'public project"shall include only the construction, erection, improvement, or repair of dams, reservoirs,powerplants, and electrical transmission lines of 230,000 volts and higher. The UPCCAA also defines maintenance work, which is not subject to UPCCAA bidding and use of in-house staff accounting procedures: January 30, 2018 Regular ADMIN Committee Meeting Agen& Packet- Page 37 of 51 Page 17 of 28 Uniform Public Construction Cost Accounting Act Review "Public project"does not include maintenance work. For purposes of this section, "maintenance work"includes all of the following: (1)Routine, recurring, and usual work for the preservation or protection of any publicly owned or publicly operated facility for its intended purposes. (2)Minor repainting. (3)Resurfacing of streets and highways at less than one inch. (4)Landscape maintenance, including mowing, watering, trimming,pruning,planting, replacement of plants, and servicing of irrigation and sprinkler systems. (5) Work performed to keep, operate, and maintain publicly owned water,power, or waste disposal systems, including, but not limited to, dams, reservoirs,powerplants, and electrical transmission lines of 230,000 volts and higher. FINDINGS AND RECOMMENDATIONS Current Procedures Versus UPCCAA The following compares key provisions of the UPCCAA with current District policy(which is based on PCC 20800) in contracting for construction work: Current District Procedures No specific bidding requirements No specific bidding requirements • Less than $3,500 • $45,000 or less Informal bidding Informal bidding • $3,500 to $15,000 • $45,001 to $175,000 Formal bidding Formal bidding • More than $15,000 • More than $175,000 Adoption by Other Agencies Over 1,000 local government agencies have adopted the provisions of the UPCCAA as of March 2017: • Counties 40 • Cities 221 • Schools 432 • Community Colleges 46 • Special Districts 301 For most of these agencies, the purpose of adopting UPCCAA provisions was for greater contracting flexibility, not greater use of in-house staff. Like the District, as a practical January 30, 2018 Regular ADMIN Committee Meeting Agen& Packet- Page 38 of 51 Page 18 of 28 Uniform Public Construction Cost Accounting Act Review I matter, most of these agencies have limited ability to do expanded construction work with in- house staff: their staffing is dedicated to day-to-day operations and maintenance. However, they adopted the UPCCAA procedures for the benefits of simpler procedures in contracting for less complex, lower cost projects Summary of Advantages and Disadvantages The following summarizes advantages and disadvantages of adopting the UPCCAA: DisadvantagesAdvantages Alternative Biddin Procedures Participating agencies report that informal • Implementing new informal bidding bidding procedures result in: procedures may not be worth the effort. • Expedited contracting for small projects. • Minor extension of formal bid notice • Faster award process. from ten days to 14 days. • Improved timeliness of project completion. • Elimination of considerable red tape and cumbersome paperwork relative to advertising and filing of reports. • Simplified administration. With simpler informal bid procedures for contractors: potential for lower construction costs. Use of In-House Staff • Greater flexibility for use compared • With the appellate court ruling, with existing policy($45,000 vs unlimited use of in-house staff is $15,000). possible. However, making use of this added flexibility would require Board approval of revised procedures. • Implementing cost accounting requirements may pose undue administrative burdens. Work Load Assessment. A "high level"workload assessment by staff indicates that if the District elects to become subject to the UPCCAA, there would be about 30 formal construction bids and 20 to 40 informal bids for construction work. Based on my experience with other organizations and discussions with District staff, very few projects are likely to trigger the cost accounting requirements for the use of in-house staff. January 30, 2018 Regular ADMIN Committee Meeting AgAa Packet- Page 39 of 51 Page 19 of 28 Uniform Public Construction Cost Accounting Act Review Recommendations As reflected above, while there are a number of likely advantages in becoming subject to the UPCCAA, there are also possible downsides. Neither of these can be fully assessed based on the District's circumstances without experience. Accordingly, I recommend that the District adopt the UPCCAA on a pilot program basis for one year to assess if the alternative bidding procedures make contracting for projects of$175,000 or less, simpler and faster, with similar or lower contract costs, than if formal bidding procedures were used; and if the $45,000 force account limit poses undue administrative burdens in complying with the Act's cost accounting requirements. Since adopting the UPCCAA is voluntary, it is not an irrevocable decision: if at the end of the pilot program the District has not experienced the potential benefits, it can discontinue using the UPCCAA provisions and return to its current policies (with the potential of amending current policies and allowing unlimited use of in-house resources in performing projects). IMPLEMENTATION Formal Actions There are two relatively simple Board actions required for implementation: • Resolution electing to become subject to the UPCCAA. • Ordinance adopting informal bidding procedures. A sample resolution and ordinance are provided in Appendix A and B. After adoption. the resolution will need to be forwarded to the State Controller's Office at: Office of the State Controller Division of Accounting and Reporting Local Government Policy Section P.O. Box 942850 Sacramento CA 94250 As recommended by the Commission, the amounts subject to the procedures in Appendix B reference the UPCCAA, rather than specific amounts. In this way, the dollar limits will keep pace with construction cost increases over time. New Procedures New procedures will be required in implementing the bidding procedures and in-house staff cost accounting procedures. The Commission has prepared a comprehensive manual for implementing and managing the UPCCAA's procedural requirements. This manual, last updated in June 2015, is available on the State Controller's web site at: hLtp://www.sco.ca.gov/Files-ARD-Local/CUCCAC%20Manual.pd January 30, 2018 Regular ADMIN Committee Meeting AgenL Packet- Page 40 of 51 Page 20 of 28 Uniform Public Construction Cost Accounting Act Review Given the availability of this well-written and documented manual combined with the recommendation for a pilot program, I recommend taking a"lean" approach to revising procedures: rather than revising the District's extensive, formal policies at this time, develop interim guidelines as needed. If the decision at the end of the one-year pilot program is to discontinue using the UPCCAA procedures, then no unnecessary added work will be incurred. On the other hand, if the decision is to continue using the UPCCAA, then formal revisions can be made that will benefit from the District's pilot program experience. The following is a summary of key provisions that the District will want to cover in its interim guidelines: Formal Bid Procedures. While it is likely that the District already provides bid notice far longer than this for projects that exceed$175,000, the minimum period for notice under the UPCCAA is four days longer: 14 days compared with the current policy of ten days. Additionally, the District will be required to provide notice to construction trade journals via mail, email or fax as specified by the Commission. For the District, this will mean sending notices to two statewide organizations (Construction Bidboard and McGraw-Hill Construction Dodge) and at least two of six regional trade journals. These are provided in Appendix C. Informal Bidding Procedures. The District will have far greater flexibility in the level of detail for plans and specifications, depending on the complexity of the project, as well as bid terms and conditions. For example,under current policy, a bidder's security of 10% of the bid amount is required for all projects greater than $15,000. While the District retains this the discretion under the UPCCAA for larger projects even if they are under $175,000, it is no longer required to do so. And again, depending on the complexity of the project,bid award evaluation and award can also be much faster. In short, the complexity of the process can be determined on a case-by-case basis, depending on the nature of the work and what makes sense under the circumstances. Moreover, where the District makes the bid process simpler for itself, it also makes the process simpler for contractors. As such, there is the potential for lower construction costs. Along with greater discretion in preparing specifications and bid terms, the only other significant change is notification. The UPCCAA provides three options: • Maintain a bidders list by type of work. • Notice to the construction trade journals via mail, email or fax provided in Appendix C. • Do both. There are very detailed procedures for developing and maintaining the bidders list, which may be more work than justified. Accordingly, at least for the pilot program, I recommend that the District use the simpler"notice to trade journals" approach. (The sample ordinance in Appendix B reflects this approach.) January 30, 2018 Regular ADMIN Committee Meeting Agen6a Packet- Page 41 of 51 Page 21 of 28 Uniform Public Construction Cost Accounting Act Review In-House Staff Cost Accounting. The purpose behind the cost accounting procedures set forth under the UPCCAA is to ensure that agencies do not exceed the $45,000 limit when informal bidding is required. The standards ensure that all costs are fully accounted for(as a contractor would), including labor(salary and benefits), materials, subcontracts, equipment use and overhead. Given that the goal of cost accounting procedures is to ensure that the use of in-house resources does not exceed $45,000, it doesn't make sense to formally use these procedures for minor work. (Conceptually, $2,000 of work might be considered construction under the UPCCAA; but this so far removed from the $45,000 threshold, it wouldn't make sense to use detailed accounting procedures for this.) For this reason, many of the agencies that have adopted UPCCAA procedures only use detailed cost accounting when it is clear that the work is "construction"versus maintenance; and if"construction,"that it is likely to approach the $45,000 threshold. While this will require staff judgment, it is the approach that makes the most sense for the District given that: • It is not staffed to take on significant "construction"work subject to the UPCCAA. • And such, its main goal (like most of the other 1,040 agencies that have adopted the UPCCAA) is the use of the alternative bidding procedures—not to expand its use of in- house resources. Accordingly, it is expected that very few projects —perhaps just one or two per year—will require detailed cost accounting. Two steps are recommended in accounting for in-house resources during the pilot program: • Preparation of a project cost estimate when it appears likely that cost accounting might be required(a worksheet for this is provided in Appendix D). • Where the estimate shows a likelihood of approaching the $45,000 threshold, account for costs using the same format as the estimate in Appendix D. A suggested"rule of thumb:" if the estimate shows possible costs that are within 60% of the $45,000 threshold(about $27,000), detailed cost accounting should be used. Given the few uses expected, the worksheet in Appendix D is recommended over trying to integrate this into the District's general ledger and project cost accounting system. One of the purposes of the pilot program is to assess how often and how complex cost accounting will be. For this reason, the District should begin with a simple, "exception-based" approach. There are two conceptual issues in accounting for in-house costs: • Indirect(overhead) costs. The Manual provides two options for the District. It can use its own indirect cost rate (225% for 2017-18), which is composed of benefits and non- work hours (120%) and administrative overhead (105%). The Manual also allows the use of 30% for administrative overhead. It is the District's option as to which approach to use January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 42 of 51 Page 22 of 28 Uniform Public Construction Cost Accounting Act Review (keeping in mind that the District would still need to use the 120%rate for staffing costs). There is a slight fiscal advantage in using the 30%rate, as conceptually, more work could be accomplished within the $45,000 threshold. However, in the interest of simplicity, at least during the pilot program, I recommend that the District use its adopted overhead rate. • Equipment use rates. The Manual sets forth extensive procedures for developing agency-specific equipment use rates. However, it also allows using established third- party sources for this and offers several options, including equipment use rates set by Caltrans. I recommend this as the simplest approach. The Caltrans equipment use rate manual is on its web site at: hllp://www.dot.ca.gov/hq/construe/eqrr/Book 2017.pdf Board Involvement in the Formal Bid Process Like many local government agencies, the Board is currently involved in the formal bid process at the "contract award" stage. There are two drawbacks with this late involvement: • Detailed bid packages defining the project and bid process have already been prepared, limiting the Board's input and making any changes awkward at best (and most likely requiring the issuance of new invitations for bids). This requires added staff work— which was likely very extensive to begin with—and delays the construction project. • When the Board is involved, it is often for the relatively simple ministerial task of determining who submitted the lowest bid. It makes more sense to move the Board's involvement to an earlier stage, where it can better exercise policy discretion: approval of the bid package and authorization to invite bids. This provides the Board with meaningful discretion on whether to move forward with the project at all and at what cost; and to define the project work scope and any key terms and conditions. However, once these parameters are in place, the recommended approach delegates to staff the ministerial action of determining who submitted the lowest bid and awarding the contract. In those few cases where bids come in above budget or there are other unexpected issues, bid award would return to the Board. This revision will make contracting for construction projects more efficient while retaining appropriate internal controls and more meaningfully involving the Board in the formal bid process. Assessing the Pilot Program At the end of the pilot program, the staff should report back to the Board with its assessment of the results. The report should: • Identify the number of formal and informal bids awarded; and number of in-house projects completed that required the use of detailed cost accounting procedures. January 30, 2018 Regular ADMIN Committee Meeting Aged&Packet- Page 43 of 51 Page 23 of 28 Uniform Public Construction Cost Accounting Act Review • Discuss advantages and disadvantages encountered in using alternate bidding procedures; and any undue administrative hardships in accounting for the use of in-house resources. • Based on this assessment, recommend whether the District should continue using the UPCCAA procedures; and if so, any policy and procedure changes that should be made based on the pilot program experience. SUMMARY This report outlines the provisions of the UPCCAA and compares them with the District's current policies for construction projects (which in turn are based applicable State public contract code requirements). After considering advantages and disadvantages, it recommends going forward with adopting the UPCCAA on a pilot program basis for one year to assess if the alternative bidding procedures make contracting for projects of$175,000 or less, simpler and faster, with similar or lower contract costs, than if formal bidding procedures were used; and if the $45,000 force account limit poses undue administrative burdens in complying with the Act's cost accounting requirements. If at the end of the pilot program the District has not experienced the potential benefits, it can discontinue using the UPCCAA provisions and return to its current policies. The report also addresses implementation issues, including recommending that the District consider engaging the Board earlier in the formal bid process; and assessment factors that should be considered at the end of the pilot program. I appreciate the opportunity to serve the District in preparing this assessment and I am available to answer any questions concerning its findings and recommendations. APPENDIX A. Sample Resolution B. Sample Ordinance C. Trade Journals D. Sample Cost Accounting Worksheet . - - - - - - - - - - - - - - - - January 30, 2018 Regular ADMIN Committee Meeting Agedd4 Packet- Page 44 of 51 Page 24 of 28 Appendix A Sample Resolution RESOLUTION No. 2017- A RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT ELECTING TO BECOME SUBJECT TO ALTERNATIVE BIDDING AND UNIFORM PUBLIC CONSTRUCTION COST ACCOUNTING PROCEDURES WHEREAS, prior to the passage of Assembly Bill No. 1666, Chapter 1054, Statutes of 1983, which added Chapter 2, commencing with Section 22000, to Part 3 of Division 2 of the Public Contract Code, existing law did not provide a uniform cost accounting standard for construction work performed or contracted by local public agencies; and WHEREAS, Public Contract Code Section 22000 et seq., the Uniform Public Construction Cost Accounting Act, establishes such a uniform cost accounting standard; and WHEREAS, the Commission established under the Act has developed uniform public construction cost accounting procedures for implementation by local public agencies in the performance of or in the contracting for construction of public projects; and WHEREAS, the Act provides for alternative bidding procedures for construction projects that have the potential to significantly reduce the administrative costs of bidding and allow for faster project completion, while still retaining a competitive process and containing project costs. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of Central Contra Costa Sanitary District that it hereby elects under Public Contract Code Section 22030 to become subject to the uniform public construction cost accounting procedures set forth in the Act and to the Commission's policies and procedures manual and cost accounting review procedures, as they may each from time to time be amended, and directs that the City Clerk notify the State Controller forthwith of this election. PASSED AND ADOPTED this day of 2017, by the Board of Directors of the Central Contra Costa Sanitary District by the following vote: AYES: Members: NOES: Members: ABSENT: Members: President of the Board of Directors COUNTERSIGNED: Secretary of the District Approved as to Form: Counsel for the District January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 45 of 51 Page 25 of 28 Appendix B Sample Ordinance ORDINANCE NO. AN ORDINANCE OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT ESTABLISHING INFORMAL BIDDING PROCEDURES UNDER THE UNIFORM PUBLIC CONSTRUCTION COST ACCOUNTING ACT WHEREAS, the Uniform Public Construction Cost Accounting Act (Act) provides for informal bidding procedures for construction projects that have the potential to significantly reduce the administrative costs of bidding and allow for faster project completion, while still retaining a competitive process and containing project costs; and WHEREAS, the District has elected to become subject to the uniform public construction cost accounting procedures under the Act, thereby allowing it to adopt informal bidding procedures for construction projects. NOW, THEREFORE, the Board of Directors of Central Contra Costa Sanitary District does ordain as follows: Section 1. Informal Bid Procedures. Construction projects ("Public Projects" as defined by the Act) and in accordance with the limits listed in Section 22032 of the Public Contract Code, may be let to contract by informal procedures as set forth in Section 22032, et seq., of the Public Contract Code. Section 2. Notice Inviting Informal Bids. Where a construction project is to be performed, which is subject to the provisions of this Ordinance, a notice inviting informal bids shall be mailed, emailed or faxed to all construction trade journals as specified by the California Uniform Construction Cost Accounting Commission in accordance with Section 22036 of the Public Contract Code. However, if the product or service is proprietary in nature such that it can be obtained only from a certain contractor or contractors, the notice inviting informal bids may be sent exclusively to such contractor or contractors. Section 3. Award of Contracts. The District General Manager, Deputy General Manager, Purchasing and Materials Manager, and Director of Engineering and Technical Services are each authorized to award informal construction contracts. Section 4. This ordinance shall be a general regulation of the District and shall be published once in the Contra Costa Times and the San Ramon Valley Times, newspapers of general circulation within the District, and shall be effective on the eighth calendar day following such publication. PASSED AND ADOPTED this day of , 2017, by the Board of Directors of the Central Contra Costa Sanitary District by the following vote: AYES: Members: NOES: Members: ABSENT: Members: President of the Board of Directors COUNTERSIGNED: Secretary of the District Approved as to Form: Counsel for the District January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 46 of 51 Page 26 of 28 Appendix C Trade Journal Notices Notice to both of the following Statewide journals: Construction Bidboard(eBidboard) Attn: James Moriarty-CEO 11622 El Camino Real San Diego, CA 92130 Phone: 800-479-5314 Fax: 619-688-0585 e-mail: planroomgebidboard.com McGraw-Hill Construction Dodge 148 Princeton Hightstown Rd,N-1 Hightstown,NJ 08520 Phone: 609-426-7403 Fax: 888-359-5520 Jason.szafranskigmhfi.com www.construction.com Notice to two of the following six regional trade journals: Marin Builders Association Bay Area Builders Exchange 660 Las Gallinas Avenue 2440 Stanwell Drive, Suite B San Rafael, CA 94903 Concord, CA 94520-4801 Phone: 415-462-1220 Phone: 925-685-8630 Fax: 415-462-1225 Fax: 925-685-3424 e-mail: mba@marinba.org e-mail: infogbayareabx.com www.marinba.org www.bUareabx.com Placer County Contractors Association, Inc. Peninsula Builders Exchange 10656 Industrial Avenue, Suite 160 735 Industrial Road Roseville, CA 95678 San Carlos, CA 94070 Phone: 916-771-7229 Phone: 650-591-4486 Fax: 916-771-0556 Fax: 650-591-8108 e-mail: planroomgplacerbx.com e-mail: tomkconstructionplans.org www.pccamembers.com www.constructiopplans.org Bay Area Builders' Exchange Builders' Exchange of Stockton 3055 Alvarado Street 7500 West Lane San Leandro, CA 94577 Stockton, CA 95210 Phone: 510-483-8880 Phone: 209-478-1000 Fax: 510-352-1509 Fax: 209-478-2132 e-mail: spleary@beac.com e-mail:jluna(cr�,besonline.com www.beac.com www.besonline.com January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 47 of 51 Page 27 of 28 Appendix D Sample Cost Accounting Worksheet Labor Hours Hourly Rate Total Position - Position - Position - Position - Total Labor - Materials and . . Total - Sales Tax Delivery Other Costs Total Supplies and Equipment Costs - Contract Services Total Contract Services - Equipment Use Hours Hourly Rate Total Total Equipment Use - Other Costs Total Other Costs - TOTAL - January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 48 of 51 Page 28 of 28 CENTRAL CONTRA COSTA SANITARY DISTRICT INSTRUCTIONS FOR ADOPTION AND IMPLEMENTATION OF THE UNIFORM PUBLIC CONSTRUCTION COST ACCOUNTING ACT (ACT) BY LOCAL AGENCIES 1) The Governing Board must elect by resolution to become subject to the uniform construction cost accounting procedures promulgated by the State Controller pursuant to the Public Contract Code, Section 22019. The resolution shall specify that the local agency will meet the requirements prescribed in the California Uniform Construction Cost Accounting Commission's Cost Accounting Policies and Procedures Manual and state the effective date the agency will implement the accounting and bidding procedures. 2) The local agency must notify the State Controller in writing of the election to become subject to the uniform construction cost accounting procedures along with a copy of the resolution mailed to the following address: Office of the State Controller Local Government Programs and Services Division Local Government Policy Section P.O. Box 942850 Sacramento, CA 94250 3) When a local agency elects to become subject to the uniform construction cost accounting procedures, the entire entity is considered subject to the Act and no departments will be exempt. However, Special Districts which are governed by a board of supervisors or city council are subject only if a separate election is made. 4) An informal bidding ordinance, or a board adopted policy equivalent to such as required by the participating agency, shall be enacted pursuant to Public Contract Code, Section 22034. 5) Once opting into the Act, participating agencies must always adhere to the terms of the Act until such time the agency formally opts out by resolution of its governing board. Having opted in, selective adherence to the terms of the Act is a violation. 6) The governing board may discontinue the agency's participation under the uniform public construction cost accounting procedures by adopting a resolution stating this fact. A copy of the resolution shall be filed with the State Controller. 7) The State Controller shall notify the California Uniform Construction Cost Accounting Commission (Commission) of all local agencies electing to become subject to the uniform public construction cost accounting procedures. In addition, the Commission shall also be notified of local agencies electing to discontinue participation under these procedures. January 30, 2018 Regular ADMIN Committee Meeting Agenda Packet- Page 49 of 51