Buy American
Earlier this month was a deadline for the 2016 Legislative Session, the deadline for all fiscal bills to be voted out of the Appropriations Committees. In order to be considered, all remaining bills must now be on the floors of their respective house of introduction or they are dead. Many of the bills we are tracking for NCAT, including legislation carried over from last year, where held on the Appropriations Committees’ “Suspense File” due to the fact that they contained large costs to the State’s General Fund.
One example is a bill we supported, AB 2181 by Assemblymember Cheryl Brown (D – San Bernardino). This bill would have been the first step in a multi-year process to encourage state agencies to incorporate “buy American” and “buy California” provisions into their procurement processes. As California continues the push to be a leader in the implementation of comprehensive targets for the reduction of greenhouse gas (GHG) emissions, many businesses in California who manufacture “energy-intensive” materials, used in the construction of large infrastructure projects, are being put at a competitive disadvantage to businesses located in other states or countries that have lower environmental standards. Energy-intensive products include:
– Flat glass manufacturing
– Cement manufacturing
– Rolled shape manufacturing
– Iron and steel manufacturing
The bill attempted to correct this problem by making sure those companies in our state, that provide building materials produced and shipped in California, are not overlooked for infrastructure projects that will help the state achieve its clean air and climate energy goals. In addition, under this bill state agencies would have been required to consider the total emissions in their bid processes, taking into account the GHG emissions that are produced when the energy-intensive products are manufactured or produced and the GHG emissions associated with the transportation of the energy-intensive product from the site of its manufacture to the project site.
This bill had already successfully passed through two key policy committees, the Assembly Committee on Natural Resources on a 6-1 vote and the Assembly Committee on Accountability and Administrative Review on an 8-0 vote. However, the Assembly Appropriations Committee held the bill citing millions of dollars in increases, including; the Department of Water Resources (DWR) which estimated costs at an additional $3 to $5 million on an annual construction budget of $100 million; University of California (UC) which estimated $2 million per year in reporting costs and unknown increases in material costs and potential project delays; and, California State University (CSU) that estimated increased costs of $560,000 to $840,000 to develop the data and tools necessary to integrate GHG as part of selection criteria developed over a 5 to 7 year period. Additionally, CSU estimated annual construction cost increases of $35 million for a $1 billion construction spending budget resulting from higher cost bidders receiving contracts.
Previous efforts to apply bid preferences to products in California have met similar fates. AB 1543 by Assembly Member Alejo, titled “Public Contracts: Buy American” didn’t get a hearing in its first policy committee. The most successful effort, AB 429 by Assembly Member Dahle, was narrowed to only solid wood products before it was vetoed by the Governor who wrote in his veto message, “…while I encourage the purchase of California products, especially when price and quality are equal, this bill could invite costly legal challenges for little benefit.”
Change Order Reform
Following the Veto of AB 1347 (Chiu) last year, there wasn’t a bill introduced this year because we are working with the Governor’s office to keep the issue in play. If we get a green light from the administration, we have a vehicle parked in the Senate, AB 626 by Assemblymember Low (D – Campbell), that we will gut and amend. There is a high probability that the bill will apply to local agencies exclusively, and if all goes to plan, we will hopefully deliver a change order reform bill to the Governor that he can sign this year.
Much like AB 1347, this year’s effort to reform legislation regarding change orders would ensure contractors are compensated timely for extra work requested by public agencies. Currently, there is a loophole in the prompt pay statutes that allow public agencies to wait months, and in some cases up to years, to pay contractors for work outside of the original contract. These same contractors must still pay for their construction materials, wages, benefits and overhead on that work. Tackling the inequity in the public works change order process is paramount to the growth and prosperity of our industry. The number one reason union contractors go bankrupt is that they get strung out on change orders.
We are focused on passing change order reform legislation that adheres to the following guiding principles:
- Ensures that the contractor has the ability to initiate the payment process for any work performed in addition to the original contract.
- Requires that public agencies review claims for extra work in a timely fashion.
- It requires that the public agency shall have the authority to deny or dispute any claim or any portion of a claim.
- It establishes that any portion of a claim that is not in dispute shall be paid per the timelines currently set in California prompt pay statutes.
- It establishes that any claim or any portion of a claim that is denied or disputed shall go to nonbinding mediation in an effort to settle.
It is important to remember, the delay of payment to contractors on public works has negative financial consequences on their employees. Nonpayment can result in a delay of trust fund contributions and most cases leaves many contractors without the necessary resources needed to bid the next project and continue doing business, ultimately diminishing work opportunities.