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TO: BOARD OF SUPERVISORS t'. �` y ' ` CONTRA
FROM: John Sweeten,County Administrator COUNTY
COSTA
DATE: April 8,2003 't""
SUBJECT: SB 163(Alarcon)-Oppose
SPECIFIC REQUEST(S)OR RECOMMENDATIONS)& BACKGROUND AND JUSTIFICATION
RECOMMENDATION(S):
OPPOSE SB 163 (Alarcon) which would significantly limit the authority of General Law counties to enter into
personal service contracts.
BACKGROUNDIREASON(S) FOR RECOMMENDATIONS):
Centra Costa County has a longstanding policy of opposing state mandates and supporting local flexibility to
manage its operations. The 2003 State Legislature Platform includes the following positions:
Oppose any efforts to increase the County's share of cost, maintenance effort requirements or other
financing responsibilities for state-mandated programs absent new revenues sufficient to meet current
and future program needs.
Support efforts to reform the statellocal relationship in a way that mares both fiscal and programmatic
sense for local government.
CONTINUED ON ATTACHMENT: e YES SIGNATURE* r
a--- RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BO MITTEE
. , APPROVE —OTHER
SIGNATURE(S).�
ACTION OF BOAR APPROVED AS RECOMMENDED OTHER
r ,
VOTE OF SUPERVISORS
X UNANIMOUS
(ABSENT none) I HEREBY CERTIFY THAT THIS IS A
AYES: NOES: ) TRUE AND CORRECT COPY OF AN
ABSENT: ABSTAIN: ACTION TAKEN AND ENTERED
DISTRICT III SEAT VACANT ON MINUTES OF THE BOARD OF
SUPERVISORS ON THE DATE SHOWN.
Contact:Sara Hoffman,535-1090
ATTESTED April 8, 2003
cc: CAO JOHN SWEETEN,CLERK OF
CSAC(via CAO) THE BOARD OF SUPERVISORS
League of California Cities(via CAO) TY A$IVIiNiSTRATOR
Les Spahnn(via CAO) AND COU T
BY, �s�x �,< t >_ DEPUTY
BACKGROUNDIREASONM FOR RECOMMENDATION teont'd):
The California State Association of Counties (CSAC) and the League of California Cities are apposed to SB
163 (Alarcon)for numerous reasons,including the following:
1. There is no need for this bill. Local agencies can already establish the provisions of SB 163 without
this statewide prescriptive mandate. SB 163 represents yet another significant erosion of local control
of administrative tools necessary to manage local government.
2. General law counties and cities already face significant limitations on their ability to seep cost and
administrative efficiencies through contracting-out for services. This bill would add yet additional
restrictions and administrative costs. It would further restrict availability of this infrequently used tool
during this time of economic downturn when it could be most beneficial in preservation of essential
public services.
3. This bill would expose local governments to expensive and time-consuming litigation due to the vague
requirement that potential economic advantage of contracting must not outweigh the public's interest
in having a particular function performed directly by the local agency.
4. Cost comparison provisions of the bill are overly prescriptive and weighted to the disadvantage of the
contract by precluding the local agency cost comparison from including various indirect overhead
costs,but requiring contractor costs to include local agency oversight costs.
5. This bill would neutralize compensation saving advantages of contract services by requiring that
contractors pay industry wages(however that is defined) and not undercut local agency wages.
f. The bill mandates that it not result in displacement of existing public agency workers without
providing ample flexible options such as administrative protection of salary and transfer to other jobs
in the local agency with different job titles, or offer of employment with the contractor.
Existing law already puts substantial limitations on the authority of General Law counties,cities and counties to
enter into personal service contracts. General Law counties such as Contra Costa are generally restricted to a
limited list of specialized services identified in Government Code 31000 and other service-specific code
sections. Internal Revenue Service rulings on employment status and retirement systems standards for
permanent employment impose further restrictions on the use of contract employees. The cities also face
additional authority limitations under other government code sections.
SB 163 would add a number of new and additional conditions that must be satisfied by a general law county or
city prior to entering into a service contract. It would require demonstration that the contract would achieve cost
savings. Certain indirect overhead costs would be precluded for county cost calculations,yet contractor costs
must include county oversight costs. Contractors must also pay industry comparable wages that do not undercut
local agency wages. The contract must not result in displacement of local agency workers. In addition,the
contract must achieve one of the following conditions: (1)the contract would be for new functions that the
Legislature mandates or authorizes be performed by independent contractors, (2)the services would not be
available within the county,city,or county and city and cannot be satisfactorily performed by local agency
employees, (3)the services would be incidental to a purchase or lease contract, (4)the policy, administrative, or
legal goals and purposes of the county, city, or city and county could not be accomplished through the regular or
ordinary hiring process,(5)the work would meet criteria for emergency appointment,(6)equipment,materials,
facilities,or support services would be provided that could not feasibly be provided by the local.agency,and(7)
the services would be of an urgent,temporary or occasional nature. In addition,the potential economic
advantage of contracting must not outweigh the public's interest in having a particular function performed
directly by the local agency. Many of these provisions will undoubtedly encourage litigation,with consequent
delays and unnecessary costs
CSAC characterizes SB 163 as a"solution in search of a problem." They have offered to work with the author
and sponsors in order to resolve any demonstrated problems with existing law. If there are problems, staff
believes that a targeted approach to problem solving is better than a blanket restriction on the ability of the
Board of Supervisors to govern the operations of the County.
AMENDED IN SENATE MARCH 25, 2003
SENATE BILL No. 163
Introduced by Senator Alarcon
February 11,2003
An act to add Sections 31000.10 and 37103.1 to the Government
Code,relating to personal services contracting.
LEGISLATIVE COUNSEVS DICIEST
SB 163, as amended, Alarcon. Personal eeatraefiftg 9
Service contracts: counties and cities.
Existing law requires public entities to comply with certain
procedures in soliciting and awarding public contracts. Existing law
also authorizes public entities, under limited circumstances, to enter
into a perseml contract for the provision of services.
This bill would authorize a county, city, or city and county, other
than a chartered county, city, or city and county, to enter into a perqena4
geMeeg contract for services with a private entity, if the contract would
achieve cost savings and if any of the fallowing conditions are satisfied:
(1) the contract would be for new functions that the Legislature
mandates or authorizes be performed by independent contractors, (2)
the services would not be available within the county,city,or county and
city or cannot be satisfactorily performed by district employees,(3)the
services would be incidental to a purchase or lease contract, (4) the
policy, administrative,or legal,goals and purposes of the county, city,
or city and county could not be accomplished through the regular or
ordinary hiring process,(5)the work would meet criteria for emergency
appointment, (6) equipment, materials, facilities, or support services
would be provided that could not feasibly be provided by the district,
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SB 163 —2 —
and
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and (7) the services would be of an urgent, temporary, or occasional
nature.
The bill would operate prospectively and would not apply to any
existing rl-sse�i contracts for services.
This dill would require a county,city,or city and county to adopt new
practices with respect to pet se ' seryi contracting for services,and
thereby would impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certainn costs mandated by the state.
Statutory provisions establish procedures for making that
reimbursement,including the creation of a State Mandates Claims Fund
to pay the costs of mandates that do not exceed $1,000,000 statewide
and other procedures for claims whose statewide costs exceed
$1,000,000.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these statutory
provisions.
'dote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
The people of the State o,f'California do enact as follows:
1 SECTION 1. Section 31000.10 is added to the Government
2 Code,to read:
3 31000.10. (a) Notwithstanding any other provision of this
4 division,petsonal contracting for all services currently or
5 customarily performed by county employees to achieve cost
6 savings is permissible,unless otherwise prohibited, when all the
7 following conditions are met:
8 (1) The county board of supervisors or the county clearly
9 demonstrates that the proposed contract will result in actual overall
10 cost savings to that county,provided that:
11 (A) In comparing costs, there shall be included the county's
12 additional cost of providing the same service as proposed by a
13 contractor. These additional costs shall include the salaries and
14 benefits of additional staff that would be needed and the cost of
15 additional space,equipment,and materials needed to perform the
16 function.
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1 (B) In comparing costs,there may not be included the county's
2 indirect overhead costs,unless these costs can be attributed solely
3 to the fimction in question and would not exist if that function was
4 not performed by the county. indirect overhead costs shall mean
5 the pro rata share of existing administrative salaries and benefits,
6 rent,equipment costs,utilities, and materials.
7 (C) In comparing costs,there shall be included in the cost of a
8 contractor providing a service any continuing county costs that
9 would be directly associated with the contracted function. These
10 continuing county costs shall include,but not be limited to,those
11 for inspection, supervision,and monitoring.
12 (2) Proposals to contract out work may not be approved solely
13 on the basis that savings will result from lower contractor pay rates
14 or benefits. Proposals to contract out work shall be eligible for
15 approval if the contractor's wages are at the industry's level and
16 do not undercut county pay rates.
17 (3) The contract does not cause the displacement of county
18 employees. The term "displacement" includes layoff,demotion,
19 involuntary transfer to a new classification,involuntary transfer to
20 a new location requiring a change of residence, and time base
21 reductions. Displacement does not include changes in shifts or
22 days off,nor does it include reassignment to other positions within
23 the same classification and general location or employment with
24 the contractor, so long as wages and benefits are comparable to
25 those paid by the county.
26 (4) The savings shall be large enough to ensure that they will
27 not be eliminated by private sector and county cost fluctuations
28 that could normally be expected during the contracting period.
29 (5) The amount of savings clearly justifies the size and duration
30 of the contracting agreement.
31 (6) The contract is awarded through a publicized,competitive
32 bidding process.
33 (7) The contract includes specific provisions pertaining to the
34 qualifications of the staff that will perform the work under the
35 contract,as well as assurances that the contractor's hiring practices
36 meet applicable nondiscrimination standards.
37 (8) The potential for future economic risk to the county from
38 potential contractor rate increases is minimal.
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SH 163 —4-
1
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1 (9) The contract is with a firm.A"firm"means a private entity
2 that is a corporation, limited liability corporation, partnership,
3 nonprofit organization,or sole proprietorship.
4 (10) The potential economic advantage of contracting is not
5 outweighed by the public's interest in having a particular function
6 performed directly by the county.
7 (b) Notwithstanding any other provision of this chapter,
8 personal wMeeg contracting for services shall also be permissible
9 when any of the following conditions can be met:
10 (1) The contract is for new county functions and the Legislature
11 has specifically mandated or authorized the performance of the
12 work by independent contractors.
13 (2) The services meted are not available within the county,
14 cannot be performed satisfactorily by county employees, or are of
15 such a highly specialized or technical nature that the necessary
16 expert knowledge, experience, and ability are not available
17 through the county.
18 (3) The services are incidental to a contract for the purchase or
19 lease of real or personal property. Contracts under this criterion,
20 known as "service agreements," shall include,but not be limited
21 to, agreements to service or maintain office equipment or
22 computers that are leased or rented.
23 (4) The policy, administrative, or legal goals and purposes of
24 the county cannot be accomplished through the utilization of
25 persons selected pursuant to the regular or ordinary county hiring
26 process. Contracts are permissible under this criterion to protect
27 against a conflict of interest or to ensure independent and unbiased
28 findings in cases where there is a clear need for a different,outside
29 perspective. These contracts shall include,but not be limited to,
30 obtaining expert witnesses in litigation.
31 (5) The nature of the work is such that the criteria for
32 emergency appointments apply. "Emergency appointment"
33 means an appointment made for a period not to exceed 60 working
34 days either during an actual emergency to prevent the stoppage of
35 public business or because of the limited duration of the work.The
36 method of selection and the qualification standards for an
37 emergency employee shall be determined by the county. The
38 frequency of appointment, length of employment, and the
39 circumstances appropriate for the appointment of firms or
40 individuals under emergency appointments shall be restricted so
98
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1 as to prevent the use of emergency appointments to circumvent the
2 regular or ordinary hiring process.
3 (6) The contractor will provide equipment,materials,facilities,
4 or support services that could not feasibly be provided by the
5 county in the location where the services are to be performed.
6 (7) The services are of such an urgent,temporary,or occasional
7 nature that the delay incumbent in their implementation under the
8 county's regular or ordinary hiring process would frustrate their
9 very purpose.
10 (c) T1xis(1) Except as provided in paragraph (2), this section
11 shall apply to all counties,including counties that have adopted a
12 merit or civil service system.
13 (2) This section does not apply to a charter county formed
14 pursuant to Section 3 ofrlrticle XI of the California Constitution.
15 (d) This section shall apply to perse—MlAserymm contracts for
16 services entered into after January 1,2004.This section does not
17 apply to the renewal of personal serN4ees contracts for services
18 subsequent to January 1,2004,when:the contract was entered into
19 before January 1, 2004, irrespective of whether the contract is
20 renewed or rebid with the existing contractor or with a new
21 contractor.
22 SEC. 2. Section 37103.1 is added to the Government Code,to
23 read:
24 37103.1. (a) Notwithstanding any other provision of this
25 chapter,pergam!serv: econtracting for all services currently or
26 customarily performed by city employees to achieve cost savings
27 is permissible,unless otherwise prohibited,when all the following
28 conditions are met:
29 (1) The legislative body clearly demonstrates that the proposed
30 contract will result in actual overall cost savings to that city,
31 provided that.
32 (A) In comparing costs, there shall be included the city's
33 additional cost of providing the same service as proposed by a
34 contractor. These additional costs shall include the salaries and
35 benefits of additional staff that would be needed and the cost of
36 additional space,equipment,and materials needed to perforin the
37 function.
38 (B) In comparing costs, there may not be included the city's
39 indirect overhead costs unless these costs can be attributed solely
40 to the function in question and would not exist if that function was
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SB 153 —6-
1
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1 not performed by the city.Indirect overhead costs shall mean the
2 pro rata share of existing administrative salaries and benefits,rent,
3 equipment costs,utilities, and materials.
4 (C) In comparing costs,there shall be included in the cost of a
5 contractor providing a service any continuing city costs that would
6 be directly associated with the contracted function. These
7 continuing city costs shall include,but not be limited to,those for
8 inspection, supervision,and monitoring.
9 (2) Proposals to contract out work may not be approved solely
10 on the basis that savings will result from lower contractor pay rates
I I or benefits. Proposals to contract out work shall be eligible for
12 approval if the contractor's wages are at the industry's level and
13 do not undercut city pay rates.
14 (3) The contract does not cause the displacement of city
15 employees. The term "displacement" includes layoff,demotion,
16 involuntary transfer to a neer classification,involuntary transfer to
17 a neve location requiring a change of residence, and time base
18 reductions. Displacement does not include changes in shifts or
19 days off,nor does it include reassignment to other positions within
20 the same classification and general location or employment with
21 the contractor, so long as wages and benefits are comparable to
22 those paid by the city.
23 (4) The savings shall be large enough to ensure that they will
24 not be eliminated by private sector and city cost fluctuations that
25 could normally be expected during the contracting period.
26 (5) The amount of savings clearly justifies the size and duration
27 of the contracting agreement.
28 (6) The contract is awarded through a publicized,competitive
29 bidding process.
30 (7) The contract includes specific provisions pertaining to the
31 qualifications of the staff that will perform the work under the
32 contract,as well as assurances that the contractor's hiring practices
33 meet applicable nondiscrimination standards.
34 (8) The potential for future economic risk to the city from
35 potential contractor rate increases is minimal.
36 (9) The contract is with a firm.A"firm"means a private entity
37 that is a corporation, limited liability corporation, partnership,
38 nonprofit organization, or sole proprietorship.
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1 (10) The potential economic advantage of contracting is not
2 outweighed by the public's interest in having a particular function
3 performed directly by the city.
4 (b) Notwithstanding any other provision of this chapter,
5 persam!gerviees contracting,for services shall also be permissible
6 when any of the following conditions can be met:
7 (1) The contract is for new city functions and the Legislature
8 has specifically mandated or authorized the performance of the
9 work by independent contractors.
10 (2) The services eentmete are not available w=ithin the city,
11 cannot be performed satisfactorily by city employees, or are of
12 such a highly specialized or technical nature that the necessary
13 expert knowledge, experience, and ability are not available
14 through the city.
15 (3) The services are incidental to a contract for the purchase or
16 lease of real or personal property. Contracts under this criterion,
17 known as "service agreements," shall include,but not be limited
18 to, agreements to service or maintain office equipment or
19 computers that are leased or rented.
20 (4) The policy, administrative, or legal goals and purposes of
21 the city cannot be accomplished through the utilization of persons
22 selected pursuant to the regular or ordinary city hiring process.
23 Contracts are permissible under this criterion to protect against a
24 conflict of interest or to ensure independent and unbiased findings
25 in cases where there is a clear need for a different, outside
26 perspective. These contracts shall include,but not be limited to,
27 obtaining expert witnesses in litigation.
28 (5) The nature of the work is such that the criteria for
29 emergency appointments apply. "Emergency appointment"
30 means an appointment made for a period not to exceed 60 working
31 days either during an actual emergency to prevent the stoppage of
32 public business or because of the limited duration of the work.The
33 method of selection and the qualification standards for an
34 emergency employee shall be determined by the city. The
35 frequency of appointment, length of employment, and the
36 circumstances appropriate for the appointment of firms or
37 individuals under emergency appointments shall be restricted so
38 as to prevent the use of emergency appointments to circumvent the
39 regular or ordinary hiring process.
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SB 163 —8-
1
--8-1 (6) The contractor will provide equipment,materials,facilities,
2 or support services that could not feasibly be provided by the city
3 in the location where the services are to be performed.
4 (7) The services are of such an urgent,temporary,or occasional
5 nature that the delay incumbent in their implementation under the
6 city's regular or ordinary hiring process would frustrate their very
7 purpose.
8 (c) 44tis(1) Except as provided in paragraph (2), this section
9 shall apply to all cities,including cities that have adopted a merit
10 or civil service system.
11 (2) This section does not apply to a charter city farmed
12 pursuant to Section 3 ofArticle XI of the California Constitution.
13 (d) This section shall apply to pem! ser-viee contracts for
14 services entered into after January 1,2004.This section does not
15 apply to the renewal of personal sere ees contracts for services
16 subsequent to January 1,2004,where the contract was entered into
17 before January 1, 2004, irrespective of whether the contract is
18 renewed or rebid with the existing contractor or with a new
19 contractor.
20 SEC. 3. Notwithstanding Section 17610 of the Government
21 Code, if the Commission on State Mandates determines that this
22 act contains-posts mandated by the state,reimbursement to local
23 agencies and school districts for those costs shall be made pursuant
24 to Part 7(commencing with Section 17500)of Division 4 of Title
25 2 of the Government Code. If the statewide cost of the claim for
26 reimbursement does not exceed one million dollars($1,000,000),
27 reimbursement shall be made from the State Mandates Claims
28 Fund.
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