Best Value Construction Contracting Program

Best value (BV) procurement is an alternative to the traditional design-bid-build method of public works contracting.  It permits UC to consider the additional value a contractor may offer in concert with their bid price, thus determining the bid which delivers the best value. A contract award based on the best value enables us to transform our industry from one of traditional low bid driven conflicts and opposition, to that of a collaborative practice of business partners. 

Background

SB 667 (Migden), Chapter 367, Statutes of 2006, established the five-year Best Value Pilot Program at UC San Francisco.  SB 835 (Wolk), Chapter 636, Statutes of 2011, extended the sunset in SB 667 until January 1, 2017, and expanded the best value pilot to encompass all UC campuses and medical centers.  In a December 2015 report on the pilot project, UC noted that, since January 2012, it had awarded over 320 construction contracts totaling $4 billion.  Forty of these contracts, or 13%, totaling $1.2 billion, utilized the best value construction authority.  UC reported that these contracts provided numerous benefits, including decreases in bid protests, disputes, change order requests and claims, and reduced administrative oversight and contract/project management staff time.

In 2016, UC sponsored SB 1214 (Allen), Chapter 788, Statutes of 2016, proposed to eliminate the sunset on UC's authority to use best value contracting.  Due to concerns raised by the State Building and Construction Trades Council regarding what they believed was the lack of uniformity in UC's best value statute and provisions governing similar contracting practices for other government entities, SB 1214, as enacted, simply extended the pilot program sunset by one year, to January 1, 2018.  AB-1424 (Levine) sunsets the Best Value (BV) pilot program and makes permanent UC's authority to exercise best value construction procurement.  

Text of the new law is available: Assembly Bill No. 1424.

What is it?

Under the BV program, UC prequalifies bidders, evaluates the bid, assigns a qualification score to the bid based on five factors, and then divides the price of the bid by its qualification score. The lowest resulting cost per quality point represents the best value bid.  

The five qualifications that must be evaluated are defined in Public Contract Code Section 10506.5 and exclusively include the bidder’s:

  • Financial condition
  • Relevant experience
  • Demonstrated management competency
  • Labor compliance
  • Safety record

The process is best utilized on projects with complex design, delivery and installation requirements, including research and medical installations, as well as constrained work areas and scheduling needs based on maintaining ongoing operations. 

Best value selection in public works contracting is a rare privilege and comes with obligations.  When the University exercises the BV procurement method, it will join several other state agencies in requiring specific labor workforce employment requirements as defined in Public Contract Code Section 10506.8(d)(2).  For work performed on or after January 1, 2018, at least 40% percent of journeymen employed on the contract at every tier must be graduates of an apprenticeship program for applicable occupation.  This percentage increases in subsequent years (50% starting January 1, 2019 and 60% starting January 1, 2020).  Campuses should consider their local market conditions and labor availability carefully before fully committing to exercising BV on a project.   

Best Value selections have been, and will continue to be, closely monitored by the Office of the President to ensure good results.  OP Construction Services and the Capital Programs Institute (CPI) will be providing guidelines for campus staff wishing to implement the program. 

How it got done

We would like to extend a tremendous thank you to UCOP State Government Relations and IMPAC for supporting our objectives and producing results. We also maintain our highest appreciation for SGR Legislative Director Jason Murphy, who has provided the personal attention, patience, tenacity, and calm measured disposition to advance our priorities and to steward into law three of the four milestone bills, including the final capstone bill.