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HomeMy WebLinkAboutItem 7.3 Labor Guidelines Rpt ,.y OnpUtcG 1/I/ 11\ 19 ( '= ....Ile 82 STAFF REPORT CITY CLERK ,,�, CITY COUNCIL File #600-10 c/roti_ DATE: October 2, 2012 • TO: Honorable Mayor and City Councilmembers FROM: Joni Pattillo, City Managers f «tine, SUBJECT: Labor Guidelines Report Prepared by Stephen.Muzio, Assistant City Attorney EXECUTIVE SUMMARY: The City Council requested the City Attorney prepare an analysis of various labor items relating to City construction projects. In completing its analysis, the City Attorney's Office has identified various alternatives to the City's current practices the City Council may wish to pursue. FINANCIAL IMPACT: Depending on the City Council's direction, changes to the City's current policies and procedures relating to construction projects will have varying financial impacts on the City. The current two- year budget and work plan does not include the Staff time required to implement any of the alternatives pursuant to this presentation. If the City Council wishes to pursue changes, Staff would return with a report on the estimated implementation costs and ongoing impacts to projects. RECOMMENDATION: Staff recommends that the City Council receive the Staff presentation and provide Staff with direction. \ Submitted By Reviewed By City Attorney Park & Community Services Director DESCRIPTION: The City Council previously directed the City Attorney's Office to prepare an analysis of various issues relating to City projects to both identify the City's current practices and to provide the City Council with information regarding various alternative practices that the City could legally implement if it wished to do so. Pursuant to this direction, the City Attorney's Office and City Staff have prepared a report addressing the following: pre-qualification of bidders on City projects, options to encourage the hiring of local contractors on City projects, an overview of Page 1 of 5 ITEM NO. 7.3 California prevailing wage law and apprenticeship programs. Each section of this Staff Report includes a brief discussion of alternatives that the City may wish to consider if it wishes to modify the City’s current practices. Originally the City Council directed that the analysis also address the use of Project Labor Agreements. However, based on direction given at the April 17, 2012 City Council Meeting, the issue of Project Labor Agreements is not addressed in this report. A. Prequalification of Bidders Prequalification of bidders is a statutorily authorized means of screening potential bidders on public works projects. The California Public Contract Code specifically authorizes cities to utilize prequalification procedures. The California Department of Industrial Relations (“DIR”), in consultation with representatives of public agencies and a broad spectrum of interested parties, has prepared a sample prequalification form that is utilized by most cities in the state. The model questionnaire addresses issues relating to insurance, compliance with labor and work safety laws, and the contractor’s experience on certain types of projects. Cities can develop their own questionnaires, or they can modify the DIR questionnaire to address issues of local concern. Most cities utilize the DIR prequalification form, either unchanged or with some modifications. The questions (and scoring of the questions) should comply with statutory and constitutional requirements. Contractors wishing to bid for public works jobs fill out the questionnaire to “pre-qualify” for the right to bid on either a specific public works project, or on public works projects undertaken by a public agency during a specified period of time. Contractors that fail to qualify can be excluded from bidding on that project, or during that period of time. A contractor that is disqualified through the prequalification process is entitled to an administrative appeal procedure to seek a reversal of the determination, and may then file a lawsuit. Prequalification can be utilized to qualify contractors for particularly large or complex projects, or can be used to prequalify contractors to bid on all projects meeting a certain price threshold over a period of time. Because prequalification is a means of “weeding out” bidders, the bases for exclusion of bidders should be related to the City’s legitimate needs for the project or projects. Anecdotal evidence is mixed on the impact of prequalification on the number of bidders on projects. On the one hand, utilization of a prequalification process may have the effect of reducing the number of bidders on a project, both because some may be weeded out, but also because some contractors may not wish to incur the burden of undergoing the process. On the other hand, some contractors with whom Staff has spoken have said that they actually prefer prequalification because it ensures that they are “competing” only against responsible contractors, rather than contractors who may not be as meticulous about creating safe work environments and complying with state law requirements. The City Council may wish to direct Staff to return with a policy requiring the use of DIR form questionnaire on some or all City projects that are required to be publicly bid. If that is the City Council’s Direction, Staff would provide the City Council with additional information regarding the costs of implementing a prequalification process. In addition, depending on the City Council’s direction on other items in this Study, the City Council may wish to ask that specific questions be added to the prequalification questionnaire to address local policies and concerns. Potential Costs of Implementation: Preparation and implementation of prequalification would require the expenditure of Staff time and other City resources to develop a questionnaire, to review completed questionnaires, and to develop and administer a process by which contractors are disqualified from bidding on City projects and can appeal their disqualification. These costs Page 2 of 5 would increase if the Council was to direct that prequalification be used for all City projects, as opposed to only projects of a certain size or type. B. Local Preferences Two types of local preferences exist. Local hiring ordinances encourage the use of local labor on certain projects. Local business ordinances encourage the utilization of local businesses (rather than employees specifically). In theory, local business and local hiring ordinances can have either “good-faith” or “mandatory” standards for compliance. Good-faith ordinances require that outreach efforts be made to local businesses and labor but do not establish firm quotas. Mandatory ordinances establish firm quotas for the utilization of local businesses or labor but would likely face challenge in the absence of a study that establishes a strong factual basis to justify their imposition. Additionally, ongoing administration of such ordinances would likely result in substantial costs to the City. Due to Constitutional concerns relating to the Privileges and Immunities Clause, it is extremely difficult to establish a legally defensible basis for mandatory ordinances, though San Francisco, which prepared an analysis showing that businesses in San Francisco operated at a competitive disadvantage to businesses located in other jurisdictions, successfully defended its local business preference ordinance against a lawsuit challenging portions of the ordinance. Another factor to consider is whether there are sufficient local contractors with the necessary experience and qualifications to work on City projects. Although it is unclear that it will be possible to justify a mandatory local hire or local business preference ordinance, the City Council could direct Staff to return with a proposed consultant contract for the preparation of a study assessing whether sufficient grounds exist to justify the adoption of either or both types of ordinances. Alternatively, the City Council may wish to direct Staff to return with an analysis of alternatives for a good-faith local hire or local business preference ordinance and the costs of implementing those alternatives. Potential Costs of Implementation: The preparation of a study by a consultant to assess whether a mandatory local hire or local business preference ordinance can be justified would likely cost at least $30,000 to $50,000. The outcome of such a study is very uncertain. Preparation and implementation of a good-faith local hire or local business preference would require the expenditure of Staff time and other City resources to develop the policy and monitor compliance with it. C. Prevailing Wage Law Consistent with its obligations under the California Labor Code, the City, in its contracts for certain public works projects with a value of more than $1,000, requires that labor employed on those projects be paid the “general prevailing rate of per diem wages for work of a similar nature,” or “prevailing wages.” This requirement also applies to parts of some projects constructed by private entities, such as the construction of necessary infrastructure, including roads and utilities, required as a condition of development. Enforcing compliance on these projects poses some additional difficulties for the City. Although the City is required to properly identify projects subject to prevailing wages, to ensure that prevailing wage provisions are included in the contracts for the project, and to report to the state any violations of the prevailing wage law that come to its attention, the contractors themselves are most directly responsible for compliance with the prevailing wage laws. Among other things, contractors are required to maintain certified payroll records that show that they are paying appropriate prevailing wages. The City could, if it wished, require that these records be Page 3 of 5 provided to the City as a matter of due course, either on all projects or on projects meeting a specified threshold. The Labor Code contains provisions that would allow the City to establish a labor compliance program, to be administered by the City, a third party, or the Department of Industrial Relations. Such programs require the monitoring and auditing of certified payroll records and that agencies using them take certain other actions. If the City adopted such a program, then the “trigger” for projects where prevailing wages would be required would increase to $25,000 for construction projects and to $15,000 for alteration, demolition, repair and maintenance projects. Effective January 1, 2012, agencies that construct a project that paid for in whole or in part with state issued bond funds are required to utilize the labor compliance program administration services provided by the Department of Industrial Relations for that project. The City Council may wish to direct Staff to return with a policy that imposes default reporting obligations on City contractors subject to prevailing wages. The City Council may also wish to direct Staff to return with alternatives for a policy that explores means by which the City may better ensure compliance on private projects that are subject to prevailing wage requirements. Staff would also prepare an analysis of the costs that may be associated with implementing the policies. Costs of Implementation: The development and implementation of either type of policy would require the expenditure of Staff time and other City resources. . D. Apprenticeship Requirements The Labor Code also requires contractors on local agency projects with a value of $30,000 or more to utilize a certain percentage of apprentice labor, to the extent that such labor is available. To the best of our knowledge, no Bay Area cities comparable in size to the City of Dublin have taken steps to increase apprenticeship participation on their projects beyond what is required under state law. Although the City does not have any direct responsibility for monitoring compliance with the applicable statute, it is required to inform the State Division of Apprenticeship Standards when it awards a contract that is subject to the apprenticeship requirements. Included within these statutes are provisions that permit, but do not require, agencies to closely monitor contractors’ compliance with the apprenticeship requirements. The City Council may wish to direct Staff to return with a policy that increases the level of oversight by the City with respect to contractors’ compliance with the statutory apprentice utilization requirements. The City Council could also direct Staff to return with options for a policy that either reduces the threshold for triggering apprenticeship requirements or that increases the level of apprentice participation on covered projects. Staff would also prepare an analysis of the costs that may be associated with implementing such policies. Costs of Implementation: The development and implementation of such a policy would require the expenditure of Staff time and other City resources. SUBSEQUENT STEPS Upon receipt of direction from the City Council, Staff will return at a future meeting date with an analysis of the deliverables that have been requested, their cost implications and the estimated time needed to implement them. Page 4 of 5 NOTICING REQUIREMENTS/PUBLIC OUTREACH: In preparing its analysis, the City Attorney’s Office met two times each with representatives from various local unions and with representatives from Associated Builders and Contractors, a trade organization representing “merit based” (non-union) contractors. The City Attorney’s Office also contacted members of organizations representing union contractors. At the first meeting with each group, the representatives were given the opportunity to provide their perspective regarding the major subject areas of the study. At the second meeting with each group, the representatives were given an opportunity to give feedback on a draft of the City Attorney’s summary findings. Based on this second meeting, these summary findings were amended and have been included in the “Description” section of this Staff Report. ATTACHMENTS: None Page 5 of 5