Important New Requirements for all Lease-Leaseback Projects Awarded on or After January 1, 2017 (K-12) - School & College Legal Services of California

Effective January 1, 2017, Assembly Bill 2316 and Senate Bill 693 will take effect: these bills make the following significant changes to the lease-leaseback process.

LEGAL UPDATE

October 11, 2016

To: Superintendents, Member School Districts (K-12)

From: Loren W. Soukup, Senior Associate General Counsel

Subject: Important New Requirements for all Lease-Leaseback Projects Awarded on or After January 1, 2017

Memo No. 35-2016

Effective January 1, 2017, Assembly Bill 2316 and Senate Bill 693 will take effect: these bills make the following significant changes to the lease-leaseback process.

AB 2316

1. Education Code § 17406 will now require a competitive “best value” solicitation process before a lease-leaseback contract can be awarded. Education Code § 17400 defines “best value” as a “competitive procurement process whereby the selected proposer is selected on the basis of objective criteria for evaluating the qualifications of proposers with the resulting selection representing the best combination of price and qualifications.”

2. Before awarding a lease-leaseback contract, the school district will be required to adopt and publish specified procedures and guidelines for evaluating the qualifications of the proposers that ensures the best value selections by the school district are conducted in a fair and impartial manner. The adopted procedures and guidelines must, at a minimum, include all of the requirements set forth under Education Code § 17406 (a)(2).

3. The new law permits school districts to include in the lease-leaseback contract preconstruction services prior to approval from the Department of General Services’ Division of the State Architect (DSA), as long as the contract provides that no work for which the contractor is required to be licensed for, which DSA approval is required, can be performed before receipt of the required DSA approval.

4. If a project which was procured using the lease-leaseback process prior to July 1, 2015 is invalidated by a court because it failed to comply with the lease-leaseback statute at that time, the contractor will be entitled to be paid the reasonable cost of work it performed, with the exception for profit, provided the conditions in Education Code § 17406(d) are met.

5. School districts over 2,500 ADA will still be required to prequalify lease-leaseback contractors and the mechanical, electrical, and plumbing subcontractors under Public Contract Code § 20111.6 for all lease-leaseback projects in excess of $1 million regardless of the funding source.

SB 693

1. Education Code § 17407.5 which requires that each contractor and subcontractor employ a “skilled and trained workforce” for each “apprenticeable occupation” on a lease-leaseback project has been amended to align with Chapter 2.9 (commencing with Section 2600) of Part 1 of Division 2 of the Public Contract Code.

2. Pursuant to Public Contract Code § 2601, the percentage of the “skilled journeypersons” required for each LLB project will be extended by one year, requiring 60% of skilled journeypersons to be graduates of an approved apprenticeship program by January 1, 2020.

3. Pursuant to Public Contract Code § 2602, if the contractor fails to provide the monthly report required by this section, or provides a report that is incomplete, the school district is required to withhold further payments until a complete report is provided. Additionally, if a monthly report is not in compliance with Public Contract Code §§2600 et seq., the school district is required to withhold further payments until the contractor provides a plan to achieve substantial compliance, with respect to the relevant apprenticeable occupation, prior to completion of the contract or project.

Please contact our office with questions regarding this Legal Update or any other legal matter.

The information in this Legal Update is provided as a summary of law and is not intended as legal advice. Application of the law may vary depending on the particular facts and circumstances at issue. We, therefore, recommend that you consult legal counsel to advise you on how the law applies to your specific situation.

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