Volume I, No. 16

March 5, 2009

Bill Introduced to Prohibit No-Bid Contracts

Senator Lou Correa (D-Santa Ana) has introduced Senate Bill 694 that would eliminate the ability to let public works contract without competitively bidding if the contract is worth more than $50,000.

Specifically, the bill adds a new section to the Public Contract Code requiring any public works project worth more than $50,000 to be competitively bid and awarded to the lowest responsive bidder if it “is not otherwise required to be performed under a competitively bid contract by state law,” and the public work is:

• Owned by the public entity;
• Intended to be conveyed to the public entity within five years of project completion; or
• Financed by taxes or assessments levied, or bond sold or guaranteed, by the public entity.

SB 694 (Correa) has significant implications for lease-leaseback contracts, CM-at-Risk contracts, sole source and job order contracting.  The bill will impact traditional construction projects and has the potential to impact energy contracts, as well.

The most recent legislative effort to eliminate no-bid contracts, namely lease-leaseback contracts, was vetoed by the Governor.  However, not too long after SB 694 was introduced President Barack Obama issued a Presidential Memorandum to limit no-bid contracts at the federal level.  Therefore, SB 694 may gain more momentum this year than its predecessors.

Stay tuned.