New Law Changes Prequalification Procedures for Certain Contracts

February 2013

Beginning with contracts awarded on or after January 1, 2014, California law now requires districts’ governing boards to adopt new procedures to prequalify bidders for public projects that use funds received under the Leroy F. Green School Facilities Act or from future state school bonds involving projected expenditures of one million dollars or more.

For these projects, Assembly Bill (“AB”) 1565, which amended the California Public Contract Code, mandates that governing boards require prospective bidders to complete and submit a standardized prequalification questionnaire and financial statement, verified under oath.  Previously, districts could decide for themselves whether they would require a standardized questionnaire and/or financial statement.  Neither the questionnaires nor the financial statements are considered public records and they are not open to public inspection. 

Boards also must adopt and apply a uniform system of rating bidders on the basis of the completed questionnaires and financial statements.  The questionnaires, financial statements and rating system must cover, at a minimum, all of the issues included in the standardized questionnaire and model guidelines for rating bidders developed by the Department of Industrial Relations. 

Under AB 1565, districts are precluded from accepting bids from any bidder that did not submit prequalification documents at least ten (10) business days before the date fixed for the public opening of sealed bids or from a bidder that has not been prequalified for at least five (5) business days prior to that date.  For purposes of the new law, a “bidder” includes the general contractor and, if used, all electrical, mechanical and plumbing subcontractors.  AB 1565 does not preclude governing boards from prequalifying or disqualifying a subcontractor.

If a public project covered by AB 1565 includes electrical, mechanical or plumbing components that will be performed by electrical, mechanical or plumbing contractors, the governing board must prepare a list of its prequalified general contractors and electrical, mechanical and plumbing subcontractors.  The list must be available to all bidders at least five business days before the date fixed for public opening of sealed bids. 

Governing boards may establish a process for prequalifying prospective bidders subject to AB 1565 on a quarterly or annual basis.  A prequalification is valid for one calendar year.

School districts with an average daily attendance of less than 2,500 are exempt from the new requirements of AB 1565.  Additionally, AB 1565 contains a “sunset” provision under which it ceases to be effective as of January 1, 2019, unless further legislative action is taken to extend the law.

Although AB 1565 only impacts contracts entered into on or after January 1, 2014, it contains numerous new rules that will require districts to get their prequalification processes in place well before then.  School boards should take steps now to familiarize themselves with the new requirements and consult legal counsel to ensure their prequalification documents are drafted or revised appropriately to comply with the new law.

If you have any questions regarding this matter, please call one of our six offices.

F3 NewsFlash prepared by Paul G. Thompson and John W. Norlin.
Paul is the office managing partner in the F3 Sacramento office.
John is Special Counsel in the F3 San Diego office.

This F3 NewsFlash is a summary only and not legal advice.  We recommend that you consult with legal counsel to determine how this legal development may apply to your specific facts and circumstances.  Information on a free NewsFlash subscription can be found at www.fagenfriedman.com.

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