CONTRACT LAW 101 SUPPLIES & EQUIPMENT & LEGAL MECHANISMS FOR SUSTAINABLE BUILDINGS DOUGLAS N. YEOMAN...

CONTRACT LAW 101CONTRACT LAW 101SUPPLIES & EQUIPMENTSUPPLIES & EQUIPMENT

&&LEGAL MECHANISMS FOR LEGAL MECHANISMS FOR SUSTAINABLE BUILDINGSSUSTAINABLE BUILDINGS

DOUGLAS N. YEOMANDOUGLAS N. YEOMANPARKER & COVERT LLPPARKER & COVERT LLP

(714) 573-0900(714) [email protected]@parkercovert.com

INTRODUCTIONINTRODUCTION The typical Purchasing or Facilities

Department is faced on a daily basis with issues involving various types of contracts. For each such contract, the following questions should be asked: (a) what is the authority for entering into the agreement; (b) does the contract contain adequate protections for the district; (c) who will be signing the contract and is that person so authorized; and (d) what procedures, if any, must be complied with before the contract can be approved.

OVERVIEWOVERVIEW

During this workshop we will take a closer look at public works contracts, personal property and service contracts, together with bidding requirements and exceptions, and general bidding principles.

We will also explore several legal mechanisms available to public entities for sustainable buildings through the development of alternative energy sources.

COMPETITIVE BIDDING COMPETITIVE BIDDING REQUIREMENTSREQUIREMENTS

Duty to publicly bid contracts.Duty to publicly bid contracts. Public Contract Code Public Contract Code § 20111 (K-12)§ 20111 (K-12) Public Contract Code § 20651 (CC)Public Contract Code § 20651 (CC)

Purpose of competitive bidding is to Purpose of competitive bidding is to eliminate favoritism, fraud and eliminate favoritism, fraud and corruption; avoid misuse of public corruption; avoid misuse of public funds; and stimulate advantageous funds; and stimulate advantageous market place competition.market place competition.

COMPETITIVE BIDDING COMPETITIVE BIDDING REQUIREMENTS – Cont.REQUIREMENTS – Cont.

Payment on contracts made in Payment on contracts made in violation of the competitive bidding violation of the competitive bidding laws is prohibited.laws is prohibited.

1915 California Supreme Court case 1915 California Supreme Court case of of Reams v. CooleyReams v. Cooley ruled that when ruled that when a statute prescribes the method of a statute prescribes the method of contracting, a contract made in contracting, a contract made in violation of the statutorily prescribed violation of the statutorily prescribed mode is void.mode is void.

EXCEPTIONS TO COMPETITIVE EXCEPTIONS TO COMPETITIVE BIDDINGBIDDING

Notwithstanding the competitive bidding Notwithstanding the competitive bidding requirements, certain exceptions provide a requirements, certain exceptions provide a district with flexibility to enter into contracts district with flexibility to enter into contracts without lengthy procurement procedures.without lengthy procurement procedures.

Contract amounts less than statutory Contract amounts less than statutory threshold (Public Contract Code threshold (Public Contract Code § § 20111; 20651)20111; 20651)

Emergency Contracting (Public Contract Emergency Contracting (Public Contract Code §§ 20113; 20654; 1102)Code §§ 20113; 20654; 1102)

Section 1102 defines “emergency” as Section 1102 defines “emergency” as “a “a sudden, unexpected occurrencesudden, unexpected occurrence that poses a clear and imminent that poses a clear and imminent danger, requiring immediate action to danger, requiring immediate action to prevent or mitigate the loss or prevent or mitigate the loss or impairment of life, health, property, or impairment of life, health, property, or essential public services.”essential public services.”

EXCEPTIONS TO COMPETITIVE EXCEPTIONS TO COMPETITIVE BIDDING- Cont.BIDDING- Cont.

Sole Source (Case Law)Sole Source (Case Law) Where competitive bidding will produce Where competitive bidding will produce

no advantage, will not affect the final no advantage, will not affect the final result, or it is practically impossible to result, or it is practically impossible to obtain what is required, then competitive obtain what is required, then competitive bidding may be dispensed with.bidding may be dispensed with.

Day Labor (Public Contract Code Day Labor (Public Contract Code § § 20114; 20655)20114; 20655) May make repairs, alterations, additions May make repairs, alterations, additions

or painting or repainting or decorating or painting or repainting or decorating school buildings, repair or build school buildings, repair or build apparatus or equipment, make apparatus or equipment, make improvements on school grounds and improvements on school grounds and erect new buildings and perform erect new buildings and perform maintenance, provided total job hours maintenance, provided total job hours do not exceed 350 hours.do not exceed 350 hours.


Continuing Contract Exception (Case Continuing Contract Exception (Case Law)Law) Completion contractor may be retained without Completion contractor may be retained without

competitive bid where contract provides for the competitive bid where contract provides for the completion of work in the event of contractor completion of work in the event of contractor termination for substantial violation of contact. termination for substantial violation of contact.

Alternative Procurement Procedure Alternative Procurement Procedure (Public Contract Code (Public Contract Code § 22010)§ 22010) Applicable to public agencies who by board Applicable to public agencies who by board

resolution have elected to become subject to the resolution have elected to become subject to the uniform construction cost accounting uniform construction cost accounting procedures commencing with § 22010 and has procedures commencing with § 22010 and has notified the State Controller.notified the State Controller.

Increases bidding threshold to projects over Increases bidding threshold to projects over $100,000; establishes an informal bidding $100,000; establishes an informal bidding procedure for projects of $100,000 or less; and procedure for projects of $100,000 or less; and authorizes projects of $25,000 or less to be authorizes projects of $25,000 or less to be performed by employees of the district by force performed by employees of the district by force account, by negotiated contract, or by purchase account, by negotiated contract, or by purchase order.order.


Personal Property Purchases Personal Property Purchases (Public Contract Code (Public Contract Code § 20118; § 20118; 20652)20652) If governing board has determined it to If governing board has determined it to

be in the best interest of the district, be in the best interest of the district, board may authorize by contract, lease, board may authorize by contract, lease, requisition, or purchase order, any requisition, or purchase order, any public corporation or agency, to lease public corporation or agency, to lease data-processing equipment, purchase data-processing equipment, purchase materials, supplies, equipment, materials, supplies, equipment, automotive vehicles, tractors, and other automotive vehicles, tractors, and other personal property for the district in the personal property for the district in the manner in which the public corporation manner in which the public corporation or agency is authorized by law to make or agency is authorized by law to make the leases or purchases from a vendor.the leases or purchases from a vendor.


Personal Property Purchases – Cont.Personal Property Purchases – Cont. Upon receipt of the personal property which Upon receipt of the personal property which

complies with the contract specifications, complies with the contract specifications, district draws a warrant in favor of the public district draws a warrant in favor of the public corporation or agency, corporation or agency, or may make a direct or may make a direct payment to the vendorpayment to the vendor..

So called “piggyback contracts” have been So called “piggyback contracts” have been abused by districts to include more than abused by districts to include more than incidental incidental servicesservices along with personal along with personal property acquisitions.property acquisitions.

January 24, 2006, Office of the Attorney January 24, 2006, Office of the Attorney General issued an opinion requested by SAB General issued an opinion requested by SAB on use of piggyback contracts to acquire on use of piggyback contracts to acquire factory-built modular building components for factory-built modular building components for installation on a permanent foundation.installation on a permanent foundation.


AG concluded that school districts may AG concluded that school districts may notnot use piggyback contracts for such use piggyback contracts for such acquisitions, but left open the ability to acquisitions, but left open the ability to purchase “portable” and “relocatable” purchase “portable” and “relocatable” classrooms through use of piggyback classrooms through use of piggyback contracts.contracts.

The AG opinion also included a footnote The AG opinion also included a footnote stating that section 20118 “provides no stating that section 20118 “provides no authority for a school district contract authority for a school district contract directly with a lessor or vendor.” In directly with a lessor or vendor.” In response to the AG opinion, section response to the AG opinion, section 20118 was amended during the 2006 20118 was amended during the 2006 Legislative Term (A.B. 1967) to Legislative Term (A.B. 1967) to specifically allows a district to make specifically allows a district to make payment directly to the vendor.payment directly to the vendor.


Ten Percent Limitation on Changes Ten Percent Limitation on Changes (Public Contract Code (Public Contract Code § 20118.4; 20659) § 20118.4; 20659) Changes permissible if cost does not Changes permissible if cost does not

exceed the exceed the greatergreater of the applicable of the applicable bidding statute or 10% of the original bidding statute or 10% of the original contract price.contract price.

Does 10% rule apply to each change Does 10% rule apply to each change order or cumulatively?order or cumulatively?

Educational Material (Public Contract Educational Material (Public Contract Code § 20118.3; Ed. Code § 81651)Code § 20118.3; Ed. Code § 81651) May purchase supplemental textbooks, May purchase supplemental textbooks,

library books, educational films, library books, educational films, audiovisual materials, test materials, audiovisual materials, test materials, workbooks, and periodicals without workbooks, and periodicals without taking estimates or advertising for bids.taking estimates or advertising for bids.


Perishable Foodstuffs & Seasonal Commodities Perishable Foodstuffs & Seasonal Commodities (Ed. Code (Ed. Code § 38083; Public Contract Code § § 38083; Public Contract Code § 20660)20660)

Energy Service and Conservation Contracts Energy Service and Conservation Contracts (Government Code §§ 4217.10 to 4217.18)(Government Code §§ 4217.10 to 4217.18) A closer look at the legal mechanisms A closer look at the legal mechanisms

available to districts for the development available to districts for the development of alternative energy sources will be of alternative energy sources will be explored later in the presentation.explored later in the presentation.

Energy service contracts must only Energy service contracts must only include “conservation measures”, include “conservation measures”, meaning electrical, maintenance, load meaning electrical, maintenance, load management techniques and management techniques and equipment, or other measures to equipment, or other measures to reducereduce energy or make for a more efficient use energy or make for a more efficient use of energy.of energy.


Contracts for Special Services Contracts for Special Services (Government Code (Government Code § 53060)§ 53060) District may contract for special services District may contract for special services

and advice in financial, economic, and advice in financial, economic, accounting, engineering, legal, or accounting, engineering, legal, or administrative matters if such persons administrative matters if such persons are specially trained and experienced are specially trained and experienced and competent to perform the special and competent to perform the special services required.services required.

GENERAL BIDDING GENERAL BIDDING PRINCIPLESPRINCIPLES

Conflict of Interest in Bids Where Bidder Conflict of Interest in Bids Where Bidder Assists in Preparation of SpecificationsAssists in Preparation of Specifications Consultant assisting district in Consultant assisting district in

preparation of bid documents or the preparation of bid documents or the plans and specifications to be used in plans and specifications to be used in the bid process should not bid on the the bid process should not bid on the contract, in order to avoid violating contract, in order to avoid violating Government Code Government Code § 1090§ 1090..

Request for Bids Versus Request for Request for Bids Versus Request for ProposalsProposals Request for bids is a competitive bidding Request for bids is a competitive bidding

process, with specific statutory process, with specific statutory requirements, and where the district requirements, and where the district publishes bid specifications and publishes bid specifications and contractual provisions which all bidders contractual provisions which all bidders must meet.must meet.

GENERAL BIDDING GENERAL BIDDING PRINCIPLES – Cont.PRINCIPLES – Cont.

Request for Bids Versus Request for Request for Bids Versus Request for Proposals – Cont.Proposals – Cont. Request for proposals is not a Request for proposals is not a

competitive bid process. District competitive bid process. District normally will establish certain general normally will establish certain general requirements and vendors are asked to requirements and vendors are asked to submit their own proposals to meet submit their own proposals to meet these requirements. The RFP process these requirements. The RFP process normally also includes the negotiation normally also includes the negotiation between the district with one or more of between the district with one or more of the proposers.the proposers.

Award to Any of Three Lowest Award to Any of Three Lowest Responsible Bidders for Data Responsible Bidders for Data Processing Systems and Supporting Processing Systems and Supporting Software (Public Contract Code Software (Public Contract Code §20118.1; Ed. Code § 81645)§20118.1; Ed. Code § 81645)

GENERAL BIDDING GENERAL BIDDING PRINCIPLES – Cont.PRINCIPLES – Cont.

Transportation Contracts (Ed. Transportation Contracts (Ed. Code Code § 39802)§ 39802) Modified competitive bidding procedure Modified competitive bidding procedure

for expenditures in excess of $10,000, for expenditures in excess of $10,000, allows the governing board to award a allows the governing board to award a transportation contract to other than the transportation contract to other than the lowest bidder, provided that the lowest bidder, provided that the prevailing bidder can supply the better prevailing bidder can supply the better service.service.

Awarding Bid to Lowest Awarding Bid to Lowest Responsible Responsive BidderResponsible Responsive Bidder Responsive Bidder (Waiver of Minor Responsive Bidder (Waiver of Minor

Variations). A bid in response to a Variations). A bid in response to a request for competitive bids must request for competitive bids must substantially conform to the substantially conform to the specifications in the proposal.specifications in the proposal.

Awarding Bid to Lowest Bidder – Awarding Bid to Lowest Bidder – Cont.Cont.

Minor irregularities in a bid may be waived. Minor irregularities in a bid may be waived. What constitutes a minor irregularity requires What constitutes a minor irregularity requires looking at the following factors: whether the looking at the following factors: whether the deviation could be a vehicle for favoritism; affect deviation could be a vehicle for favoritism; affect the amount of the bid; influence potential the amount of the bid; influence potential bidders to refrain from bidding; or effect the bidders to refrain from bidding; or effect the ability to make bid comparisons.ability to make bid comparisons.

Responsible BidderResponsible Bidder Is the bidder qualified, e.g. possess the quality, Is the bidder qualified, e.g. possess the quality,

fitness and capacity to satisfactorily perform the fitness and capacity to satisfactorily perform the particular work under consideration.particular work under consideration.

If determined not to be a responsible bidder, the If determined not to be a responsible bidder, the 1972 case of 1972 case of City of Inglewood – L.A. County City of Inglewood – L.A. County Civic Center Authority v. Superior CourtCivic Center Authority v. Superior Court, , requires that before rejecting its bid as a non-requires that before rejecting its bid as a non-responsible bidder, the district must notify the responsible bidder, the district must notify the bidder of any evidence reflecting upon its bidder of any evidence reflecting upon its responsibility and afford that bidder an responsibility and afford that bidder an opportunity to rebut such adverse evidence and opportunity to rebut such adverse evidence and to present evidence that it is qualified to perform to present evidence that it is qualified to perform the contract to the public body.the contract to the public body.


Rejection of All BidsRejection of All Bids Provided that the bid documents contain Provided that the bid documents contain

an express reservation of the right to an express reservation of the right to reject all bids, the courts have routinely reject all bids, the courts have routinely upheld such decisions for any reason and upheld such decisions for any reason and at any time before a district accepts a bid.at any time before a district accepts a bid.

Bid Security (Public Contract Code Bid Security (Public Contract Code § § 20111; 20651)20111; 20651) All bids for construction work must be All bids for construction work must be

accompanied by bid security in the form of accompanied by bid security in the form of (1) cash, (2) a cashier’s check made (1) cash, (2) a cashier’s check made payable to the district, (3) a certified check payable to the district, (3) a certified check made payable to the district, or (4) a made payable to the district, or (4) a bidder’s bond executed by an admitted bidder’s bond executed by an admitted surety insurer.surety insurer.


Bid Security – Cont.Bid Security – Cont. Bids for materials and supplies may, but Bids for materials and supplies may, but

need not, require bid security.need not, require bid security. Award of Multiple Contracts From Award of Multiple Contracts From

One BidOne Bid If different portions of a project are If different portions of a project are

called out in a bid, the district cannot called out in a bid, the district cannot reserve the right to divide the work after reserve the right to divide the work after the bids are received.the bids are received.

Substitution of Subcontractors Substitution of Subcontractors (Public Contract Code (Public Contract Code §4100 §4100 etet seqseq.).) Purpose is to prevent the practice of bid Purpose is to prevent the practice of bid

shopping and bid peddling.shopping and bid peddling.


Substitution of Subcontractors- Cont.Substitution of Subcontractors- Cont. Subcontractors must be listed for subcontract Subcontractors must be listed for subcontract

work, including fabrication and installation, work, including fabrication and installation, constituting more than one half of one percent of constituting more than one half of one percent of the total bid.the total bid.

If more than one subcontractor listed for the If more than one subcontractor listed for the same portion of work, prime contractor agrees same portion of work, prime contractor agrees that it is fully qualified to perform that portion that it is fully qualified to perform that portion itself and it shall perform that portion.itself and it shall perform that portion.

May only substitute a listed subcontractor if one May only substitute a listed subcontractor if one of nine circumstances exist as set forth in Public of nine circumstances exist as set forth in Public Contract Code Contract Code § 4107, and the procedure is § 4107, and the procedure is followed.followed.

If general contractor violates the Subcontracting If general contractor violates the Subcontracting Fair Practices Act, after a public hearing, the Fair Practices Act, after a public hearing, the district, pursuant to Public Contract Code § district, pursuant to Public Contract Code § 4110, may either cancel the contract or assess 4110, may either cancel the contract or assess a penalty of not more than 10% of the amount of a penalty of not more than 10% of the amount of the subcontract involved.the subcontract involved.


Unit Price BidsUnit Price Bids Caution should be exercised when considering Caution should be exercised when considering

the use of unit price bids. Unit price bids have the use of unit price bids. Unit price bids have historically been used by districts when the historically been used by districts when the exact amount of work or materials is not known, exact amount of work or materials is not known, so bids are called for at unit prices instead of so bids are called for at unit prices instead of lump sum.lump sum.

In Attorney General Opinion No 00-901 (2001), In Attorney General Opinion No 00-901 (2001), the Attorney General’s Office concluded that the Attorney General’s Office concluded that districts are not authorized to enter into “job districts are not authorized to enter into “job order contracts” which are competitively bid, firm order contracts” which are competitively bid, firm fixed price, indefinite quantity contracts for the fixed price, indefinite quantity contracts for the performance of minor construction, as well as performance of minor construction, as well as the renovation, alteration, painting, and repair of the renovation, alteration, painting, and repair of existing facilities.existing facilities.

For unit price bids not to be considered a job For unit price bids not to be considered a job order contract, the contract needs to contain order contract, the contract needs to contain sufficient information to identify the specific sufficient information to identify the specific projects or type of project, include a definite projects or type of project, include a definite scope of work, and restrict the duration of the scope of work, and restrict the duration of the contract.contract.

Awarding Bid to Lowest Awarding Bid to Lowest Bidder – Cont.Bidder – Cont. Alternate Bids (Public Contract Alternate Bids (Public Contract

Code Code § 20103.8)§ 20103.8) If either additive or deductive alternate If either additive or deductive alternate

bids are proposed for a project, the bid bids are proposed for a project, the bid solicitation must specify one or four solicitation must specify one or four methods which the district will utilize for methods which the district will utilize for determining the low bidder.determining the low bidder.

If no method is designated, the low If no method is designated, the low bidder is determined based on the base bidder is determined based on the base bid without consideration of the prices bid without consideration of the prices on the additive or deductive items.on the additive or deductive items.


Limiting Bidding to Specified Limiting Bidding to Specified Product or Manufacturer (Public Product or Manufacturer (Public Contract Code Contract Code § 3400)§ 3400) Public policy requires that all Public policy requires that all

responsible bidders have the responsible bidders have the opportunity to compete, so calling for a opportunity to compete, so calling for a particular brand of product or trade particular brand of product or trade name restricts the competition among name restricts the competition among bidders.bidders.

Public Contract Code §3400 contains Public Contract Code §3400 contains specific exceptions to the use of “or specific exceptions to the use of “or equal” products. Provided that the equal” products. Provided that the invitation for bids makes one of the four invitation for bids makes one of the four findings set forth in paragraph (b) of § findings set forth in paragraph (b) of § 3400, a district is authorized to use a 3400, a district is authorized to use a specific brand or trade name.specific brand or trade name.


Identical Bids (Public Contract Code Identical Bids (Public Contract Code § § 20117; Government Code § 53064)20117; Government Code § 53064) If two identical bids, the award is to be If two identical bids, the award is to be

determined by lot.determined by lot. Contract Entered Into After Competitive Contract Entered Into After Competitive

BiddingBidding The contract entered into must be substantially The contract entered into must be substantially

the same as the contract terms included in the the same as the contract terms included in the bid documents. Slight variances or incidental bid documents. Slight variances or incidental changes in the proposed form of contract will not changes in the proposed form of contract will not require readvertisement for bids.require readvertisement for bids.

Purchasing Consortiums/Cooperative Purchasing Consortiums/Cooperative Purchasing Agreements (Government Purchasing Agreements (Government Code § 6502 Code § 6502 etet seqseq.).) Districts are authorized to enter into joint powers Districts are authorized to enter into joint powers

agreements whereby they combine their agreements whereby they combine their purchasing requirements for supplies which are purchasing requirements for supplies which are common to their needs (e.g., office supplies and common to their needs (e.g., office supplies and custodial supplies.)custodial supplies.)


Participation by Disabled Veteran Participation by Disabled Veteran Business Enterprises (Military and Business Enterprises (Military and Veterans Code Veterans Code § 999 § 999 etet seqseq.; Public .; Public Contract Code § 10115 Contract Code § 10115 etet seqseq.).) School districts utilizing Propositions 47 or 55 School districts utilizing Propositions 47 or 55

funding must comply with the 3% participation funding must comply with the 3% participation goal for use of DVBEs.goal for use of DVBEs.

Contracts Subject to Labor Compliance Contracts Subject to Labor Compliance Program Enforcement (Labor Code Program Enforcement (Labor Code §1771.7)§1771.7) With the passage of AB1506 during the 2002 With the passage of AB1506 during the 2002

Legislative Term, any district public works Legislative Term, any district public works project where construction commenced on or project where construction commenced on or after April 1, 2003, and is financed with funds after April 1, 2003, and is financed with funds from either Propositions 47 or 55, must initiate from either Propositions 47 or 55, must initiate and enforce, or contract with a third party to and enforce, or contract with a third party to initiate and enforce, a Labor Compliance initiate and enforce, a Labor Compliance Program.Program.

Legal Mechanisms for Sustainable Legal Mechanisms for Sustainable BuildingsBuildings

With the ever increasing supply of funds With the ever increasing supply of funds to encourage “green” building and the to encourage “green” building and the development of alternative energy development of alternative energy sources, expanding opportunities exist sources, expanding opportunities exist for consultants to assist districts. for consultants to assist districts. During the next few slides, we will look During the next few slides, we will look at:at: Alternative Energy Public Policy.Alternative Energy Public Policy. 4 different legal mechanisms that are 4 different legal mechanisms that are

available to public agencies for the available to public agencies for the development of alternative energy development of alternative energy sources.sources.

Treatment of Environmental Treatment of Environmental Incentives.Incentives.

Alternative Energy Public PolicyAlternative Energy Public Policy

Employ measures to reduce Employ measures to reduce wasteful, uneconomical, and wasteful, uneconomical, and unnecessary uses of energy, thereby unnecessary uses of energy, thereby reducing the rate of growth of energy reducing the rate of growth of energy consumption, prudently conserve consumption, prudently conserve energy resources, and assure energy resources, and assure statewide environmental, public statewide environmental, public safety, and land use goals.safety, and land use goals.

Promote all feasible means of Promote all feasible means of energy and water conservation and energy and water conservation and all feasible uses of alternative energy all feasible uses of alternative energy and water supply sources, including, and water supply sources, including, but not limited to solar technologies.but not limited to solar technologies.

California Solar InitiativeCalifornia Solar Initiative

On August 21, 2006, Governor On August 21, 2006, Governor Schwarzenegger signed SB1 into Schwarzenegger signed SB1 into law which establishes a goal in law which establishes a goal in California to install solar energy California to install solar energy systems with a generation capacity systems with a generation capacity of 3,000 megawatts, to establish a of 3,000 megawatts, to establish a self-sufficient solar industry in which self-sufficient solar industry in which solar energy systems are a viable solar energy systems are a viable mainstream option for both homes mainstream option for both homes and businesses in 10 years, and to and businesses in 10 years, and to place solar energy systems on 50% place solar energy systems on 50% of new homes in 13 years.of new homes in 13 years.

Legal MechanismsLegal Mechanisms

Energy Management Energy Management Agreement.Agreement. Education Code sections 81660 – Education Code sections 81660 –

81662 authorize community 81662 authorize community college districts to college districts to competitively competitively bidbid and enter into energy and enter into energy management agreements for management agreements for energy management systems energy management systems involving solar energy or solar and involving solar energy or solar and energy management systems.energy management systems.

Maximum term of 15 years or Maximum term of 15 years or estimated useful life of system, estimated useful life of system, whichever is less.whichever is less.

Energy Service ContractEnergy Service Contract Energy Service Contract and Facility Energy Service Contract and Facility

Ground Lease.Ground Lease. Government Code sections Government Code sections

4217.10 – 4217.18 grant great 4217.10 – 4217.18 grant great flexibility to public agencies in flexibility to public agencies in structuring agreements for the structuring agreements for the development of energy development of energy conservation, co-generation and conservation, co-generation and alternate energy supply sources. alternate energy supply sources. Competitive bidding is not required.Competitive bidding is not required.

Conservation measures must result Conservation measures must result in reduction of energy use or more in reduction of energy use or more efficient use of energy.efficient use of energy.

Energy Service Contract – Cont.Energy Service Contract – Cont.

Governing Board must determine Governing Board must determine in noticed public hearing that in noticed public hearing that entering into the energy service entering into the energy service agreement will be in the best agreement will be in the best interests of the public agency.interests of the public agency.

Board must find (a) anticipated Board must find (a) anticipated cost of energy from cost of energy from implementation of conservation implementation of conservation measures will be less than measures will be less than existing energy costs without existing energy costs without conservation measures, and if conservation measures, and if applicable, (b) the difference, if applicable, (b) the difference, if any, between fair rental value of any, between fair rental value of the property and agreed rent will the property and agreed rent will be offset by energy savings.be offset by energy savings.

Energy Service Contract – Cont.Energy Service Contract – Cont.

If facility financing agreement, If facility financing agreement, governing board must also governing board must also determine that entering into the determine that entering into the financing agreement is in the best financing agreement is in the best interest of the public agency.interest of the public agency.

Board must make similar finding to Board must make similar finding to that of a energy service that of a energy service agreement but in addition to agreement but in addition to finding that energy savings are finding that energy savings are projected to exist, board must also projected to exist, board must also find that the energy savings will be find that the energy savings will be sufficient to repay the financing or sufficient to repay the financing or the cost of design, construction the cost of design, construction and operation of the energy and operation of the energy conservation facility.conservation facility.

Power Purchase AgreementPower Purchase Agreement

Government Code sections 5956 – Government Code sections 5956 – 5956.10 authorize governmental 5956.10 authorize governmental agencies to utilize private investment agencies to utilize private investment capital to study, plan, design, construct, capital to study, plan, design, construct, develop, finance, maintain, rebuild, develop, finance, maintain, rebuild, improve, repair, or operation, or any improve, repair, or operation, or any combination thereof, of combination thereof, of fee-producing fee-producing infrastructure facilitiesinfrastructure facilities..

Agency must solicit proposals as part of Agency must solicit proposals as part of a competitive negotiation process, but a competitive negotiation process, but neither competitive bidding nor neither competitive bidding nor compliance with any procurement compliance with any procurement provision in the Public Contract Code or provision in the Public Contract Code or Government Code is required.Government Code is required.

Purchase Power Agreement – Cont.Purchase Power Agreement – Cont.

Purchase Power Agreement is Purchase Power Agreement is required to contain certain required to contain certain provisions which are listed in your provisions which are listed in your handout.handout.

Lease of Photovoltaic System.Lease of Photovoltaic System. In implementing the 2006 In implementing the 2006

California Solar Initiative, the Los California Solar Initiative, the Los Angeles Department of Water and Angeles Department of Water and Power has instituted a Solar Power has instituted a Solar Photovoltaic Incentive Program. Photovoltaic Incentive Program. As part of this program, DWP has As part of this program, DWP has provided a lease alternative to provided a lease alternative to owning the photovoltaic system.owning the photovoltaic system.

Photovoltaic System Lease – Cont.Photovoltaic System Lease – Cont.

LADWP has imposed the following LADWP has imposed the following 5 conditions to be eligible for the 5 conditions to be eligible for the $2.80 per installed watt incentive $2.80 per installed watt incentive payment:payment: Guaranteed for minimum of 20 years.Guaranteed for minimum of 20 years. System is operational and operated System is operational and operated

at expected generation production for at expected generation production for 20 year term.20 year term.

Customer ownership by end of 20 Customer ownership by end of 20 year term.year term.

Lease payments not based on Lease payments not based on energy production from equipment.energy production from equipment.

Incentive payment made directly to Incentive payment made directly to customer.customer.

Treatment of Environmental Treatment of Environmental IncentivesIncentives

Governmental agencies should Governmental agencies should negotiate the ownership of as many negotiate the ownership of as many environmental incentives and environmental incentives and attributes as possible. A sample attributes as possible. A sample environmental incentive provision is environmental incentive provision is described in your handout whereby described in your handout whereby the agency owns all environmental the agency owns all environmental attributes and Solar Renewable attributes and Solar Renewable Energy Credits associated with the Energy Credits associated with the solar generating facility.solar generating facility.

CONCLUSIONCONCLUSION As discussed today there are numerous bidding

requirements and exceptions and general bidding principles which apply depending upon the type of contract. No matter what time constraints a district may be under, it is important to take the time to ensure that all bidding requirements and general bidding principles have been or will be complied with, and that adequate protections are included in each contract.

During the past 30 years of legislative activity in During the past 30 years of legislative activity in California on the issue of alternative energy California on the issue of alternative energy resources, a number of legal mechanisms have resources, a number of legal mechanisms have been initiated to encourage the development and been initiated to encourage the development and implementation of alternative energy sources. implementation of alternative energy sources. We have examined a few such mechanisms We have examined a few such mechanisms which will only increase with the many solutions which will only increase with the many solutions that solar power offers our global environment, that solar power offers our global environment, and ever increasing opportunities which will exist and ever increasing opportunities which will exist for consultants desiring to assist school and for consultants desiring to assist school and community college districts.community college districts.

CONTRACT LAW 101 SUPPLIES & EQUIPMENT & LEGAL MECHANISMS FOR SUSTAINABLE BUILDINGS DOUGLAS N. YEOMAN...

Documents

Transcript of CONTRACT LAW 101 SUPPLIES & EQUIPMENT & LEGAL MECHANISMS FOR SUSTAINABLE BUILDINGS DOUGLAS N. YEOMAN...