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CONTRACT LAW 101 SUPPLIES & EQUIPMENT & LEGAL MECHANISMS FOR SUSTAINABLE BUILDINGS DOUGLAS N. YEOMAN PARKER & COVERT LLP (714) 573-0900

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Presentation on theme: "CONTRACT LAW 101 SUPPLIES & EQUIPMENT & LEGAL MECHANISMS FOR SUSTAINABLE BUILDINGS DOUGLAS N. YEOMAN PARKER & COVERT LLP (714) 573-0900"— Presentation transcript:

1 CONTRACT LAW 101 SUPPLIES & EQUIPMENT & LEGAL MECHANISMS FOR SUSTAINABLE BUILDINGS DOUGLAS N. YEOMAN PARKER & COVERT LLP (714)

2 INTRODUCTION 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.

3 OVERVIEW 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.

4 COMPETITIVE BIDDING REQUIREMENTS Duty to publicly bid contracts. Duty to publicly bid contracts. Public Contract Code § (K-12) Public Contract Code § (K-12) Public Contract Code § (CC) Public Contract Code § (CC) Purpose of competitive bidding is to eliminate favoritism, fraud and corruption; avoid misuse of public funds; and stimulate advantageous market place competition. Purpose of competitive bidding is to eliminate favoritism, fraud and corruption; avoid misuse of public funds; and stimulate advantageous market place competition.

5 COMPETITIVE BIDDING REQUIREMENTS – Cont. Payment on contracts made in violation of the competitive bidding laws is prohibited. Payment on contracts made in violation of the competitive bidding laws is prohibited California Supreme Court case of Reams v. Cooley ruled that when a statute prescribes the method of contracting, a contract made in violation of the statutorily prescribed mode is void California Supreme Court case of Reams v. Cooley ruled that when a statute prescribes the method of contracting, a contract made in violation of the statutorily prescribed mode is void.

6 EXCEPTIONS TO COMPETITIVE BIDDING Notwithstanding the competitive bidding requirements, certain exceptions provide a district with flexibility to enter into contracts without lengthy procurement procedures. Notwithstanding the competitive bidding requirements, certain exceptions provide a district with flexibility to enter into contracts without lengthy procurement procedures. Contract amounts less than statutory threshold (Public Contract Code § 20111; 20651) Contract amounts less than statutory threshold (Public Contract Code § 20111; 20651) Emergency Contracting (Public Contract Code §§ 20113; 20654; 1102) Emergency Contracting (Public Contract Code §§ 20113; 20654; 1102) Section 1102 defines emergency as a sudden, unexpected occurrence that poses a clear and imminent danger, requiring immediate action to prevent or mitigate the loss or impairment of life, health, property, or essential public services. Section 1102 defines emergency as a sudden, unexpected occurrence that poses a clear and imminent danger, requiring immediate action to prevent or mitigate the loss or impairment of life, health, property, or essential public services.

7 EXCEPTIONS TO COMPETITIVE BIDDING- Cont. Sole Source (Case Law) Sole Source (Case Law) Where competitive bidding will produce no advantage, will not affect the final result, or it is practically impossible to obtain what is required, then competitive bidding may be dispensed with. Where competitive bidding will produce no advantage, will not affect the final result, or it is practically impossible to obtain what is required, then competitive bidding may be dispensed with. Day Labor (Public Contract Code § 20114; 20655) Day Labor (Public Contract Code § 20114; 20655) May make repairs, alterations, additions or painting or repainting or decorating school buildings, repair or build apparatus or equipment, make improvements on school grounds and erect new buildings and perform maintenance, provided total job hours do not exceed 350 hours. May make repairs, alterations, additions or painting or repainting or decorating school buildings, repair or build apparatus or equipment, make improvements on school grounds and erect new buildings and perform maintenance, provided total job hours do not exceed 350 hours.

8 EXCEPTIONS TO COMPETITIVE BIDDING- Cont. Continuing Contract Exception (Case Law) Continuing Contract Exception (Case Law) Completion contractor may be retained without competitive bid where contract provides for the completion of work in the event of contractor termination for substantial violation of contact. Completion contractor may be retained without competitive bid where contract provides for the completion of work in the event of contractor termination for substantial violation of contact. Alternative Procurement Procedure (Public Contract Code § 22010) Alternative Procurement Procedure (Public Contract Code § 22010) Applicable to public agencies who by board resolution have elected to become subject to the uniform construction cost accounting procedures commencing with § and has notified the State Controller. Applicable to public agencies who by board resolution have elected to become subject to the uniform construction cost accounting procedures commencing with § and has notified the State Controller. Increases bidding threshold to projects over $100,000; establishes an informal bidding procedure for projects of $100,000 or less; and authorizes projects of $25,000 or less to be performed by employees of the district by force account, by negotiated contract, or by purchase order. Increases bidding threshold to projects over $100,000; establishes an informal bidding procedure for projects of $100,000 or less; and authorizes projects of $25,000 or less to be performed by employees of the district by force account, by negotiated contract, or by purchase order.

9 EXCEPTIONS TO COMPETITIVE BIDDING- Cont. Personal Property Purchases (Public Contract Code § 20118; 20652) Personal Property Purchases (Public Contract Code § 20118; 20652) If governing board has determined it to be in the best interest of the district, board may authorize by contract, lease, requisition, or purchase order, any public corporation or agency, to lease data-processing equipment, purchase materials, supplies, equipment, automotive vehicles, tractors, and other personal property for the district in the manner in which the public corporation or agency is authorized by law to make the leases or purchases from a vendor. If governing board has determined it to be in the best interest of the district, board may authorize by contract, lease, requisition, or purchase order, any public corporation or agency, to lease data-processing equipment, purchase materials, supplies, equipment, automotive vehicles, tractors, and other personal property for the district in the manner in which the public corporation or agency is authorized by law to make the leases or purchases from a vendor.

10 EXCEPTIONS TO COMPETITIVE BIDDING- Cont. Personal Property Purchases – Cont. Personal Property Purchases – Cont. Upon receipt of the personal property which complies with the contract specifications, district draws a warrant in favor of the public corporation or agency, or may make a direct payment to the vendor. Upon receipt of the personal property which complies with the contract specifications, district draws a warrant in favor of the public corporation or agency, or may make a direct payment to the vendor. So called piggyback contracts have been abused by districts to include more than incidental services along with personal property acquisitions. So called piggyback contracts have been abused by districts to include more than incidental services along with personal property acquisitions. January 24, 2006, Office of the Attorney General issued an opinion requested by SAB on use of piggyback contracts to acquire factory-built modular building components for installation on a permanent foundation. January 24, 2006, Office of the Attorney General issued an opinion requested by SAB on use of piggyback contracts to acquire factory-built modular building components for installation on a permanent foundation.

11 EXCEPTIONS TO COMPETITIVE BIDDING- Cont. AG concluded that school districts may not use piggyback contracts for such acquisitions, but left open the ability to purchase portable and relocatable classrooms through use of piggyback contracts. AG concluded that school districts may not use piggyback contracts for such acquisitions, but left open the ability to purchase portable and relocatable classrooms through use of piggyback contracts. The AG opinion also included a footnote stating that section provides no authority for a school district contract directly with a lessor or vendor. In response to the AG opinion, section was amended during the 2006 Legislative Term (A.B. 1967) to specifically allows a district to make payment directly to the vendor. The AG opinion also included a footnote stating that section provides no authority for a school district contract directly with a lessor or vendor. In response to the AG opinion, section was amended during the 2006 Legislative Term (A.B. 1967) to specifically allows a district to make payment directly to the vendor.

12 EXCEPTIONS TO COMPETITIVE BIDDING- Cont. Ten Percent Limitation on Changes (Public Contract Code § ; 20659) Ten Percent Limitation on Changes (Public Contract Code § ; 20659) Changes permissible if cost does not exceed the greater of the applicable bidding statute or 10% of the original contract price. Changes permissible if cost does not exceed the greater of the applicable bidding statute or 10% of the original contract price. Does 10% rule apply to each change order or cumulatively? Does 10% rule apply to each change order or cumulatively? Educational Material (Public Contract Code § ; Ed. Code § 81651) Educational Material (Public Contract Code § ; Ed. Code § 81651) May purchase supplemental textbooks, library books, educational films, audiovisual materials, test materials, workbooks, and periodicals without taking estimates or advertising for bids. May purchase supplemental textbooks, library books, educational films, audiovisual materials, test materials, workbooks, and periodicals without taking estimates or advertising for bids.

13 EXCEPTIONS TO COMPETITIVE BIDDING- Cont. Perishable Foodstuffs & Seasonal Commodities (Ed. Code § 38083; Public Contract Code § 20660) Perishable Foodstuffs & Seasonal Commodities (Ed. Code § 38083; Public Contract Code § 20660) Energy Service and Conservation Contracts (Government Code §§ to ) Energy Service and Conservation Contracts (Government Code §§ to ) A closer look at the legal mechanisms available to districts for the development of alternative energy sources will be explored later in the presentation. A closer look at the legal mechanisms available to districts for the development of alternative energy sources will be explored later in the presentation. Energy service contracts must only include conservation measures, meaning electrical, maintenance, load management techniques and equipment, or other measures to reduce energy or make for a more efficient use of energy. Energy service contracts must only include conservation measures, meaning electrical, maintenance, load management techniques and equipment, or other measures to reduce energy or make for a more efficient use of energy.

14 EXCEPTIONS TO COMPETITIVE BIDDING- Cont. Contracts for Special Services (Government Code § 53060) Contracts for Special Services (Government Code § 53060) District may contract for special services and advice in financial, economic, accounting, engineering, legal, or administrative matters if such persons are specially trained and experienced and competent to perform the special services required. District may contract for special services and advice in financial, economic, accounting, engineering, legal, or administrative matters if such persons are specially trained and experienced and competent to perform the special services required.

15 GENERAL BIDDING PRINCIPLES Conflict of Interest in Bids Where Bidder Assists in Preparation of Specifications Conflict of Interest in Bids Where Bidder Assists in Preparation of Specifications Consultant assisting district in preparation of bid documents or the plans and specifications to be used in the bid process should not bid on the contract, in order to avoid violating Government Code § Consultant assisting district in preparation of bid documents or the plans and specifications to be used in the bid process should not bid on the contract, in order to avoid violating Government Code § Request for Bids Versus Request for Proposals Request for Bids Versus Request for Proposals Request for bids is a competitive bidding process, with specific statutory requirements, and where the district publishes bid specifications and contractual provisions which all bidders must meet. Request for bids is a competitive bidding process, with specific statutory requirements, and where the district publishes bid specifications and contractual provisions which all bidders must meet.

16 GENERAL BIDDING PRINCIPLES – Cont. Request for Bids Versus Request for Proposals – Cont. Request for Bids Versus Request for Proposals – Cont. Request for proposals is not a competitive bid process. District normally will establish certain general requirements and vendors are asked to submit their own proposals to meet these requirements. The RFP process normally also includes the negotiation between the district with one or more of the proposers. Request for proposals is not a competitive bid process. District normally will establish certain general requirements and vendors are asked to submit their own proposals to meet these requirements. The RFP process normally also includes the negotiation between the district with one or more of the proposers. Award to Any of Three Lowest Responsible Bidders for Data Processing Systems and Supporting Software (Public Contract Code § ; Ed. Code § 81645) Award to Any of Three Lowest Responsible Bidders for Data Processing Systems and Supporting Software (Public Contract Code § ; Ed. Code § 81645)

17 GENERAL BIDDING PRINCIPLES – Cont. Transportation Contracts (Ed. Code § 39802) Transportation Contracts (Ed. Code § 39802) Modified competitive bidding procedure for expenditures in excess of $10,000, allows the governing board to award a transportation contract to other than the lowest bidder, provided that the prevailing bidder can supply the better service. Modified competitive bidding procedure for expenditures in excess of $10,000, allows the governing board to award a transportation contract to other than the lowest bidder, provided that the prevailing bidder can supply the better service. Awarding Bid to Lowest Responsible Responsive Bidder Awarding Bid to Lowest Responsible Responsive Bidder Responsive Bidder (Waiver of Minor Variations). A bid in response to a request for competitive bids must substantially conform to the specifications in the proposal. Responsive Bidder (Waiver of Minor Variations). A bid in response to a request for competitive bids must substantially conform to the specifications in the proposal.

18 Awarding Bid to Lowest Bidder – Cont. Minor irregularities in a bid may be waived. What constitutes a minor irregularity requires looking at the following factors: whether the deviation could be a vehicle for favoritism; affect the amount of the bid; influence potential bidders to refrain from bidding; or effect the ability to make bid comparisons. Minor irregularities in a bid may be waived. What constitutes a minor irregularity requires looking at the following factors: whether the deviation could be a vehicle for favoritism; affect the amount of the bid; influence potential bidders to refrain from bidding; or effect the ability to make bid comparisons. Responsible Bidder Responsible Bidder Is the bidder qualified, e.g. possess the quality, fitness and capacity to satisfactorily perform the particular work under consideration. Is the bidder qualified, e.g. possess the quality, fitness and capacity to satisfactorily perform the particular work under consideration. If determined not to be a responsible bidder, the 1972 case of City of Inglewood – L.A. County Civic Center Authority v. Superior Court, requires that before rejecting its bid as a non- responsible bidder, the district must notify the bidder of any evidence reflecting upon its responsibility and afford that bidder an opportunity to rebut such adverse evidence and to present evidence that it is qualified to perform the contract to the public body. If determined not to be a responsible bidder, the 1972 case of City of Inglewood – L.A. County Civic Center Authority v. Superior Court, requires that before rejecting its bid as a non- responsible bidder, the district must notify the bidder of any evidence reflecting upon its responsibility and afford that bidder an opportunity to rebut such adverse evidence and to present evidence that it is qualified to perform the contract to the public body.

19 Awarding Bid to Lowest Bidder – Cont. Rejection of All Bids Rejection of All Bids Provided that the bid documents contain an express reservation of the right to reject all bids, the courts have routinely upheld such decisions for any reason and at any time before a district accepts a bid. Provided that the bid documents contain an express reservation of the right to reject all bids, the courts have routinely upheld such decisions for any reason and at any time before a district accepts a bid. Bid Security (Public Contract Code § 20111; 20651) Bid Security (Public Contract Code § 20111; 20651) All bids for construction work must be accompanied by bid security in the form of (1) cash, (2) a cashiers check made payable to the district, (3) a certified check made payable to the district, or (4) a bidders bond executed by an admitted surety insurer. All bids for construction work must be accompanied by bid security in the form of (1) cash, (2) a cashiers check made payable to the district, (3) a certified check made payable to the district, or (4) a bidders bond executed by an admitted surety insurer.

20 Awarding Bid to Lowest Bidder – Cont. Bid Security – Cont. Bid Security – Cont. Bids for materials and supplies may, but need not, require bid security. Bids for materials and supplies may, but need not, require bid security. Award of Multiple Contracts From One Bid Award of Multiple Contracts From One Bid If different portions of a project are called out in a bid, the district cannot reserve the right to divide the work after the bids are received. If different portions of a project are called out in a bid, the district cannot reserve the right to divide the work after the bids are received. Substitution of Subcontractors (Public Contract Code §4100 et seq.) Substitution of Subcontractors (Public Contract Code §4100 et seq.) Purpose is to prevent the practice of bid shopping and bid peddling. Purpose is to prevent the practice of bid shopping and bid peddling.

21 Awarding Bid to Lowest Bidder – Cont. Substitution of Subcontractors- Cont. Substitution of Subcontractors- Cont. Subcontractors must be listed for subcontract work, including fabrication and installation, constituting more than one half of one percent of the total bid. Subcontractors must be listed for subcontract work, including fabrication and installation, constituting more than one half of one percent of the total bid. If more than one subcontractor listed for the same portion of work, prime contractor agrees that it is fully qualified to perform that portion itself and it shall perform that portion. If more than one subcontractor listed for the same portion of work, prime contractor agrees that it is fully qualified to perform that portion itself and it shall perform that portion. May only substitute a listed subcontractor if one of nine circumstances exist as set forth in Public Contract Code § 4107, and the procedure is followed. May only substitute a listed subcontractor if one of nine circumstances exist as set forth in Public Contract Code § 4107, and the procedure is followed. If general contractor violates the Subcontracting Fair Practices Act, after a public hearing, the district, pursuant to Public Contract Code § 4110, may either cancel the contract or assess a penalty of not more than 10% of the amount of the subcontract involved. If general contractor violates the Subcontracting Fair Practices Act, after a public hearing, the district, pursuant to Public Contract Code § 4110, may either cancel the contract or assess a penalty of not more than 10% of the amount of the subcontract involved.

22 Awarding Bid to Lowest Bidder – Cont. Unit Price Bids Unit Price Bids Caution should be exercised when considering the use of unit price bids. Unit price bids have historically been used by districts when the exact amount of work or materials is not known, so bids are called for at unit prices instead of lump sum. Caution should be exercised when considering the use of unit price bids. Unit price bids have historically been used by districts when the exact amount of work or materials is not known, so bids are called for at unit prices instead of lump sum. In Attorney General Opinion No (2001), the Attorney Generals Office concluded that districts are not authorized to enter into job order contracts which are competitively bid, firm fixed price, indefinite quantity contracts for the performance of minor construction, as well as the renovation, alteration, painting, and repair of existing facilities. In Attorney General Opinion No (2001), the Attorney Generals Office concluded that districts are not authorized to enter into job order contracts which are competitively bid, firm fixed price, indefinite quantity contracts for the performance of minor construction, as well as the renovation, alteration, painting, and repair of existing facilities. For unit price bids not to be considered a job order contract, the contract needs to contain sufficient information to identify the specific projects or type of project, include a definite scope of work, and restrict the duration of the contract. For unit price bids not to be considered a job order contract, the contract needs to contain sufficient information to identify the specific projects or type of project, include a definite scope of work, and restrict the duration of the contract.

23 Awarding Bid to Lowest Bidder – Cont. Alternate Bids (Public Contract Code § ) Alternate Bids (Public Contract Code § ) If either additive or deductive alternate bids are proposed for a project, the bid solicitation must specify one or four methods which the district will utilize for determining the low bidder. If either additive or deductive alternate bids are proposed for a project, the bid solicitation must specify one or four methods which the district will utilize for determining the low bidder. If no method is designated, the low bidder is determined based on the base bid without consideration of the prices on the additive or deductive items. If no method is designated, the low bidder is determined based on the base bid without consideration of the prices on the additive or deductive items.

24 Awarding Bid to Lowest Bidder – Cont. Limiting Bidding to Specified Product or Manufacturer (Public Contract Code § 3400) Limiting Bidding to Specified Product or Manufacturer (Public Contract Code § 3400) Public policy requires that all responsible bidders have the opportunity to compete, so calling for a particular brand of product or trade name restricts the competition among bidders. Public policy requires that all responsible bidders have the opportunity to compete, so calling for a particular brand of product or trade name restricts the competition among bidders. Public Contract Code §3400 contains specific exceptions to the use of or equal products. Provided that the invitation for bids makes one of the four findings set forth in paragraph (b) of § 3400, a district is authorized to use a specific brand or trade name. Public Contract Code §3400 contains specific exceptions to the use of or equal products. Provided that the invitation for bids makes one of the four findings set forth in paragraph (b) of § 3400, a district is authorized to use a specific brand or trade name.

25 Awarding Bid to Lowest Bidder – Cont. Identical Bids (Public Contract Code § 20117; Government Code § 53064) Identical Bids (Public Contract Code § 20117; Government Code § 53064) If two identical bids, the award is to be determined by lot. If two identical bids, the award is to be determined by lot. Contract Entered Into After Competitive Bidding Contract Entered Into After Competitive Bidding The contract entered into must be substantially the same as the contract terms included in the bid documents. Slight variances or incidental changes in the proposed form of contract will not require readvertisement for bids. The contract entered into must be substantially the same as the contract terms included in the bid documents. Slight variances or incidental changes in the proposed form of contract will not require readvertisement for bids. Purchasing Consortiums/Cooperative Purchasing Agreements (Government Code § 6502 et seq.) Purchasing Consortiums/Cooperative Purchasing Agreements (Government Code § 6502 et seq.) Districts are authorized to enter into joint powers agreements whereby they combine their purchasing requirements for supplies which are common to their needs (e.g., office supplies and custodial supplies.) Districts are authorized to enter into joint powers agreements whereby they combine their purchasing requirements for supplies which are common to their needs (e.g., office supplies and custodial supplies.)

26 Awarding Bid to Lowest Bidder – Cont. Participation by Disabled Veteran Business Enterprises (Military and Veterans Code § 999 et seq.; Public Contract Code § et seq.) Participation by Disabled Veteran Business Enterprises (Military and Veterans Code § 999 et seq.; Public Contract Code § et seq.) School districts utilizing Propositions 47 or 55 funding must comply with the 3% participation goal for use of DVBEs. School districts utilizing Propositions 47 or 55 funding must comply with the 3% participation goal for use of DVBEs. Contracts Subject to Labor Compliance Program Enforcement (Labor Code §1771.7) Contracts Subject to Labor Compliance Program Enforcement (Labor Code §1771.7) With the passage of AB1506 during the 2002 Legislative Term, any district public works project where construction commenced on or after April 1, 2003, and is financed with funds from either Propositions 47 or 55, must initiate and enforce, or contract with a third party to initiate and enforce, a Labor Compliance Program. With the passage of AB1506 during the 2002 Legislative Term, any district public works project where construction commenced on or after April 1, 2003, and is financed with funds from either Propositions 47 or 55, must initiate and enforce, or contract with a third party to initiate and enforce, a Labor Compliance Program.

27 Legal Mechanisms for Sustainable Buildings With the ever increasing supply of funds to encourage green building and the development of alternative energy sources, expanding opportunities exist for consultants to assist districts. During the next few slides, we will look at: With the ever increasing supply of funds to encourage green building and the development of alternative energy sources, expanding opportunities exist for consultants to assist districts. During the next few slides, we will look at: Alternative Energy Public Policy. Alternative Energy Public Policy. 4 different legal mechanisms that are available to public agencies for the development of alternative energy sources. 4 different legal mechanisms that are available to public agencies for the development of alternative energy sources. Treatment of Environmental Incentives. Treatment of Environmental Incentives.

28 Alternative Energy Public Policy Employ measures to reduce wasteful, uneconomical, and unnecessary uses of energy, thereby reducing the rate of growth of energy consumption, prudently conserve energy resources, and assure statewide environmental, public safety, and land use goals. Employ measures to reduce wasteful, uneconomical, and unnecessary uses of energy, thereby reducing the rate of growth of energy consumption, prudently conserve energy resources, and assure statewide environmental, public safety, and land use goals. Promote all feasible means of energy and water conservation and all feasible uses of alternative energy and water supply sources, including, but not limited to solar technologies. Promote all feasible means of energy and water conservation and all feasible uses of alternative energy and water supply sources, including, but not limited to solar technologies.

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

30 Legal Mechanisms Energy Management Agreement. Energy Management Agreement. Education Code sections – authorize community college districts to competitively bid and enter into energy management agreements for energy management systems involving solar energy or solar and energy management systems. Education Code sections – authorize community college districts to competitively bid and enter into energy management agreements for energy management systems involving solar energy or solar and energy management systems. Maximum term of 15 years or estimated useful life of system, whichever is less. Maximum term of 15 years or estimated useful life of system, whichever is less.

31 Energy Service Contract Energy Service Contract and Facility Ground Lease. Energy Service Contract and Facility Ground Lease. Government Code sections – grant great flexibility to public agencies in structuring agreements for the development of energy conservation, co-generation and alternate energy supply sources. Competitive bidding is not required. Government Code sections – grant great flexibility to public agencies in structuring agreements for the development of energy conservation, co-generation and alternate energy supply sources. Competitive bidding is not required. Conservation measures must result in reduction of energy use or more efficient use of energy. Conservation measures must result in reduction of energy use or more efficient use of energy.

32 Energy Service Contract – Cont. Governing Board must determine in noticed public hearing that entering into the energy service agreement will be in the best interests of the public agency. Governing Board must determine in noticed public hearing that entering into the energy service agreement will be in the best interests of the public agency. Board must find (a) anticipated cost of energy from implementation of conservation measures will be less than existing energy costs without conservation measures, and if applicable, (b) the difference, if any, between fair rental value of the property and agreed rent will be offset by energy savings. Board must find (a) anticipated cost of energy from implementation of conservation measures will be less than existing energy costs without conservation measures, and if applicable, (b) the difference, if any, between fair rental value of the property and agreed rent will be offset by energy savings.

33 Energy Service Contract – Cont. If facility financing agreement, governing board must also determine that entering into the financing agreement is in the best interest of the public agency. If facility financing agreement, governing board must also determine that entering into the financing agreement is in the best interest of the public agency. Board must make similar finding to that of a energy service agreement but in addition to finding that energy savings are projected to exist, board must also find that the energy savings will be sufficient to repay the financing or the cost of design, construction and operation of the energy conservation facility. Board must make similar finding to that of a energy service agreement but in addition to finding that energy savings are projected to exist, board must also find that the energy savings will be sufficient to repay the financing or the cost of design, construction and operation of the energy conservation facility.

34 Power Purchase Agreement Government Code sections 5956 – authorize governmental agencies to utilize private investment capital to study, plan, design, construct, develop, finance, maintain, rebuild, improve, repair, or operation, or any combination thereof, of fee-producing infrastructure facilities. Government Code sections 5956 – authorize governmental agencies to utilize private investment capital to study, plan, design, construct, develop, finance, maintain, rebuild, improve, repair, or operation, or any combination thereof, of fee-producing infrastructure facilities. Agency must solicit proposals as part of a competitive negotiation process, but neither competitive bidding nor compliance with any procurement provision in the Public Contract Code or Government Code is required. Agency must solicit proposals as part of a competitive negotiation process, but neither competitive bidding nor compliance with any procurement provision in the Public Contract Code or Government Code is required.

35 Purchase Power Agreement – Cont. Purchase Power Agreement is required to contain certain provisions which are listed in your handout. Purchase Power Agreement is required to contain certain provisions which are listed in your handout. Lease of Photovoltaic System. Lease of Photovoltaic System. In implementing the 2006 California Solar Initiative, the Los Angeles Department of Water and Power has instituted a Solar Photovoltaic Incentive Program. As part of this program, DWP has provided a lease alternative to owning the photovoltaic system. In implementing the 2006 California Solar Initiative, the Los Angeles Department of Water and Power has instituted a Solar Photovoltaic Incentive Program. As part of this program, DWP has provided a lease alternative to owning the photovoltaic system.

36 Photovoltaic System Lease – Cont. LADWP has imposed the following 5 conditions to be eligible for the $2.80 per installed watt incentive payment: LADWP has imposed the following 5 conditions to be eligible for the $2.80 per installed watt incentive payment: Guaranteed for minimum of 20 years. Guaranteed for minimum of 20 years. System is operational and operated at expected generation production for 20 year term. System is operational and operated at expected generation production for 20 year term. Customer ownership by end of 20 year term. Customer ownership by end of 20 year term. Lease payments not based on energy production from equipment. Lease payments not based on energy production from equipment. Incentive payment made directly to customer. Incentive payment made directly to customer.

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

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


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