Opinion Columns & Blogs - INACTIVE

AB 2316 is insider deal that soaks taxpayers

The leaseback contract that was used to build Fresno Unified’s Gaston Middle School is the subject of a lawsuit and part of a federal investigation.
The leaseback contract that was used to build Fresno Unified’s Gaston Middle School is the subject of a lawsuit and part of a federal investigation. THE FRESNO BEE FILE

The pay-to-play corruption associated with no-bid school leaseback contracts in California is well documented. Just search online for these stories: “Bankers push school bonds for C.A.S.H.,” “Centinela school corruption,” “On local school bonds, big donors often win big contracts” or “Ex-school boss pleads guilty to federal charge.”

With $25 billion-plus in school construction bonds on the 2016 ballots, the construction industry, led by the Associated General Contractors, Construction Employers Association and State Building Trades Council, is shamelessly promoting Assembly Bill 2316 to lock in advantage for a handful of large and publicly traded construction companies to the economic detriment of school districts, taxpayers and local contractors.

I hope Senate Education Committee members that include Andy Vidak, R-Hanford, will reject this crony capitalism legislation that has already passed the Assembly.

Many Assembly members from the Valley voted for this insider legislation: Joaquin Arambula, D-Kingsburg; Jim Patterson, R-Fresno; Frank Bigelow, R-O’Neals; Susan Eggman, D-Stockton; Kristin Olsen, R-Modesto; and Rudy Salas, D-Bakersfield. Two Valley lawmakers opposed it: Shannon Grove, R-Bakersfield, and Devon Mathis, R-Visalia.

AB 2316 is touted as a remedy against school-contracting corruption, but it is really a wolf in sheep’s clothing that allows and encourages continued overspending and waste of school bond tax dollars on favored insider contractors.

It is terrible special-interest legislation written to maintain a few contractors’ monopoly on bond-funded school construction contracts by allowing school boards to hand out multimillion-dollar contracts based on perceived “best value” rather than verifiable best price. “Best value” is Sacramento doublespeak for best friend or best contributor.

While AB 2316 uses the terms “competitive procurement process” and “objective criteria,” it does not sufficiently define selection criteria or evaluation standards. Thus school bureaucrats can still steer contracts to their favorite contractors based on prior relationships and/or future expectations. Without properly defined selection criteria and evaluation standards, best value continues to allow and encourage favoritism, corruption and pay to play.

Price can’t be a significant factor in the proposed contractor-selection process either. Under AB 2316, final plans and specifications approved by the Division of State Architect are no longer required at the time of contractor selection. DSA-approved plans and specifications have been required by law since 1933’s Long Beach earthquake to ensure safe and sound construction for students and maximum cost savings for school districts.

Would you ever commit to buy only from a single car dealership before you even decided what kind of car you were going to buy? That is AB 2316’s best-value selection process.

AB 2316’s best-value process is contrary to over 100 years of California law and public contracting policy designed to encourage real, open competition by all capable and qualified bidders to reduce costs and prevent crony capitalism.

Once other bidders realize they have little chance of winning contacts under AB 2316’s rigged selection process, they will stop participating – further inflating profits for the favored insiders.

Worse yet, AB 2316 retroactively allows a handful of contractors who previously broke the law to keep almost all of the tens of millions of dollars they took from California schools via prior contracts with illegal conflicts of interest. Without AB 2316, these contractors are required to return to our schools all of the money they illegally received.

After recently losing two conflict-of-interest appeals, the construction industry proponents of AB 2316 have traded their lawyers for lobbyists in the hopes they can buy from Sacramento politicians that which they could not get from the courts – a get-out-of-jail-free card.

By retroactively limiting California’s longstanding remedy for illegal public contracts, AB 2316 rewards contractors who broke the law to the financial detriment of California schools and taxpayers.

The best and safest solution is a simple one-sentence amendment to Education Code 17406 clarifying Education Code 17417’s impartial and verifiable best-price competitive bidding procedures apply to all leaseback school construction contracts.

Competitive bidding procedures for 17417 have been around since 1957, and none of the fraud, favoritism and corruption that has occurred over the last 10 years existed until those procedures were ignored based on prior self-serving amendments of Education Code 17406 lobbied for by the construction industry.

Legislation to prevent more shady leaseback school construction contracts is required, but AB 2316’s proposed “fix” will make things worse and reward the biggest offenders. The false savings and integrity proponents of AB 2316 are touting are smoke and mirrors that human nature and profit-seeking contractors can easily defeat at the expense of schools and taxpayers.

Kevin R. Carlin of San Diego is an attorney representing taxpayers and public-interest organizations throughout California. Among his clients is Fresno contractor Stephen Davis, who claims the contract used to build Fresno Unified’s Gaston Middle School is illegal and is fighting for the builder, Harris Construction, to return the $37 million spent on the project to the district.