An article written recently for the Contra Costa Times and Oakland Tribune discusses a dated law that permits no-bid award of public contracts for energy. The law, passsed in 1983, is Government Code 4217.12, and it states,
(a) Notwithstanding any other provision of law, a public agency may enter into an energy service contract and any necessarily related facility ground lease on terms that its governing body determines are in the best interests of the public agency if the determination is made at a regularly scheduled public hearing, public notice of which is given at least two weeks in advance, and if the governing body finds:
(1) That the anticipated cost to the public agency for thermal or electrical energy or conservation services provided by the energy conservation facility under the contract will be less than the anticipated marginal cost to the public agency of thermal, electrical or other energy that would have been consumed by the public agency in the absence of those purchases.
(2) That the difference, if any, between the fair rental value for the real property subject to the facility ground lease and the agreed rent, is anticipated to be offset by below-market energy purchases or other benefits provided under the energy service contract.
While the sponsor of the bill does not specifically recall the legislative intent, it appears to reflect an early effort to award government contracts to clean energy companies that were not competitive compared to energy producers using traditional fuels. Now, as a recent contract for a solar installation awarded by the Peralta Community College District proves, this law appears to unintentionally undermine competition among sustainable energy producers. The district, even in the face of a last minute proposal from SunPower that could have saved the district $1 million, awarded the contract to Chevron Energy Solutions.
Not so long ago, in an effort to get the best deal for taxpayers, local, state, and federal governments were required to accept the lowest bid on proposals for contracts. Low-bid requirements, however, backfired often resulting in cheap, error-prone government construction. Deficient construction led to change orders, modifications, and/or repairs resulting in eventual contract prices far above initial bids. Due to these shortfalls in the bidding process, governments have turned to ”best value” bidding and procurement such as “design-build,” that affords more flexibility to the award of government contracts.
Government Code 4217.12, however, predates best-value procurement, and appears obsolete. Flexibility was the impetus behind Gov. Code 4217.12, but procurement methods now provide sufficient flexibility without the no-bid option afforded by 4217.12. The federal government procurement process is defined and regulated in Title 48 of the Code of Federal Regulation (CFR). In California, the procurement process is generally defined in the Government Code, but can be found in other areas of state law depending on the project.
As California works to expand its energy sources, and energy production takes on diverse forms, competitive bidding must return to the procurement process. Best-value bidding, while open to abuses of its own, is better than no bid process at all.
For more on the contract recently awarded to Chevron Energy Solutions by the Peralta Community College District, read the article by Matt Krupnick by clicking here
