Public Agencies Can Now Use Their Own Employees Through Force Accounts, or Hire Other Entities Through Negotiated Contracts or Purchase Orders for Construction Projects Under $45,000, if they Opt into the Uniform Cost Accounting Act

The Uniform Cost Accounting Act at Public Contract Code section 22000 et seq. (“UCAA”) allows participating agencies to avoid the formal bidding procedure for projects that fall under certain cost thresholds. The UCAA includes two thresholds: 1) the "Direct Hire Threshold" which allows public agencies to hire their own employees through a force account or hire other entities directly through a negotiated contract or purchase order to perform public construction contracts and 2) the "Informal Bidding Threshold" which allows public agencies to use an informal bidding procedure. The threshold amounts set forth in the UCAA are periodically changed by the California legislature. As of January 1, 2012, the Direct Hire Threshold is $45,000, meaning any project costing $45,000 or less can be performed by the public agency's employees through a force account or the public agency can hire another entity directly through a negotiated contract or purchase order. The Informal Bidding Threshold is $175,000, meaning any contract costing $175,000 or less may be bid using the informal bidding procedure set forth in the UCAA. Any project over $175,000 must be let through formal bidding procedures.

Whenever the thresholds in the UCAA are changed, public agencies tend to reexamine whether opting into the UCAA is a good idea. In general, the UCAA is touted as a simplified bidding process. The ability to complete construction costs worth $45,000 or less without bidding is definitely appealing specifically to school districts when compared to the competitive bidding threshold of $15,000 under Public Contract Code section 20111. The informal bidding procedure, available for projects $175,000 or under, can also be a nice option as it allows school districts to avoid the formal bidding requirements of Public Contract Code section 20111. However, the UCAA does require public agencies to meet their own set of administrative requirements that can be laborious. Specifically, the public agency must pass a resolution opting into the UCAA and follow the notification procedures for informal bidding described in the UCAA.

In a nutshell, the notification procedure in the UCAA requires public agencies to mail a written notice on a yearly basis to all construction trade journals designated in the UCAA’s Commission Manual inviting licensed contractors to submit their name for inclusion on the public agency’s list of qualified bidders for the year. Based on the responses, the public agency must maintain a list of qualified contractors, organized according to categories of work. If a project qualifies for the informal bidding process, the District solicits bids from the contractors on its list and chooses the lowest responsible bidder from bids received from this list.

While maintaining a list may seem like an arduous task, it does have its benefits. For one, public agencies will know the potential bidders on a project before seeking bids. The public agency can also use the prequalification process under Public Contract Code section 20111.5 in conjunction with the list to promote a qualified pool of bidders. It is also important to note that once a public agency opts to use the UCAA, it must follow the procedures required by the UCAA for every project. In other words, public agencies cannot choose to use the UCAA for some projects and not others.

The increases in the thresholds of the UCAA offer a good opportunity for public agencies to assess whether the UCAA is a good option for its construction projects. If a public agency typically undertakes projects that fall within the thresholds noted above, it may wish to explore the UCAA option. However, all public agencies should assess the cost and time required to meet the administrative requirements associated with the UCAA, as well as the fact that large projects are still ineligible for the benefits of the UCAA, when assessing whether the UCAA offers a adequate relief from the cost and work associated with the formal bidding process.

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