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SR 03-27-2018 3I City Council Report City Council Meeting: March 27, 2018 Agenda Item: 3.I 1 of 4 To: Mayor and City Council From: Gigi Decavalles-Hughes, Director, Finance Department, Procurement Subject: Second Modification to Gafcon Contract for Citywide Prevailing Wage and Labor Compliance Recommended Action Staff recommends that the City Council authorize the City Manager to negotiate and execute a second modification to Contract No. 10435, in the amount of $600,000 for three years with two additional one-year renewal options with Gafcon, Inc., a California- based company, to provide citywide State and Federal labor compliance and certified payroll monitoring on an as-needed basis. This will result in a five-year amended agreement with a new total amount not to exceed $900,000, with future year funding contingent on Council budget approval. Executive Summary Since 2016, Gafcon, Inc. (Gafcon) has provided certified payroll monitoring services for city projects subject to State and Federal prevailing wage requirements. Services consist of job classification selection, certified payroll compliance monitoring, on-site interviews of workers, and enforcement if needed. Although a formal solicitation was conducted, the original three-year contract was executed under City Manager authority as a pilot to ensure compliance with state-mandated requirements in a timely fashion. At the time, staff did not have a full understanding about the quantity of projects that would require monitoring. The first modification on February 28, 2017, addressed this issue as staff developed a better understanding of actual use. As of the first modification, Gafcon was monitoring 81 projects. Gafcon is currently monitoring 105 active projects citywide. Due to an increase in the number of projects currently monitored, in anticipation of future large-scale projects, and to support the addition of Davis-Bacon Act Federal Prevailing Wage compliance monitoring, staff recommends amending the agreement with Gafcon in the amount of $600,000 for three years, with two additional one-year renewal options, for a new total amount not to exceed $900,000 over a five-year period. 2 of 4 Background Two 2014 California laws (SB 7 and SB 854) define prevailing wage requirements, and establish responsibilities for prevailing wage payment. Prevailing wage law applies to any Public Works project that exceeds $15,000 for repair/maintenance and $25,000 for new construction. The law requires prevailing wage payment to certain labor categories identified in the State of California Labor Code (commencing in Section 1770et seq.) when employed for any work on or in the execution of a Public Works project. The City must 1) award public works bids in compliance with the law and report these bid awards to the California Department of Industrial Relations (DIR); and 2) ensure contractors/subcontractors register with the DIR and provide certified payroll records to the Labor Commissioner. On May 31, 2016, following a formal Request for Proposals (RFP), under City Manager authority, staff executed agreement #3142 in the amount not to exceed $80,000 over a three-year period with Gafcon to provide certified payroll monitoring services for projects subject to State and Federal prevailing wage requirements. On February 28, 2017 (Attachment A), a first modification to Contract No. 10435 (CCS), formerly known as agreement #3142, was approved by Council in the amount of $220,000 over a three-year period with a new total amount not to exceed $300,000. Discussion City prevailing wage projects include construction and maintenance of public buildings, housing, public work infrastructure and similar facilities, and could include projects funded in part or in whole by Federal or State grants. Gafcon is currently monitoring 105 active projects Citywide. Gafcon ensures that the Prime Contractor and Subcontractors comply with all California Labor Codes as outlined by California State Department of Industrial Relations (DIR). During the span of a project, Gafcon assists with the following:  Audit of certified payroll records to assure compliance with laws/regulations; 3 of 4  Compliance with apprenticeship laws/regulations and training fund contributions;  Identifies labor compliance violations and resolves issues and calculates applicable penalties/fines;  Conducts on-site inspections and worker interviews;  Provides the City progress payment and withhold recommendations based on the contractor’s compliance with labor laws/regulations through project close-out. Gafcon will now also monitor Federal Davis-Bacon Act prevailing wage compliance requirements. This work has been done on a case-by-case basis individually by various contractors. Adding this scope to the existing contract with Gafcon will afford continuity by providing one point of contact. The City has three to five federally-funded projects which require adherence to federal and state prevailing wage laws. The added scope for this work would be minimal as three to five projects represent only approximately three to five percent of the total number of projects monitored. The larger projects currently being monitored by Gafcon include: City Services Building, Clean Beaches Initiative, Water Main Replacement, and Parking Structure Repairs. These are larger projects that require significant labor compliance and monitoring. Gafcon also oversees and manages the City’s Labor Compliance Program for Prop 84- funded projects, which includes annual reporting to DIR. The two additional one-year renewal options would ensure the projects mentioned above continue to be monitored efficiently and would ensure a smooth project close-out. Anticipated future large-scale projects include the City Yards Modernization Project, with a requested project budget of $114,000,000, and Fire Station #1, with a requested project budget of $41,000,000. Of the $600,000 requested for this second modification, approximately half will fund compliance monitoring for the current and future large-scale projects mentioned above. For example, the City Services Building alone will budget approximately $125,000 for Prevailing Wage and Labor Compliance charges. 4 of 4 Gafcon has agreed to honor their pricing for the two additional one-year renewal option terms and the additional scope. The modification amount is based on a monthly spending average of $14,700 by Departments and Divisions for a steadily increasing number of City prevailing wage projects since May 2016. Staff recommends the approval of a second modification to Contract No. 10435 (CCS) in the amount of $600,000 with two additional one-year renewal options with Gafcon to provide citywide State and Federal labor compliance and certified payroll monitoring services for a total amount not to exceed $900,000 over five years. Financial Impacts and Budget Actions The contract modification to be awarded to Gafcon is $600,000 with two additional one- year renewal options, for an amended agreement total not to exceed $900,000 over a five-year period. Funds are available within existing budgets, and would be charged to the appropriate Division or project account based on request for oversight and labor compliance services. Future year funding is contingent on Council budget approval and budget adoption. Prepared By: Araceli Esparza, Purchasing Services Manager Approved Forwarded to Council Attachments: A. February 28, 2017 Staff Report (Weblink) B. Gafcon Oaks Form REFERENCE: Modified Contract No. 10435 (CCS)