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“The Perfect Storm”

“The Perfect Storm”

How SBX2-9 Will Drastically Harm the Construction
Industry in California

“The Perfect Storm”
How SBX2-9 Will Drastically Harm the Construction
Industry in California. The currently written legislation and regulations for SBX2-9 will most certainly negatively affect Construction, Jobs and hurt the economy. Although SBX2-9 was written with good intention, it fails in the details dramatically. The law will create another massive State department called the Compliance Monitoring Unit (CMU) that is supposed to take over the responsibility of the local agency to manage labor compliance on State bond funded construction projects. The idea was for the State to mandate this requirement and charge the local agency ¼% of the construction cost to do the work. Several major problems occur immediately and have no solution.

These include:

1. The estimated revenue to be collected for this CMU department is $10-20 million annually.

  • The CMU department’s minimum expenses will be $50 Million or more to operate.
  • This is a whopping deficit to start with.
 With a State hiring freeze, my concern is that the services will just not be performed at all.

2. To make matters worse, the new CMU stated (in its’ only policy) that the services provided to the local agency will only be 40% of the monitoring currently required by the California 1776 labor laws.

  • This still leaves the local agency with a requirement to pay for the other 60% of the required monitoring.
  • I don’t think the local agencies are going to be happy when they find out they have to pay the State to do monitoring and still hire staff to meet required labor compliance laws. I anticipate a massive backlash by the local agencies.

3. The final straw in this is that the law eliminates a private industry that is already supplementing the local agency monitoring requirements.

  • This eliminates expertise of thousands of private sector jobs throughout the State
  • It basically eliminates a labor compliance system that is considered to be one of the best in the Country.
How does this“Perfect Storm” come to be?

It is being cultivated by a three events:

1. The current economic condition of the State (high unemployment)

2. Lack of construction projects in the private sector

3. SBX2-9
These are the three fronts all-moving very rapidly at each other to create the perfect storm for California Construction.

We can’t do anything about the economy, or the lack of private work, but we can do something about SBX2-9. With 1000’s of public works projects to be awarded in the next few years, swarms of contractors will be bidding on these public works projects. Contractors with little or no public works experience will do anything to win a job and that means very low bidding will occur. Many of these contractors will look to every nook and cranny to save money and make a profit on the job they just won on low bid. Labor rates and workers will be used as a way to make up the losses.
Thousands of projects will go in droves to low bidders; possibly unqualified contractors. Add the effects of SBX2-9’s lack of monitoring and the drastic need for work and you have the Perfect Storm. Those harmed will be the Local Agencies, small and large contractors, workers and craftsmen. The new, low-cost, unskilled workers will be the big beneficiary. Thousands will be employed throughout the State, bringing tax revenue down, loss of wages, and a lower quality of work. In these conditions, injury and death rates are proven to increase by up to 50%. Worker compensation will be affected as well. Where will the skilled carpenters, plumbers and electricians go? With little or no monitoring going on, many professional craftsmen will find themselves with no work.
Are we going to let the perfect storm occur? We can make some key legislative changes to fix the problems with sbx2-9. We need action and we need it quickly.

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