If you google the term “lease lease back” the top hit is Blach Construction, Cabrillo Unified School District’s six time no bid contract vendor, where $45.3M or 72% of all our Measure S dollars have gone. Many feel that school districts throughout California have used “lease lease back” agreements to circumvent competitive bidding laws that are designed to ensure most efficient use of taxpayer dollars.
On February 12, 2015, CUSD made the unusual negotiating move of announcing they had selected Blach Construction as the no bid builder for the Cunha gym, Pilarcitos, and Hatch, long before they had any agreements in hand. The first two no bid contracts with Blach Construction were signed four months later in June 2015.
The CUSD Board then proceeded to sign six different no bid contracts totaling over $45.3M over less than 20 months with Blach. CUSD has spent $5.5M with Atlas Pellizzari Electric in six subcontracts. CUSD Construction Manager and Boys and Girls Club of the Coastside board member Ed Watkins provides a glowing review of Atlas Pellizzari Electric here
Atlas Pellizzari Electric brags about their relationship with Blach Construction here
|2015-06-18||498659||Blach construction||5 - 0||Approve a Lease-Lease Back Contract for Construction of the Temporary Campus for Pilarcitos High School|
|2015-06-18||333400||Blach construction||5 - 0||Approve Preliminary Service Agreements with Blach Construction for Hatch and Pilarcitos|
|2015-08-13||4837518||Blach construction||5 - 0||Approve a Lease-Lease Back Contract for Construction of Hatch Phase I Construction Project|
|2015-11-12||5261522||Blach construction||5 - 0||Approve a Lease-Lease Back Contract for Pilarcitos|
|2016-06-23||19773645||Blach construction||4 - 0 Michael Ahern absent||Approve a Lease-Lease Back Contract for Construction of Hatch Phase II|
|2017-01-19||14609722||Blach construction||5 - 0||Approve Lease-Lease Back Agreement with Blach Construction for Cunha C Building Repairs, except for waterproofing repairs|
|45314466||Grand Total all funds spent with or committed to Blach Construction|
|2015-06-18||78650||Atlas Pellizzari Electric||Blach||Temporary Campus for Pilarcitos High School|
|2015-08-13||1009290||Atlas Pellizzari Electric||Blach||Hatch Phase I|
|2015-11-12||851000||Atlas Pellizzari Electric||Clark/Sullivan Construction||Cunha Gym|
|2015-11-12||456960||Atlas Pellizzari Electric||Blach||Pilarcitos|
|2016-06-23||2770340||Atlas Pellizzari Electric||Blach||Hatch Phase II|
|2016-06-23||326300||Atlas Pellizzari Electric||Blach||Cunha C Building temporary|
|5492540||Grand Total all funds spent with or committed to Atlas Pellizzari Electric|
Just a few weeks after CUSD signed its first no two bid contracts with Blach Construction in June 2015, in July 2015 a California Appeals Court ruled that a lease leaseback contract was simply a way to get around competitive bidding requirements and ruled that contract illegal, potentially invalidating no bid contracts statewide
Billions of dollars in California school construction projects are in legal limbo after a state appellate court ruling determined the no-bid contract used to hire a construction firm in a Central Valley school district — a kind of contract found in districts across the state — was illegal.
The court ruled that the Fresno Unified School District misused a provision of state law called “lease-leaseback,” which allows districts to lease property to a contractor, who then builds or fixes school buildings, without a competitive bidding process that would otherwise give the job to the lowest bidder.
The July 2015 court ruling didn’t slow down CUSD, they signed the third no bid contract with Blach Construction a month later in August 2015, then two more no bid contracts with Blach Construction later in 2015 and 2016.
On September 26, 2016, Governor Brown signed AB2316 which requires competitive bidding for lease leaseback construction effective January 1, 2017. Ironically, here’s a link on CUSD’s law firm’s website about AB2316
Before AB 2316, school districts had the flexibility of entering into Lease-Leaseback agreements without formally advertising for bids, and without restriction on the school district’s discretion regarding the basis for an award of contract. Beginning January 1, 2017, school districts using Lease-Leaseback will have to abide by procurement procedures reminiscent of Design-Build requirements. In summary, the new law will require:
- Governing boards to adopt and publish procedures for evaluating proposers in accordance with a “best value” competitive procurement process;
- School districts to use a Request for Proposal (RFP) that discloses its “best value” evaluation and methodology criteria, which may be preceded by a Request for Qualifications (RFQ), if desired;
- School districts to formally advertise its RFP;
- School districts must publicly announce the award and basis for the award.
On January 19, 2017, the CUSD Board approved the latest no bid contract with Blach Construction, this one for $14.6M for Building C repairs. This contract did not have any bids, so it did not conform to AB 2316 which had taken effect on January 1, 2017.
The CUSD Board then spent most of 2017 trying to fix the January 19, 2017 no bid contract to make it legal, all the while apparently not withdrawing the original January 19 no bid contract.
In March 9, 2017, the CUSD Board approved a lease lease back RFP criteria with a 100 point rating system.
On May 25, 2017, the CUSD Board awarded Blach Construction a perfect 250 out of 250 points in their lease lease back RFP criteria with no explanation for how the criteria had changed since March.
On November 9, 2017, the CUSD Board ratified a lease lease back agreement with Blach Construction that has no guaranteed maximum price. The guaranteed maximum price was the only advantage of using a no bid contract, so now CUSD taxpayers are getting the worst possible deal to fix Building C – a contract with no guaranteed maximum price.
On December 14, 2017, the CUSD Board approved an $509,147 Architecture contract with CAW, who bragged that they have “a long-standing relationship with Blach Construction” and then told us “The project will be developed in partnership with Blach Construction who will lead the project as a lease-leaseback.”
Our vendors are telling us who will execute a construction contract before it has been bid.