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10. Disadvantaged Bus. Enterpr I ]~I . ,.\~ /' " /---' - --, . City Hall 10300 Torre Avenue Cupertino, CA 95014-3202 (408) 777-3354 F J..X (188) ;;; 2J22 F CUPEIQ1NO PUBLIC WORKS DEPARTMENT Summary AGENDA ITEM I D AGENDA DATE November 1. 2005 SUBJECT AND ISSUE Items related to the City's Disadvantaged Business Enterprises (DBE) Program for Federal-aid Contracts: A. Adopt Resolution No. 05- 18'J., : Intent to Establish a Disadvantaged Business Enterprises DBE Participation Goal for Federally Funded Projects for the Federal Fiscal year 2005-06. B. Adopt Resolution No. 05- J B 3 : Adopting a Method To Be Used in Federal- Aid Contracts to Ensure Prompt and Full Payment of Any Retainage Kept by the Prime Contractor or Subcontractor to Any Subcontractor, Per 49 Code of Federal Regulations (CFR) 26.29 and Chapter 9 of California Department of Transportation Local Assistance Procedures Manual. C. Adopt Resolution No. 05- If) 'I : Authorizing the City Manager to Appoint a Disadvantaged Business Enterprise Liaison Officer. BACKGROUND Disadvantaged Business Enterprises DBE Participation Goal On February 5, 2001, the City adopted a Disadvantaged Business Enterprise (DBE) program in compliance with new requirements of Title 49 of the Code of Federal Regulations (CFR), Part 26. This action was necessary for the City to remain eligible for U.S. Department of Transportation (DOT) funds for Federal-aid transportation projects and other Federal-aid projects. The DBE program adopted by the California Department of Transportation (Ca1trans), which established the compliance procedures for agencies within California, requires that the participating agencies establish a DBE participation goal and re-evaluate it annually. A participating agency need not perform the annual re- evaluation for years in which it has no Federal-aid projects authorized. lð-I Printed on Recycled Paper The City has specific Federal-aid projects progranuned for fiscal year 2005-06. The recent reauthorization of the Federal Transportation Equity Act for the 21 st Century (TEA-21) as the Safe, Accountable, Flexible, and Efficient Transportation Equity Act: A Legacy for Users, or SAFETEA-LU, has released federal transportation funds that will be available to the City of Cupertino during that period. The City has also received commitments for other federal-aid monies in the form of a Hazard Elimination Safety Program (HES) grant and a California Office of Traffic Safety (OTS) grant. For that reason, the City needs to have a current DBE participation goal in place. In accordance with DOT regulations, 49 CFR Part 26, Staff has calculated a Disadvantaged Business Enterprise (DBE) goal of 18.8 % for Federally funded projects for the 2005/06 Federal fiscal year. This overall goal is broken down into 18.8 % race- conscious and 0% race-neutral components. The race-conscious component is an overall goal component that focuses on assisting only DBEs. The use of contract goals is the primary example of a race-conscious measure in the DBE program. Race-neutral DBE participation includes any time a DBE obtains a prime contract through customary competitive procurement procedures, is awarded a subcontract on a prime contract that does not carry a DBE goal, or even if there is a DBE goal, obtains a subcontract from a prime contractor that did not consider its DBE status in making the award. This proposed goal, together with the methodology used to calculate the goal, and the breakout of estimated race-neutral and race-conscious participation was submitted to Caltrans for review and comment. Caltrans responded and its comments have been incorporated into the draft overall goal information. The City of Cupertino will publish a notice of the proposed overall goal, informing the public that the proposed goal and its rationale are available for inspection during normal business hours at the City of Cupertino's principal office for 30 days following the date of the notice, and inviting public comment on the goals for 45 days following the date of the notice. The overall goal re-submission to Caltrans will include a summary of information and comments received during this public participation process and the City's responses. Ca1trans will make a final review so the City may begin using the overall goal in Federal fiscal year 2005-06. Prompt Payment of Retain age Requirements Federal regulations changed in 2004 to require that one of the following three methods be used in federal-aid contracts to ensure prompt and full payment of any retainage kept by the prime contractor or subcontractor to any subcontractor. Although written so it applies to both DBE and non-DBE subcontractors, the requirement was added to the Federal DBE regulations because it was felt that the success of new DBEs could be especially sensitive to interruptions of payments for work performed. Local agencies are required to include one of the three methods in all of their federal-aid contracts to ensure prompt and full payment of retainage (withheld funds) to contractors in compliance with Title 49 Code of Federal Regulations (CFR) Part 26.29. Note that only the third of the following three options allows a local agency to hold retainage at all. I tJ~;;. 1. Decline to hold retainage from prime contractors and prohibit prime contractors and subcontractors from holding retainage from subcontractors. 2. Decline to hold retainage from the prime contractor and require a contract clause obligating prime contractors to make prompt and full payrnent of any retainage kept by prime contractor to the subcontractor within 30 days after the subcontractor's work is satisfactorily completed. 3. Hold retainage from prime contractors and provide for prompt and regular incremental acceptance of portions of the prime contract, pay retainage to prime contractors based on these acceptances, and require a contract clause obligating the prime contractor to pay all retainage owed to the subcontractor for satisfactory completion of the accepted work within 30 days after your payment to the prime contractor. As is the case with most local agencies, the City of Cupertino follows a policy with its construction contracts of withholding a portion (typically 10%) of each progress payment to the contractor for incremental work completed. These withheld amounts of each progress payment, usually referred to as retention or retainage, are not completely released to the contractor until the work of the contract is complete and accepted by the City. The withholding of retainage is meant to help ensure that all the work of the contract is satisfactorily completed and that subcontractors are paid promptly. Staff has concluded that Council should adopt method 3. Although it would require incremental acceptance of work and effectively limit the holding period for incremental retainage on federal-aid contracts to 30 days, as opposed to the current end-of-job holding period, method 3 at least allows the holding of retainage, so that some assurance that the work of the contract will be completed satisfactorily can be maintained. Appointment of a DBE Liaison Officer The DBE program adopted by Caltrans requires that each local agency appoint a DBE Liaison Officer (DBELO) to coordinate the local agency's DBE program. A proposed resolution authorizing the City manager to appoint a DBELO is included with this recommendation. FISCAL IMPACT Adopting a Disadvantaged Business Enterprise participation goal on an annual basis is a prerequisite for a local agency's participation in Federal-aid projects. Adopting the goal will make at least the following federal funds available to Cupertino for infrastructure maintenance and construction projects in fiscal year 2005-06: /6~ 3 Project Wolfe, Stelling, McClellan, Stevens Canyon Roads, and Tantau Pavement Rehabilitation Stevens Creek Blvd/SR 85 On Ramp In Pavement Crosswalk Lights and Ped in Crosswalk Sign Collins Elementary School Advance Flashing Beacons and In-Roadway Lighting Source of Federal Funds Amount of Funds SAFETEA-LU Surface Transportation Program (STP) $469,000.00 Hazard Elimination Safety (HES) 67,500.00 Office of Traffic Safety Traffic Safety Funds 44,100.00 Total $580,600.00 The $469,000.00 in STP funds will supplement the City's annual commitment of $750,000.00 in City funds to Pavement Rehabilitation in 2005-2006, allowing the City to overlay or otherwise rehabilitate more than 60% more City street miles with fiscal year 2005-2006 funding. There will be no direct fiscal impact from adopting a prompt payment of retainage option, but adoption of the third prompt payment of retainage option will require City construction inspectors to accept incremental work on construction contracts more often than is the case with current practice. There will be no direct fiscal impact from authorizing the appointment of a DBELO. However, there is a minor indirect cost to the City involved in administering a DBE program. STAFF RECOMMENDATION Staff recommends that the City Council: A. Adopt Resolution No. 05- /8;). : Intent to Establish a Disadvantaged Business Enterprises (DBE) Participation Goal for Federally Funded Projects for the Federal Fiscal Year 2005/06. B. Adopt Resolution No. 05- Ie 3 : Adopting a Method To Be Used in Federa1- Aid Contracts to Ensure Prompt and Full Payment of Any Retainage Kept by the Prime Contractor or Subcontractor to Any Subcontractor, Per 49 Code of Federal Regulations (CFR) 26.29 and Chapter 9 of California Department of Transportation Local Assistance Procedures Manual. I C>-If C. Adopt Resolution No. 05- /84 : Authorizing the City Manager to Appoint a Disadvantaged Business Enterprise Liaison Officer. Submitted by: Approved for submission to the City Council: 73:~:!: /~t ~Ufa(j- Director of Public Works --14(. David W. Knapp City Manager /0-5 RESOLUTION NO. 05-182 DRAFT A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CUPERTINO APPROVING NOTICE OF INTENT TO ADOPT A DISADVANTAGED BUSINESS ENTERPRISE PROGRAM ANNUAL GOAL FOR FEDERALLY FUNDED PROJECTS AND SET A DATE FOR A PUBLIC HEARING FOR JANUARY 17, 2006 WHEREAS, the United States Department of Transportation (DOT) requires the use of Disadvantaged Business Enterprises (DBE) in all aspects of Federal-aid contracting to the maximum extent feasible in Title 49, Parts 23 and 26, of the Code of Federal Regulations; and WHEREAS, all Federal-aid recipients are required to re-evaluate their DBE program participation goals annually and recalculate those goals for federal fiscal years in which they have Federal-aid projects authorized; and WHEREAS, the City of Cupertino, which is a recipient of Federal-aid funds, agrees to ensure DBE firms have the maximum opportunity to participate in the performance of contracts and subcontracts; and WHEREAS, the City of Cupertino's Public Works Department has calculated and proposes a 18.8% DBE participation goal for the Federal fiscal year 2005/2006; and WHEREAS, the City of Cupertino is required to publish a notice of the proposed overall goal, informing the public that the proposed goal and its rationale are available for inspection during normal business hours at the City of Cupertino's principal office for 30 days following the date of the notice, and inviting public comment on the goals for 45 days following the date of the notice; and WHEREAS, the City Council of the City of Cupertino intends to adopt the proposed DBE participation goal as currently calculated or as amended in consultation with the California Department of Transportation, NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Cupertino that the City Clerk is hereby directed to publish notice of this resolution once each in a local newspaper, a trade journal, and a minority journal. /0-(0 Resolution No. 05-182 2 BE IT FURTHER RESOLVED that the City will accept public comment for 45 days following the date ofthe notice. PASSED AND ADOPTED at a regular meeting of the City Council of the City of Cupertino this 1st day of November 2005 by the following vote: Vote Members of the Citv Council AYES: NOES: ABSENT: ABSTAIN: ATTEST: APPROVED: City Clerk Mayor, City of Cupertino /6-7 DRAFT RESOLUTION NO. 05-183 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CUPERTINO APPROVING ADOPTION OF METHOD TO BE USED IN FEDERAL-AID CONTRACTS TO ENSURE PROMPT AND FULL PAYMENT OF ANY RET AINAGE KEPT BY THE PRIME CONTRACTOR OR SUBCONTRACTOR TO ANY SUBCONTRACTOR WHEREAS, the United States Department of Transportation (DOT) requires local agencies to adopt a method to be used in Federal-aid contracts to ensure prompt and full payment of any retainage kept by the prime contractor or subcontractor to any contractor, as specified in Title 49, Parts 26.29, of the Code of Federal Regulations; and WHEREAS, of the three methods to ensure prompt and full payment of any retainage kept by the prime contractor or subcontractor to any contractor specified in Title 49, Parts 26.29, of the Code of Federal Regulations, only the third method allows retainage to be held at all; and WHEREAS, the City Council of the City of Cupertino has determined that it is in the City's interest to continue to hold retainage on Federal-aid contracts even if the period to hold retainage is limited by Federal regulations; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Cupertino that the City of Cupertino will act to ensure prompt and full payment of any retainage kept by the prime contractor or subcontractor to any contractor, in compliance with Title 49, Parts 26.29, of the Code of Federal Regulations, by adopting the following language to be incorporated in the provisions of Federal-aid contracts: The agency shall hold retainage from the prime contractor and shall make prompt and regular incremental acceptances of portions, as determined by the agency, of the contract work, and pay retainage to the prime contractor based on these acceptances. The prime contractor, or subcontractor, shall return all monies withheld in retention from a subcontractor within 30 days after receiving payment for work satisfactorily completed and accepted including incremental acceptances of portions of the contract work by the agency. Federal regulation (49CFR26.29) requires that any delay or postponement of payment over 30 days may take place only for good cause and with the agency's prior written approval. Any violation of this provision shall subject the violating prime contractor or subcontractor to the penalties, sanctions and other remedies specified in Section 7108.5 of the Business and Professions Code. These requirements shall not be construed to limit or impair any contractual, administrative, or judicial remedies otherwise available to the /0-8 Resolution No. 05-183 2 prime contractor or subcontractor in the event of a dispute involving late payment or nonpayment by the prime contractor, deficient subcontract performance, or noncompliance by a subcontractor. This provision applies to both DBE and non-DBE prime contractors and subcontractors. PASSED AND ADOPTED at a regular meeting of the City Council of the City of Cupertino this 1st day of November 2005 by the following vote: Vote Members of the City Council AYES: NOES: ABSENT: ABSTAIN: ATTEST: APPROVED: Mayor, City of Cupertino City Clerk /O-'{ RESOLUTION NO. 05-184 DRAFT A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CUPERTINO AUTHORIZING THE CITY MANAGER TO APPOINT A DISADV ANT AGED BUSINESS ENTERPRISE PROGRAM LIAISON FOR THE CITY OF CUPERTINO WHEREAS, the United States Department of Transportation (DOT) requires the use of Disadvantaged Business Enterprises (DB E) in all aspects of Federal-aid contracting to the maximum extent feasible in Title 49, Parts 23 and 26, ofthe Code of Federal Regulations (49 CFR 23 & 26); and WHEREAS, the DBE program adopted by the California Department of Transportation (Caltrans) to comply with (49 CFR 23 & 26) requires local agencies to each appoint an agency Disadvantaged Business Enterprise Liaison Officer (DBELO) to administer the agency DBE program for Federal-aid contracts; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Cupertino that the City Manager is hereby authorized to appoint a DBELO for the City of Cupertino. PASSED AND ADOPTED at a regular meeting of the City Council of the City of Cupertino this 1st day of November 2005 by the following vote: Vote Members of the Citv Council AYES: NOES: ABSENT: ABSTAIN: ATTEST: APPROVED: City Clerk Mayor, City of Cupertino 10-/0