July 7, 2022
On June 22, 2022, the State Allocation Board (SAB) took action to reaffirm and enforce its position that school districts using piggyback contracts for certain modular facilities projects are ineligible for state funding reimbursement from SAB-administered state funding programs. SAB has opted to allow funding of such projects for a 60-day grace period ending August 21, 2022, after which time a new system will be created to evaluate contracts during state funding application processing to ensure no piggyback contracts have been used improperly for modular components. The 60-day grace period will apply to projects with construction contracts approved by a district’s governing board on or before August 21, 2022. This process has been confirmed via a memo to all school districts and county offices of education sent on July 5, 2022 (review the memo by clicking here).
As a reminder, Public Contract Code section 20118 allows school districts to purchase or lease personal property using public contracts previously bid by other public agencies, without further bidding. In a 2006 opinion, the California Attorney General (AG) concluded that using piggyback contracts for factory-built modular building components for installation on a permanent foundation was unlawful. (AG Opinion No. 05-405.) The AG opinion found that modular building components affixed to permanent foundations constitute real property and thus may not be purchased using piggyback contracts under Public Contract Code section 20118. Since that time, procurement practices have varied among school districts seeking reimbursement for such projects through state funding programs, and SAB’s recent actions are in response to these varied practices.
In addition to the 60-day grace period, SAB also plans to seek an updated formal opinion from the AG and to pursue clarity through legislation on SAB’s ability to award state school facility funds for school district projects that use piggyback contracting.
SAB’s actions have raised many questions for school districts, and there can be nuances to evaluating whether specific projects or components of projects are appropriately procured and would qualify for state funding. If your K-12 school district needs assistance navigating this compliance, amending existing contracts or entering into new contracts after August 21, please contact a DWK attorney in our Business, Property and Construction Practice Group.
