BILL NUMBER: SB 1759 CHAPTERED 09/27/02 CHAPTER 976 FILED WITH SECRETARY OF STATE SEPTEMBER 27, 2002 APPROVED BY GOVERNOR SEPTEMBER 26, 2002 PASSED THE SENATE AUGUST 31, 2002 PASSED THE ASSEMBLY AUGUST 29, 2002 AMENDED IN ASSEMBLY AUGUST 28, 2002 AMENDED IN ASSEMBLY JUNE 20, 2002 AMENDED IN SENATE APRIL 15, 2002 INTRODUCED BY Senators Johannessen and Torlakson FEBRUARY 21, 2002 An act to add and repeal Section 20175.1 of the Public Contract Code, relating to public contracting, and declaring the urgency thereof, to take effect immediately. LEGISLATIVE COUNSEL'S DIGEST SB 1759, Johannessen. Public works: local agencies. Existing law requires public entities to comply with certain procedures in soliciting and evaluating bids and awarding contracts for the erection, construction, alteration, repair, or improvement of any public structure, building, road, or other public improvement. Existing law authorizes specified state agencies, cities, and counties to implement alternative procedures for the awarding of contracts on a design-build basis. This bill would authorize, until January 1, 2006, certain cities to enter into design-build contracts with a cost of at least $5,000,000, according to specified bidding and contracting procedures. The bill would require each contract to contain a provision prohibiting alteration of the performance criteria and design standards of any project without the prior written approval of the plans by the city. The bill would also require the Legislative Analyst to report to the Legislature on the use of design-build contracting. The bill would make a finding that a special law is necessary and that a general law cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique circumstances of these cities. This bill would declare that it is to take effect immediately as an urgency statute. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Section 20175.1 is added to the Public Contract Code, to read: 20175.1. (a) (1) This section provides for an alternative and optional procedure on bidding on building construction projects applicable only to the City of Brentwood, the City of Hesperia, the City of Vacaville, and the City of Woodland, upon approval of the city council of the respective city. (2) For projects with costs of at least five million dollars ($5,000,000), inclusive, the city may award the project using either the lowest responsible bidder or by best value. (3) The design-build approach may be used, but is not limited to use when it is anticipated that it will: reduce project cost, expedite project completion, or provide design features not achievable through the design-bid-build method. (4) If the city council elects to proceed under this section, the city council shall establish and enforce for design-build projects a labor compliance program containing the requirements outlined in Section 1771.5 of the Labor Code, or it shall contract with a third party to operate a labor compliance program containing the requirements outlined in Section 1771.5 of the Labor Code. This requirement shall not apply to any project where the city or the design-build entity has entered into any collective bargaining agreement or agreements that bind all of the contractors performing work on the projects. (b) As used in this section: (1) "Best value" means a value determined by objective criteria and may include, but is not limited to, price, features, functions, life-cycle costs, and other criteria deemed appropriate by the city. (2) "Design-build" means a procurement process in which both the design and construction of a project are procured from a single entity. (3) "Design-build entity" means a partnership, corporation, or other legal entity that is able to provide appropriately licensed contracting, architectural, and engineering services as needed pursuant to a design-build contract. (c) Design-build projects shall progress in a four-step process, as follows: (1) (A) The city shall prepare a set of documents setting forth the scope of the project. The documents may include, but are not limited to: the size, type, and desired design character of the buildings and site; performance specifications covering the quality of materials, equipment, and workmanship; preliminary plans or building layouts; or any other information deemed necessary to describe adequately the city's needs. The performance specifications and any plans shall be prepared by a design professional who is duly licensed and registered in California. (B) Any architect or engineer retained by the city to assist in the development of the project-specific documents shall not be eligible to participate in the preparation of a bid with any design-build entity for that project. (2) (A) Based on the documents prepared in paragraph (1), the city shall prepare a request for proposals that invites interested parties to submit competitive sealed proposals in the manner prescribed by the city. The request for proposals shall include, but is not limited to, the following elements: (i) Identification of the basic scope and needs of the project or contract, the expected cost range, and other information deemed necessary by the city to inform interested parties of the contracting opportunity, to include the methodology that will be used by the city to evaluate proposals and specifically if the contract will be awarded to the lowest responsible bidder. (ii) Significant factors which the city reasonably expects to consider in evaluating proposals, including cost or price and all nonprice related factors. (iii) The relative importance of weight assigned to each of the factors identified in the request for proposals. (B) With respect to clause (iii) of subparagraph (A), if a nonweighted system is used, the agency shall specifically disclose whether all evaluation factors other than cost or price when combined are: (i) Significantly more important than cost or price. (ii) Approximately equal in importance to cost or price. (iii) Significantly less important than cost or price. (C) If the city chooses to reserve the right to hold discussions or negotiations with responsive bidders, it shall so specify in the request for proposal and shall publish separately or incorporate into the request for proposal applicable rules and procedures to be observed by the city to ensure that any discussions or negotiations are conducted in good faith. (3) (A) The city shall establish a procedure to prequalify design-build entities using a standard questionnaire developed by the Department of Industrial Relations. In preparing the questionnaire, the director shall consult with the construction industry, including representatives of the building trades and surety industry. This questionnaire shall require information including, but not limited to, all of the following: (i) If the design-build entity is a partnership, limited partnership, or other association, a listing of all of the partners, general partners, or association members known at the time of bid submission who will participate in the design-build contract, including, but not limited to, mechanical subcontractors. (ii) Evidence that the members of the design-build entity have completed, or demonstrated the experience, competency, capability, and capacity to complete projects of similar size, scope, or complexity, and that proposed key personnel have sufficient experience and training to competently manage and complete the design and construction of the project. (iii) The licenses, registration, and credentials required to design and construct the project, including information on the revocation or suspension of any license, credential, or registration. (iv) Evidence that establishes that the design-build entity has the capacity to obtain all required payment and performance bonding, liability insurance, and errors and omissions insurance, as well as a financial statement that assures the city that the design-build entity has the capacity to complete the project. (v) Any prior serious or willful violation of the California Occupational Safety and Health Act of 1973, contained in Part 1 (commencing with Section 6300) of Division 5 of the Labor Code or the federal Occupational Safety and Health Act of 1970 (Public Law 91-596), settled against any member of the design-build entity, and information concerning workers' compensation experience history and worker safety program. (vi) Information concerning any debarment, disqualification, or removal from a federal, state, or local government public works project. (vii) Any instance where an entity, its owner, officers, or managing employees submitted a bid on a public works project and were found to be nonresponsive, or were found by an awarding body not to be a responsible bidder. (viii) Any instance where the entity, its owner, officers, or managing employees defaulted on a construction contract. (ix) Any violations of the Contractors' State License Law (Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code), excluding alleged violations of federal or state law including the payment of wages, benefits, apprenticeship requirements, or personal income tax withholding, or of Federal Insurance Contribution Act (FICA) withholding requirements settled against any member of the design-build entity. (x) Information concerning the bankruptcy or receivership of any member of the design-build entity, including information concerning any work completed by a surety. (xi) Information concerning all settled adverse claims, disputes, or lawsuits between the owner of a public works project and any member of the design-build entity during the five years preceding submission of a bid pursuant to this section, in which the claim, settlement, or judgment exceeds fifty thousand dollars ($50,000). Information shall also be provided concerning any work completed by a surety during this period. (xii) In the case of a partnership or other association that is not a legal entity, a copy of the agreement creating the partnership or association and specifying that all partners or association members agree to be fully liable for the performance under the design-build contract. (B) The information required pursuant to this subdivision shall be verified under oath by the entity and its members in the manner in which civil pleadings in civil actions are verified. Information that is not a public record pursuant to the California Public Records Act (Chapter 3.5, Division 7, Title 1 of the Government Code) shall not be open to public inspection. (4) The city shall establish a procedure for final selection of the design-build entity. Selection shall be based on either of the following criteria: (A) A competitive bidding process resulting in lump-sum bids by the prequalified design-build entities. Awards shall be made to the lowest responsible bidder. (B) A city may use a design-build competition based upon best value and other criteria set forth in paragraph (2). The design-build competition shall include the following elements: (i) Competitive proposals shall be evaluated and scored solely on the basis of the factors and source selection procedures identified in the request for proposal. However, the following minimum factors shall each represent at least 10 percent of the total weight or consideration given to all criterion factors: price, technical design and construction expertise, life cycle costs over 15 years or more, skilled labor force availability, as defined in clause (v), and an acceptable safety record. (ii) Once the evaluation is complete, the top three responsive bidders shall be ranked sequentially from the most advantageous to the least. (iii) The award of the contract shall be made to the responsible bidder whose proposal is determined, in writing, to be the most advantageous. (iv) Notwithstanding any provision of this code, upon issuance of a contract award, the city shall publicly announce its award, identifying the contractor to whom the award is made, along with a written decision supporting its contract award and stating the basis of the award. The notice of award shall also include the city's second and third ranked design-build entities. (v) (I) For the purposes of this paragraph, "skilled labor force availability" shall be determined by the existence of an agreement with a registered apprenticeship program, approved by the California Apprenticeship Council, which has graduated apprentices in each of the preceding five years. (II) The five-year graduation requirement in subclause (I) shall not apply to any apprenticeship program that, on or after the date this section is enacted, was in operation for less than the minimum number of years required for completion of the curriculum for that program. This exclusion from the five-year graduation requirement in subclause (I) shall not apply to that apprenticeship program once it has been in operation for the minimum number of years required for completion of the curriculum for that program, if either of the following occurs: (aa) That program fails to graduate an apprentice during the year in which that apprenticeship program has been in operation for the minimum number of years required for the completion of the curriculum for that program. (bb) That program fails to graduate an apprentice any year following the year in which that apprenticeship program has been in operation for the minimum number of years required for the completion of the curriculum for that program. (vi) For the purposes of this paragraph, a bidder's "safety record" shall be deemed "acceptable" if his or her experience modification rate for the most recent three-year period is an average of 1.00 or less, and his or her average total recordable injury/illness rate and average lost work rate for the most recent three-year period does not exceed the applicable statistical standards for its business category or if the bidder is a party to an alternative dispute resolution system as provided for in Section 3201.5 of the Labor Code. (vii) A city that limits the number of responsible bidders participating in a design-build competition shall evaluate the bid proposals in the manner set forth in clause (i). (viii) For purposes of this section, in evaluating the "technical design and construction expertise" of a responsible bidder participating in a design-build competition, the evaluation shall be limited to the bidder's experience and expertise within California. The evaluation of the "technical design and construction expertise" of a responsible bidder participating in a design-build competition shall not include an evaluation of the bidder's experience in utilizing a design-build procurement process. (ix) A responsible bidder awarded a design-build contract that uses a design-build procurement process in selecting subcontractors shall utilize the following criterion factors in the selection of subcontractors in a manner whereby each of those factors represents at least 15 percent of the total weight or consideration given to all criterion factors: price, technical design and construction expertise, skilled labor force availability, as defined in clause (v), and an acceptable safety record. (d) (1) Any design-build entity that is selected to design and build a project pursuant to this section shall possess or obtain sufficient bonding to cover the contract amount for nondesign services, and errors and omission insurance coverage sufficient to cover all design and architectural services provided in the contract. This section does not prohibit a general or engineering contractor from being designated the lead entity on a design-build entity for the purposes of purchasing necessary bonding to cover the activities of the design-build entity. (2) Any payment or performance bond written for the purposes of this section shall be written using a bond form developed by the city. (e) All subcontractors that were not listed by the design-build entity in accordance with clause (i) of subparagraph (A) of paragraph (3) of subdivision (c) shall be awarded by the design-build entity in accordance with the design-build process set forth by the city in the design-build package. All subcontractors bidding on contracts pursuant to this section shall be afforded the protections contained in Chapter 4 (commencing with Section 4100) of Part 1. The design-build entity shall do both of the following: (1) Provide public notice of the availability of work to be subcontracted in accordance with the publication requirements applicable to the competitive bidding process of the city. (2) Provide a fixed date and time on which the subcontracted work will be awarded in accordance with the procedure established pursuant to this section. (f) The minimum performance criteria and design standards established pursuant to paragraph (1) of subdivision (c) shall be adhered to by the design-build entity. Any deviations from those standards may only be allowed by written consent of the city. (g) The city may retain the services of a design professional or construction project manager, or both, throughout the course of the project in order to ensure compliance with this section. (h) Contracts awarded pursuant to this section shall be valid until the project is completed. (i) Nothing in this section is intended to affect, expand, alter, or limit any rights or remedies otherwise available at law. (j) (1) If the city elects to award a project pursuant to this section, retention proceeds withheld by the city from the design-build entity shall not exceed 5 percent if a performance and payment bond, issued by an admitted surety insurer, is required in the solicitation of bids. (2) In a contract between the design-build entity and the subcontractor, and in a contract between a subcontractor and any subcontractor thereunder, the percentage of the retention proceeds withheld may not exceed the percentage specified in the contract between the city and the design-build entity. If the design-build entity provides written notice to any subcontractor that is not a member of the design-build entity, prior to or at the time the bid is requested, that a bond may be required and the subcontractor subsequently is unable or refuses to furnish a bond to the design-build entity, then the design-build entity may withhold retention proceeds in excess of the percentage specified in the contract between the city and the design-build entity from any payment made by the design-build entity to the subcontractor. (k) Each city that elects to proceed under this section and uses the design-build method on a public works project shall submit to the Legislative Analyst's office, the Senate Committee on Local Government, and the Assembly Committee on Local Government before December 1, 2004, a report containing a description of each public works project procured through the design-build process, and completed on or before November 1, 2004. The report shall include, but shall not be limited to, all of the following information: (1) The type of facility. (2) The gross square footage of the facility. (3) The design-build entity that was awarded the project. (4) The estimated and actual length of time to complete the project. (5) The estimated and actual project costs. (6) A description of any written protests concerning any aspect of the solicitation, bid, proposal, or award of the design-build project, including the resolution of the protests. (7) An assessment of the prequalification process and criteria. (8) An assessment of the impact of retaining 5 percent retention on the project. (9) A description of the Labor Force Compliance Program and an assessment of the project impact, where required. (10) A description of the method used to award the contract. If best value was the method, the factors used to evaluate the bid shall be described, including the weighting of each factor and an assessment of the effectiveness of the methodology. (11) An assessment of the project impact of "skilled labor force availability." (12) An assessment of the design-build dollar limits on city projects. This shall include projects where the city wanted to use design-build methods and was precluded by the dollar limitation. It shall also include projects where the best value method of awarding contracts was not used, due to dollar limitations. (13) An assessment of the most appropriate uses for the design-build approach. (l) Any city named in this section that elects not to use the authority granted herein may also submit a report to the entities named and in accordance with the schedule in subdivision (k). This report may include an analysis of why the authority granted herein was not used by the city. (m) On or before January 1, 2005, the Legislative Analyst shall report to the Legislature on the use of the design-build method by cities pursuant to this section, including the information listed in subdivision (k). The report may include recommendations for modifying or extending this section. It is the intent of the Legislature that a moratorium be placed on the enactment of any additional legislation relating to design-build contracting until any reports required by existing law have been received by the Legislature. (n) This section shall remain in effect only until January 1, 2006, and as of that date is repealed, unless a later enacted statute, that is enacted before January 1, 2006, deletes or extends that date. SEC. 2. The Legislature finds and declares that a special law is necessary and that a general law cannot be made applicable within the meaning of Section 16 of Article IV of the California Constitution because of the unique circumstances of the City of Brentwood, the City of Hesperia, the City of Vacaville, and the City of Woodland. The facts constituting the special circumstances are: This law would enable these specified cities to address severe public infrastructure concerns by utilizing cost-effective options, such as a design-build contract, in building and modernizing essential public facilities. SEC. 3. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the Constitution and shall go into immediate effect. The facts constituting the necessity are: In order to allow the City of Brentwood, the City of Hesperia, the City of Vacaville, and the City of Woodland to take advantage of the design-build process at the earliest time possible, it is necessary for this act to take effect immediately.