BILL ANALYSIS Senate Appropriations Committee Fiscal Summary Senator Christine Kehoe, Chair 879 (Cox) Hearing Date: 05/10/2010 Amended: 04/26/2010 Consultant: Mark McKenzie Policy Vote: L Gov 3-2 _________________________________________________________________ ____ BILL SUMMARY: SB 879 would make the following changes to the authority for cities and counties to use the design-build procurement method for contracting: Extend the authority for counties to use design-build for five years, require an additional report of information to the Legislative Analyst's Office (LAO), and require the LAO to report to the Legislature. The reporting requirements and sunset date for the county authority would align with the existing sunset and reporting requirements for cities' authority to use of design-build. Lower the cost threshold for county design-build projects from $2.5 million to $1 million. Require prospective design-build entities to disclose detailed information if a court found that the firm submitted a claim that violated federal or state False Claims Acts. Require a successful design-build entity to submit lists of subcontractors, bidders, and bid awards within 14 days of the awarding of the contract. These documents would be public records and available for public inspection. Make several other changes to make the county and city authority and requirements consistent. _________________________________________________________________ ____ Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund DIR: LCP oversight minor costs, covered by fees Special* LAO report minor costs to add county design-buildGeneral information to existing city design-build report ____________ * State Public Works Enforcement Fund (a continuously appropriated fund) _________________________________________________________________ ____ STAFF COMMENTS: Existing law requires public entities to comply with certain procedures in soliciting and evaluating bids and awarding contracts for the construction of public works. The traditional approach to public contracting is referred to as the design-bid-build method, which requires local officials to invite bids for construction projects, based on a completed set of engineering plans, then award the construction bid to the lowest bidder. Current law authorizes all cities and counties to utilize the design-build method, by which a public entity can procure both design and construction services from a single company before the development of complete plans and specifications. County design-build authority expires on January 1, 2011, while cities' authority sunsets on January 1, 2016. The LAO recently reported on counties' experience with the design-build method. A report on cities' use of design-build is due to the Legislature on January 1, 2015. Page 2 SB 879 (Cox) Existing law requires cities and counties that elect to use design-build to pay a fee into the State Public Works Enforcement Fund to pay for the Department of Industrial Relations' (DIR) enforcement of prevailing wage requirements on public works projects through labor compliance programs (LCPs). By extending the sunset on county design-build authority for five years, this bill would extend the terms of a continuously appropriated special fund, thereby making an appropriation. Costs for DIR to administer LCPs for counties that use design-build would be minor and fully covered by the fees. SB 879 would require counties that use design-build pursuant to the extended authority provided in this bill to report specified information on their use of design-build to the LAO by December 1, 2014. The LAO would compile that information and report to the Legislature by January 1, 2015. The authority for counties to use design-build would sunset on January 1, 2016. Staff notes that current law imposes the same reporting requirements and timelines on cities and the LAO with respect to cities' use of design-build. Costs to compile additional county information and include it in the same LAO report would be minor. The LAO recently issued a report on county governments' experience with constructing projects with the design-build delivery method. The report included information provided by counties on 15 design-build projects from nine counties; only five of the projects were completed at the time the reports were submitted. The LAO indicated that it was difficult to draw conclusions from the small sampling of reports received about the effectiveness of design-build compared to other delivery methods, but there was no evidence to discourage the Legislature from continuing authority for local agencies to use design-build. The LAO recommends that extended authorization for use of the design-build statutes should include a uniform and consistent statute providing the same authority and limitations to all local agencies, and recommends that project cost should constitute a larger factor in awarding the contract. While SB 879 makes the county and city design-build authority consistent, the bill does not include any changes to the design-build statutes that make price a more important consideration in the award of the contract.