BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 879| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: SB 879 Author: Cox (R) Amended: 5/27/10 Vote: 21 SENATE LOCAL GOVERNMENT COMMITTEE : 3-2, 4/19/10 AYES: Cox, Aanestad, Kehoe NOES: DeSaulnier, Price SENATE APPROPRIATIONS COMMITTEE : 6-3, 5/10/10 AYES: Kehoe, Cox, Alquist, Walters, Wolk, Wyland NOES: Leno, Price, Yee NO VOTE RECORDED: Corbett, Denham SUBJECT : Construction projects: alternative bidding procedures: design-build SOURCE : Author DIGEST : This bill makes the following changes to the authority for cities and counties to use the design-build procurement method for contracting: (1) Extends the authority for counties to use design-build for five years, requires an additional report of information to the Legislative Analyst's Office (LAO), and requires 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 CONTINUED SB 879 Page 2 design-build. (2) Lowers the cost threshold for county design-build projects from $2.5 million to $1 million. (3) Requires 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. (4) Requires 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. (5) Makes several other changes to make the county and city authority and requirements consistent. Senate Floor Amendments of 5/27/10 reduce a new disclosure requirement. ANALYSIS : The Local Agency Public Construction Act requires local officials to invite bids for construction projects and then award contracts to the lowest responsible bidder. This design-bid-build method is the traditional approach to public works construction. By contrast, the design-build method allows local officials to procure both design and construction services from a single company before the development of complete plans and specifications. Counties can use the design-build method for projects worth more than $2.5 million. The counties' authority sunsets on January 1, 2011 (SB 416 [Ashburn], Chapter 585, Statutes of 2007). Cities can use the design-build method on projects worth more than $1 million. The cities' design-build statute sunsets on January 1, 2016 (AB 642 [Wolk], Chapter 314, Statutes of 2008). This bill changes the design-build statutes for both counties and cities: 1. Project limits . Counties can use the design-build contracting method on construction projects worth more than $2.5 million. The statutory cost threshold for cities' design-build projects is $1 million. This bill lowers the cost threshold for counties' design-build projects from $2.5 million to $1 million. 2. Evaluation factors . When counties and cities prepare CONTINUED SB 879 Page 3 requests for proposals for design-build projects, they must include at least 11 types of information. Specifically, they must include the "significant factors" which they will consider when evaluating proposals, including cost or price and all nonprime factors. For both counties and cities, this bill requires these significant factors to be "objective." 3. False claims . When counties and cities prepare requests for proposals for design-build projects, they must include at least 11 types of information. This bill requires prospective design-build entities to disclose violations within the last five years and detailed information if a court found that the firm submitted a claim that violated the federal or state False Claims Acts. 4. Subcontractor information . When counties and cities prepare requests for proposals for design-build projects, they must include at least 11 types of information, including a listing of all partners and subcontractors. This bill requires a successful design-build entity to submit lists of subcontractors, bidders, and bid awards within 14 days of the contract's award. This bill declares that those documents are public records and available for public inspection. The bill also requires the design-build entity to provide the awarding party with certified payroll records with 14 days of a request under the Labor Code. 5. County reports and termination . When the Legislature extended the design-build contracting authority to all counties, it required counties to tell the LAO about their experiences by December 1, 2009. The LAO had to report on these experiences by January 1, 2010. The LAO report came out in early January 2010. The counties' design-build statute automatically terminates (sunsets) on January 1, 2011. This bill extends the January 1, 2011 sunset date for the county's design-build contracting authority to January 1, 2016. Background On January 20, 2010, the Senate Local Government Committee CONTINUED SB 879 Page 4 held an oversight hearing called, "Faster, Cheaper, Better? How Counties Use Design-Build Contracting." After a briefing from the LAO, the Committee heard from 18 speakers and received additional written advice. The Committee's staff summarized the hearing's results with six staff findings: 1. Broad support exists, especially among counties, to repeal the sunset clause and make permanent the state law that allows counties to use the design-build contracting method. One labor group conditionally supports an extension of the sunset clause. 2. The Legislative Analyst's recommendation to eliminate the current $2.5 million price threshold attracted endorsements from counties and contractors, although one group affiliated with labor interests disagreed. 3. The Legislative Analyst's recommendation to enact a uniform design-build contracting statute that applies to all local governments drew similar support from counties and contractors, although one labor group is opposed. 4. Some counties want the Legislature to allow them to use design-build contracting for any capital improvement projects, but labor groups are opposed. 5. No consensus exists over how to define the criteria and assign weights for the best-value selection procedures. Most of the Legislature's debate over the future of the counties' design-build law will need to focus on controversies over these criteria and weights. A. While the Legislative Analyst wants legislators to place more emphasis on a project's cost, contractors disagree and argue that other criteria can be more important. B. While the Legislative Analyst suggested that state law explicitly allow so-called "two-envelope" bidding, there was disagreement over its usefulness and over the usefulness of the stipulated sum method. C. Some counties and labor groups disagree about CONTINUED SB 879 Page 5 retaining or eliminating consideration of life cycle costs and contractors' safety records. D. There is support for a new criterion that asks prospective design-build entities about past violations of state or federal False Claims Acts. 6. Because some counties and labor groups disagree about the counties' faithful observance of state laws that govern the counties' use of design-build contracts, legislators may wish to consider creating a forum to investigate allegations. Legislators may wish to consider assigning this function to the existing California Uniform Construction Cost Accounting Commission which already investigates allegations regarding misuse of local public works contracts. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: No According to the Senate Appropriations Committee: Fiscal Impact (in thousands) Major Provisions 2010-11 2011-12 2012-13 Fund DIR: LCP oversight minor costs, covered by feesSpecial* 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) SUPPORT : (Verified 5/27/10) American Institute of Architects, California Council California Chamber of Commerce California Special Districts Association California State Association of Counties CONTINUED SB 879 Page 6 California State Sheriff's Association CH2M HILL Counties of Imperial, Orange, Sacramento, and San Diego Design-Build Institute of America, Western Pacific Region Greater Riverside Chamber of Commerce Regional Council of Rural Counties Santa Clara Valley Water District OPPOSITION : (Verified 5/27/10) American Federation of State, County and Municipal Employees AFL-CIO California State Association of Electrical Workers California State Pipe Trades Council Professional Engineers in California Government Western States Council of Sheet Metal Workers ARGUMENTS IN SUPPORT : The California Chamber of Commerce (CalChamber) states they support "the expanded use of design-build and other alternative project delivery methods by local governments. While design-build is not appropriate in all cases, for instances that do fit, it can get projects completed for quickly and at a lower cost than through traditional design-bid-build contracting. The number of change orders are lessened as is the potential of disagreements and lawsuits among contractors, architects, and the local government entity as the project is being built. Essentially, design-build can put more construction and engineering jobs on the ground faster, which is integral to stimulating the state's economy and rehabilitating infrastructure network. The Legislative Analyst's Office made a series of recommendations, including utilizing a uniform statute for all design-build local government entities and removing any limitations to project costs. The CalChamber supports these proposals and would recommend broadening design-build authority to all local governments-cities, counties and special districts. Design-build is an important tool in local governments' tool box that can save taxpayers' money, get projects completed quickly and get jobs on the ground faster." ARGUMENTS IN OPPOSITION : The Professional Engineers in California Government (PECG) state: "In the LAO analysis entitled "Counties and Design-Build," the LAO noted, 'It is CONTINUED SB 879 Page 7 difficult to find conclusive evidence as to the benefits of the design-build method from information provided by the counties.' The LAO report does not provide enough details or a large enough sample size to warrant establishing design-build as a permanent delivery method, which your bill is attempting to do. As you know, PECG is opposed to design-build for many reasons, including, but not limited to: eliminates competitive bidding the qualification criteria are highly subjective and can be manipulated eliminates public inspection" It is the opinion of PECG that "the counties' design-build authority is ripe for abuse by the mere fact that a small group of individuals are responsible for picking winners and losers of huge public contracts." They also believe strongly that "public oversight and inspection are essential to ensuring the safety and long-term viability of our public works." PECG is also opposed "to the expansion of design-build authority to other project areas or entities." AGB:mw 5/28/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED