BILL ANALYSIS
SB 879
Page 1
Date of Hearing: June 16, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 879 (Cox) - As Amended: May 27, 2010
SENATE VOTE : 24-8
SUBJECT : Counties: cities: construction projects: alternative
bidding procedures: design-build.
SUMMARY : Extends the sunset for the use of design-build by
counties from January 1, 2011,
to January 1, 2016, and aligns the design-build statutes for
cities and counties. Specifically,
this bill :
1)Extends the sunset for the use of design-build by counties
from January 1, 2011, to
January 1, 2016.
2)Reduces the project cost threshold for county use of
design-build from $2.5 million per project to $1 million per
project.
3)Requires the design-build standard questionnaire issued by
cities or counties to include any instance in which the
entity, or any of its members, owners, officers, or managing
employees was, during the five years preceding submission of a
bid pursuant to this section, determined by a court of
competent jurisdiction to have submitted, or legally admitted
for purposes of a criminal plea to have submitted any claim in
violation of the federal False Claims Act or the state False
Claims Act.
4)Requires for city and county design-build projects, lists of
subcontractors, bidders, and bid awards relating to the
project to be submitted by the design-build entity to the
awarding body within 14 days of the award. These documents
are deemed to be public records and are required to be
available for public inspection pursuant to this chapter and
the Public Records Act.
5)Removes the requirement that certain specified minimum factors
be weighted equally when cities are evaluating competitive
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proposals.
6)Requires each county that uses the design-build method on a
public works project to submit to the Legislative Analyst's
Office (LAO) before December 1, 2014, a report containing a
description of each public works project procured through the
design-build process and completed after November 1, 2009,
and before November 1, 2014.
7)Requires the LAO, by January 1, 2015, to do another report to
the Legislature on the use
of design-build at the county level.
8)Requires cities that elect to use design-build to report to
the LAO the estimated and actual length of time to complete
the project.
EXISTING LAW :
1)Requires local officials, under the Local Agency Public
Construction Act, to invite bids
for construction projects and then award contracts to the lowest
responsible bidder under the traditional design-build project
delivery system.
2)Defines "design-build" as a procurement process in which both
the design and construction of a project are procured from a
single entity.
3)Defines "best-value" as a value determined by objective
criteria related to price, features, functions, and life cycle
costs.
4)Defines "project" as the construction of a building and
improvements directly related to the construction of a
building, and specifies that construction of other
infrastructure, including, but not limited to, streets and
highways, public rail transit, or water resources facilities
and infrastructure are not to be considered "projects."
5)Authorizes counties to use the design-build method for
projects costing more than
$2.5 million.
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6)Authorizes cities to use the design-build method for projects
costing more than $1 million.
7)Authorizes the Sonoma Valley Health Care District to use
design-build contracting for the construction of buildings and
improvements in excess of $2.5 million directly related to a
hospital or health facility building, which is required to be
reviewed and inspected according to the standards of the
Alfred E. Alquist Hospital Facilities Seismic Safety Act of
1983.
8)Authorizes the Orange County Sanitation District to use
design-build contracting for projects, including, but not
limited to, public wastewater facilities, in excess of $6
million.
9)Authorizes the Santa Clara Valley Water District to use
design-build contracting for building contracts.
10)Requires local officials to prepare documents describing the
project and its specifications;
to prepare a detailed request for proposals that invites
competitive bids; to establish a detailed procedure to
pre-qualify design-build entities; and, to establish the
procedures to select the design-build entity.
11)Requires the legislative body to establish and enforce labor
compliance programs.
12)Requires local officials to collect specified types of
information when pre-qualifying design-build entities.
13)Requires a prospective design-build entity to list its
proposed mechanical subcontractors and licenses; report past
worker safety violations, contracting problems, contract
defaults, license violations, payroll violations, and
bankruptcies; and, verify this information under oath.
14)Requires local officials to select the design-build entity by
using either a competitive bidding process in which the award
goes to the lowest responsible bidder or a best value
competition in which local officials set the criteria.
15)Requires that price, expertise, life cycle costs, skilled
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labor force availability, and safety records account for at
least 10% each of the total weight of consideration of all
best value factors.
16)Requires the local agency to rank the top three responsive
bidders; award the contract to the responsible bidder whose
proposal county or city officials rank as "the most
advantageous;" and, identify the second- and third-ranked
bidders after it publicly announces the award.
17)Requires that skilled labor force availability be determined
by the existence of an agreement with a registered and
approved apprenticeship program.
18)Requires the winning design-build entity to be bonded and
carry errors-and-omissions insurance to cover its design and
architectural services.
19)Requires the entity to adhere to the local agency's
performance criteria and design standards and obtain the local
agency's written consent for any deviations from these
standards, and authorizes the local agency to hire a design
professional to ensure compliance.
20)Authorizes the winning design-build entity to use
subcontractors not listed in its original bid, but requires
the entity to award these subcontracts by following a process
set by the local agency, including publishing notices and
setting deadlines.
21)Permits the local agency to retain no more than 5% of the
contract if the local agency's bid request required the
design-build entity to carry a performance and payment bond.
22)Requires any local agency that uses design-build contracting
to submit a report to the LAO containing specified information
that includes, but is not limited to, a description of the
Labor Force Compliance Program and an assessment of the
project impact of "skilled labor force availability."
23)Repeals the authorization for counties, the Orange County
Sanitation District, the Santa Clara Valley Water District,
and the Sonoma Valley Health Care District to use design-build
contracts on January 1, 2011.
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24)Repeals the authorization for cities to use design-build
contracts on January 1, 2016.
FISCAL EFFECT : Unknown
COMMENTS :
1)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.
2)Private companies often use the design-build method for
construction projects. Under the design-build method, a
single contract covers the design and construction of a
project with a single company or consortium that acts as both
the project designer and builder. The design-build entity
arranges all architectural, engineering, and construction
services, and is responsible for delivering the project at a
guaranteed price and schedule based upon performance criteria
set by the public agency. The design-build method can be set
by the public agency. The design-build method can be faster,
and therefore, cheaper, than the design-bid-build method, but
it requires a higher level of management sophistication since
design and construction may occur simultaneously.
3)Advocates for the design-build method of contracting for
public works contend that project schedule savings can be
realized because only a single request for proposals is needed
to select the project's designer and builder. The more
traditional design-bid-build project approach requires the
separate selection of the design consultant or contractor,
completion
of design, and then advertising for bids and selection of the
construction contractor. Proponents add that design-build
allows the overlap of design and construction activities,
resulting in additional time savings and lower project costs.
By avoiding the delays and change orders that result from the
traditional design-bid-build method of contracting, proponents
argue that officials can deliver public works faster and
cheaper.
4)The design-build language in current law is based on a
compromise struck in 2000 among local officials, labor groups,
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and contractors. Local officials wanted the flexibility and
potential cost savings offered by design-build contracts.
Labor unions wanted to ensure that counties pre-qualify
employers to protect workers' interests. Contractors wanted
to be sure they had fair access to county contracts. Further
changes to the language, consistent with the principles of the
2000 compromise were made by SB 287 (Cox), Chapter 376,
Statutes of 2005; SB 416 (Ashburn), Chapter 585, Statutes
2007, which extended this authority to use design-build
contracting for the construction of buildings and directly
related improvements to all 58 counties in the state; AB 642
(Wolk), Chapter 314, Statues 2008, which extended this
authority to use design-build contracting for the construction
of buildings and directly related improvements to all cities
in the state; and, SB 1699 (Wiggins), Chapter 415, Statutes of
2008, which extended this authority to use design-build
contracting for the construction
of buildings and improvements in excess of $2.5 million directly
related to a Sonoma Valley Health Care District hospital or
health facility building.
5)The LAO issued a report to the Legislature on February 3,
2005, titled "Design-Build: An Alternative Construction
System." After analyzing the claims of proponents and
opponents and reviewing the experience of counties that were
authorized to use design-build at the time, LAO recommended
"the Legislature grant design-build authority only to
buildings and directly related infrastructure. There are more
complex issues associated with other public works projects
such as transportation, public transit, and water resources
facilities. Evaluation of design-build as a construction
delivery option for these other infrastructure facilities is
beyond the scope of this report."
In January of this year the LAO issued a second report, this
time updating the Legislature on the use of design-build by
counties in California, based on data received from counties
who utilized this methodology. In the report, LAO states that
"although it was difficult to draw conclusions from the
reports received about the effectiveness of design-build
compared to
other project delivery methods, we do not think that the
reports provide any evidence that would discourage the
Legislature from granting design-build authority to local
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agencies on an ongoing basis. In doing so, however, we
recommend the Legislature consider some changes such as
creating uniform design-build statute, eliminating cost
limitations, and requiring project cost to be a larger factor
in awarding the design-build contract."
6)Support Arguments : The County of Sacramento, in its letter of
support, reports that the Sacramento County Airport System has
been using design-build construction method for several years
to design and construct the New Central Terminal B at
Sacramento International Airport ( a county ran airport).
Without the use of design-build for this project, there would
have been an additional $100 to $150 million dollars in
project costs.
According to the California State Association of Counties
(CSAC) and the Regional Council for Rural Counties (RCRC),
approximately nine counties have used or plan to use the
design-build method for project delivery for a variety of
projects ranging from parking facilities to parks and
recreation projects to fire stations to name a few. CSAC and
RCRC argue that "counties and taxpayers in general benefit
from the use of design-build authority resulting from cost
savings produced by this method of project delivery."
Opposition Arguments : The American Federation of State,
County and Municipal Employees (AFCSME), AFL-CIO, in its
letter of opposition states that "in the last year,
design-build has been extended to redevelopment agencies,
state buildings, wastewater systems, and correctional
facilities. The Legislature should let these projects
proceed, finish, and play out, to get a broader sense of
cost-effectiveness and efficiency of the system before
contemplating new authorization for a comprehensive
design-build program."
AFCSME goes on to say that it "does not believe the
design-build program to be faster, cheaper, or any more
innovative for the taxpayer than traditional contract bidding.
AFCSME believes this contracting system to be much less
cost-effective because we end up having a small group of
individuals having authority to grant large public contracts
to [a] small group of hand-picked firms from the private
sector essentially eliminating competitive bidding."
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REGISTERED SUPPORT / OPPOSITION :
Support
American Institute of Architects, CA Council
CA Chamber of Commerce
CA Special Districts Association
CA State Association of Counties
CA State Sheriffs' Association
CH2M Hill
Counties of Imperial, Monterey, Orange, Sacramento, San
Bernardino, Santa Clara,
and San Diego
Design-Build Institute of America, Western Pacific Region
Greater Riverside Chambers of Commerce
Regional Council of Rural Counties
Santa Clara Valley Water District
Neutral
Associated Builders and Contractors of CA
Opposition
American Federation of State, County and Municipal Employees,
AFL-CIO
CA State Pipe Trades Council
Professional Engineers in CA Government
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Service Employees International Union CA State Council
State Association of Electrical Workers
Western States Council of Sheet Metal Workers
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958