BILL ANALYSIS                                                                                                                                                                                                    Ó



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          SENATE THIRD READING
          SB 1509 (Simitian)
          As Amended  August 20, 2012
          Majority vote 

           SENATE VOTE  :32-4  
           
           EDUCATION           6-0         APPROPRIATIONS      17-0        
           
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          |Ayes:|Brownley, Norby,          |Ayes:|Gatto, Harkey,            |
          |     |Buchanan, Grove,          |     |Blumenfield, Bradford,    |
          |     |Halderman, Wagner         |     |Charles Calderon, Campos, |
          |     |                          |     |Davis, Donnelly, Fuentes, |
          |     |                          |     |Hall, Hill, Cedillo,      |
          |     |                          |     |Mitchell, Nielsen, Norby, |
          |     |                          |     |Solorio, Wagner           |
          |-----+--------------------------+-----+--------------------------|
          |     |                          |     |                          |
           ----------------------------------------------------------------- 
          SUMMARY  :  Extends the sunsets authorizing kindergarten through 
          grade 12 (K-12) and California Community Colleges (CCC) 
          districts to utilize design-build contracts for the design and 
          construction of education facilities, from January 1, 2014, to 
          January 1, 2020.  Expresses the intent of the Legislature that 
          design-build procurement does not replace or eliminate 
          competitive bidding.  Specifies that the request for proposal 
          shall not include a design-build-operate contract for 
          educational facilities.   
            
           FISCAL EFFECT :  According to the Assembly Appropriations 
          Committee, there are no direct costs, as use of the design-build 
          process is voluntary, and should result in potential savings.
           
          COMMENTS  :  Under current law, K-12 school districts are required 
          to competitively bid any public works contract over $15,000 and 
          award the contract to the lowest responsible bidder.  Current 
          law also allows contracts for architectural services to be 
          awarded on the basis of demonstrated competence and professional 
          qualifications to be performed at a fair and reasonable price 
          (not necessarily the lowest bidder).  Under this process, a 
          school district would first hire an architect to design a school 
          facility and then issue a bid for the construction phase, 
          awarding the contract to the lowest bidder.  This process is 








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          commonly called "design-bid-build."   AB 1402 (Simitian), 
          Chapter 421, Statutes of 2001, established a process called 
          "design-build" that enables a school district to issue a bid for 
          both the design and construction of projects over $10 million 
          and authorizes school districts to consider factors other than 
          cost.  AB 1402 had an initial sunset of January 1, 2007, and 
          required the Legislative Analyst's Office (LAO) to submit a 
          report with information on the experiences of districts that 
          used the design-build process and make recommendations to the 
          Legislature.  The sunset was extended to January 1, 2010, in 
          2006 (AB 127 (Nunez), Chapter 35, Statutes of 2006).  

          The author introduced another bill in 2002, AB 1000 (Simitian), 
          Chapter 637, Statutes of 2002, authorizing three CCC districts 
          to utilize design-build contracts for projects over $10 million 
          with a sunset of January 1, 2008.  SB 614 (Simitian), Chapter 
          471, Statutes of 2007, reduced the threshold for eligible K-12 
          and CCC projects from $10 million to $2.5 million, extended the 
          authority to all CCC districts, and extended the sunset dates 
          for both K-12 and CCCs to January 1, 2014.  This bill extends 
          both sunsets to January 1, 2020.   

          Under a design-build process, a K-12, CCC district, or other 
          public or private agency issues a bid for both design and 
          construction of a facility.  A general contractor may 
          collaborate with an architect/engineer to submit a proposal, or 
          a general contractor may submit the proposal and subcontract 
          with an architect/engineer.  Prior to using a design-build 
          process for a project, a school district must make written 
          findings that using the design-build method for the project will 
          meet at least one of the following objectives:  reduce 
          comparable project costs, expedite the project's completions, or 
          provide features not achievable through the traditional 
          design-bid-build process.  The school district must also 
          establish a process to prequalify design-build entities using a 
          standard questionnaire developed by the Department of Industrial 
          Relations.  The questionnaire requires contractors to provide 
          detailed information regarding the company and its financial 
          status, including whether the company has been in bankruptcy or 
          involved in a civil lawsuit, licensing information, prior 
          contracting experience (whether the contractor has completed 
          other public works projects), whether the contractor has been 
          involved or has been found to have violated any federal, state 
          or local laws, and whether the contractor has violated any labor 








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          and health and safety laws, including prevailing wage.  

          Rather than selecting the contractor based solely on the lowest 
          offer, the K-12 or CCC district may use criteria in addition to 
          cost, which may include qualification, experience, proposed 
          design approach, life cycle costs, project features and project 
          functions.  Based on the criteria selected by a governing board, 
          the proposals are scored and awarded to the bidder whose 
          proposal is considered to be the best value to the school 
          district.  Design build contracting can expedite the 
          construction of a project, avoid conflicts between 
          architects/engineers and contractors, and according to 
          experiences from school and CCC districts, reduce costs by 
          reducing change orders once construction begins.  Under a 
          design-bid-build process, the architect works independently on 
          the design of the facility.  Once construction begins, any 
          problems identified by the contractor must be resolved, 
          frequently with the school district acting as the mediator.  
          Under design-build, the architect and contractor are working 
          together from the beginning of the project, thereby reducing 
          conflicts, delays, and additional costs during the construction 
          phase.

          The design-build method does not exempt a school district from 
          complying with all requirements for receipt of state bond funds, 
          including compliance with the labor compliance program and the 
          requirement to retain an independent inspector.  According to 
          data provided by the Office of Public School Construction, which 
          administers K-12 state education bond funds, 17 school districts 
          have employed the design-build method, submitting applications 
          for 29 projects.  Of these projects, two were completed in 2008, 
          two completed in 2009, and four completed in 2011. Nineteen 
          projects are either going through the funding process or have 
          already started construction but are not finished.  Two 
          applications were returned to the districts because one 
          application was for a duplicate project and the other contained 
          insufficient documentation. 
           
           In addition to K-12 school and CCC districts, a number of 
          design-build authorizations have been given to various cities 
          and counties, state building projects, and transit districts.  
          It is unclear whether all design-build authorizations contain 
          the same requirements and process.  









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          In February 2005, the LAO issued a report titled Design-Build: 
          An Alternative Construction System in which it reported its 
          consolidated findings on design-build across several public 
          works sectors.  The LAO report was based on reports provided by 
          entities authorized to use design-build contracting and had 
          difficulty finding conclusive evidence as to the benefits of the 
          design-build method.  However, the LAO reported that the 
          entities that experimented with design-build were generally 
          pleased with the process and outcomes.  The LAO concluded that 
          design-build is a useful alternative delivery method, but made 
          the following recommendations:

          1)The state should adopt a single statute applying to all public 
            entities (state and local governments and education 
            institutions).

          2)Design-build should be available as an option and not a 
            replacement for design-bid-build.

          3)Contracts for most of the project costs should be objectively 
            awarded based on competitive bidding.

          4)No cost threshold should be imposed on the authority to use 
            design-build.

          5)Access for small and newly established contractors should be 
            assured by requiring that design build contracts be awarded to 
            contractors with experience and qualifications that are 
            consistent with the needs of the project, rather than limited 
            to the biggest and longest-established firms.  (The LAO made 
            this recommendation due to considerations of qualification and 
            experience in awarding design-build contracts, which may 
            disadvantage small, newly established contractors, who do not 
            have the range of experience of more established firms). 

          6)The authority should only be granted to construct buildings 
            and directly related infrastructure given the more complex 
            issues associated with transportation, public transit, and 
            water resources facilities. 
           
           The Los Angeles Unified School District states, "In our 
          experience we have found there are a number of inherent flaws 
          with the design-bid-build process.  The biggest flaw is the lack 
          of communication, coordination and planning between the design 








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          professional and contractor at the onset of the project.  This 
          creates contract disputes, increased change order requests, and 
          exposes the owner to unnecessary liability and litigation.  The 
          design-build method addresses this flaw by partnering with 
          contractor and design professional at the beginning of the 
          project.  Each provides input and perspective which ensures the 
          project is built in the most efficient manner.  The design-build 
          method has proven to the District to save time and money as a 
          result of fewer change orders, fewer contract disputes, provides 
          the owner with a single point of accountability, and ultimately 
          provides a better quality product."  


           Analysis Prepared by :    Sophia Kwong Kim / ED. / (916) 319-2087 



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