BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 155
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 155 (Alejo)
          As Amended  August 12, 2014
          Majority vote
           
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          |ASSEMBLY:  |     |(May 30, 2013 ) |SENATE: |25-10|(August 18,    |
          |           |     |                |        |     |2014)          |
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               (vote not relevant)

          Original Committee Reference:    L. & E.  

           SUMMARY  :  Allows the Monterey County Water Resources Agency  
          (Agency) to use design-build contracting to construct a pipeline  
          or tunnel that will connect two reservoirs that the Agency owns  
          and operates.

           The Senate amendments  delete the Assembly version of this bill,  
          and instead:

          1)Allow the Agency, upon approval by its Board of Directors  
            (Board) to use the design-build (DB) process authorized under  
            current law for counties to assign contracts for the design  
            and construction of a project that will connect Lake San  
            Antonio, located in Monterey County, and Lake Nacimiento,  
            located in San Luis Obispo County (the lakes).  

          2)Specify that the project will connect the lakes with an  
            underground tunnel or pipeline for the purpose of maximizing  
            water storage, supply, and groundwater recharge at the lakes,  
            and within the Salinas River Groundwater Basin (Basin) and the  
            Salinas Valley (Valley) proper.

          3)Require the Agency to ensure that the DB entity selected for  
            the project enters into a project labor agreement (PLA) that  
            will bind all of the contractors performing work on the  
            project.

          4)Provide that the Agency may utilize a DB process solely to  
            award contracts for the project specified in this bill and for  
            no other purpose.

          5)Provide definitions for the authority granted under this bill  
            and make a number of findings and declarations regarding the  








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            Valley, its economic benefits to the state, the impacts of  
            drought conditions on the economic viability and agricultural  
            production of the Valley, the role the lakes play in the  
            Basin, prior Agency projects to improve water storage and  
            groundwater recharge in the Basin, and the expected benefits  
            of using DB in the Agency's proposal to connect the lakes.

          6)Declare that a special law is necessary because of the unique  
            circumstances of the Agency.

          7)Provide chaptering language that allows the Agency to use  
            instead the DB procedure for local agencies as established in  
            SB 785 (Wolk) of the current legislative session, if that bill  
            is enacted and becomes effective on or before January 1, 2015.

           AS PASSED BY THE ASSEMBLY  , this bill provided that a current or  
          former employee has a right to receive a copy of their payroll  
          records.

           FISCAL EFFECT  :  None

           COMMENTS  :  

          1)Monterey County Water Resources Agency.  The Agency is a  
            special act special district created as a flood control and  
            water agency in Monterey County.  The Agency manages Lake  
            Nacimiento and Lake San Antonio, two reservoirs that provide  
            flood control, water supply and recreation in the Salinas  
            Valley.  Lake Nacimiento's watershed fills the Lake Nacimiento  
            reservoir nearly three times faster than Lake San Antonio's  
            watershed fills that reservoir.  The Agency often releases  
            water from Lake Nacimiento because it reaches its capacity,  
            even when Lake San Antonio still has excess storage available.  
             Agency officials have proposed building a tunnel or pipeline  
            between Lake Nacimiento and Lake San Antonio to redirect water  
            from Lake Nacimiento that would otherwise be released out to  
            sea and, instead, use it to fill excess capacity in Lake San  
            Antonio.

          2)Author's statement.  According to the author, "AB 155 will  
            authorize the Monterey County Water Resource Agency to award a  
            design-build contract for the combined design and construction  
            of a project to connect Lake San Antonio and Lake Nacimiento  
            with an underground pipeline for the purpose of maximizing  
            water storage, supply, and groundwater recharge. 








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            "The Salinas Valley contains some of the most fertile land in  
            the world and is one of the largest agricultural production  
            areas in the state.  Due to the expansive economic impact of  
            the areas agricultural production, a consistent and adequate  
            water supply is needed to ensure the general economic  
            well-being of the local economy and its contributions to the  
            state.

            "The project considered under this bill will maximize overall  
            water storage at the lakes by allowing the conveyance of water  
            to Lake San Antonio for storage that may otherwise overflow  
            from Lake Nacimiento.  This will improve the benefits provided  
            by the lakes and the Salinas Valley Water Project to the basin  
            and the valley.  It will mitigate the impact of the drought,  
            and improve the economic viability of the valley, the  
            environmental sustainability of the region, and agricultural  
            production."

          3)Design-build and public works projects.  State law generally  
            requires public agencies 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.  

            Under the DB 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 DB  
            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 DB method  
            can be set by the public agency.  The DB 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.

            Advocates for the DB 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 DB allows the  








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            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  
            DB can deliver public works faster and cheaper.

            Detractors of DB contend that it eliminates competitive  
            bidding, allows the private contractor or consortium to  
            inspect and sign off on their own work, and increases project  
            delivery costs.

            All counties can use the DB method to construct buildings and  
            related improvements and wastewater treatment facilities that  
            cost more than $2.5 million.  Similarly, all cities can use DB  
            to construct buildings and related improvements worth more  
            than $1 million.  A pilot program also permits cities,  
            counties, and special districts to use DB to construct a total  
            of 20 local wastewater treatment facilities, local solid waste  
            facilities, or local water recycling facilities.  The  
            Legislature also has passed a number of bills authorizing some  
            special districts to construct projects using DB.

          4)LAO reports and recommendations on design-build.  The LAO  
            issued a report to the Legislature on February 3, 2005, titled  
            Design-Build:  An Alternative Construction System, which  
            reported on all DB authorities granted to various types of  
            government entities.  After analyzing the claims of proponents  
            and opponents and reviewing the experience of local agencies  
            that were authorized to use DB at the time, the LAO  
            recommended that "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 2010 the LAO issued a second report, this time  
            updating the Legislature on the use of DB by counties in  
            California, based on data received from counties that 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  








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            from granting design-build authority to local agencies on an  
            ongoing basis.  In doing so, however, we recommend the  
            Legislature consider some changes such as creating a uniform  
            design-build statute, eliminating cost limitations, and  
            requiring project cost to be a larger factor in awarding the  
            design-build contract."

          5)PLA.  A PLA is a pre-hire agreement that establishes the terms  
            and conditions of employment for a specific construction  
            project.  They are completed before any workers are hired to  
            determine the wage rates and benefits of all employees working  
            on the project and to agree to prevent any strikes, lockouts,  
            or other work stoppages for the duration of the project.  The  
            terms of the agreement apply to all contractors and  
            subcontractors who successfully bid on the project, union or  
            non-union, and supersede any existing collective bargaining  
            agreements.

            PLAs are used on both public and private projects, and their  
            specific provisions are tailored by the contracting parties to  
            meet the needs of a particular project.  By governing and  
            establishing work rules, pay rates, and dispute resolution  
            processes for every worker on the project, PLAs can maximize  
            project stability, efficiency and productivity.  PLAs can also  
            help minimize the risks and inconvenience to the public that  
            can accompany public work projects, helping ensure that  
            projects are completed on time and on or under budget.

            According to a 2001 California Research Bureau report, "PLAs  
            are arguably the most important change in labor management  
            relations in the construction industry in recent years.  They  
            have become a fairly common part of the organization of major  
            construction projects in California? Construction of Shasta  
            Dam, which ran from 1938 to 1944, was the first project  
            involving a PLA in California.  It was a remarkable success,  
            at least in the sense that the project was completed without a  
            labor strike, at a time when other projects in the western  
            states were plagued with strikes and other labor disturbances.  
             Other notable PLA projects in California include the Bay Area  
            Rapid Transit (BART), San Francisco's Yerba Buena Project, Los  
            Angeles' Blue Line, the Los Angeles Convention Center, the San  
            Joaquin Hills Corridor toll road, the Eastside Reservoir  
            Project (the reservoir now known as Diamond Valley), the  
            National Ignition Facility at Lawrence Livermore Labs, San  
            Francisco International Airport's newest terminals,  








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            construction for several large school districts, and others.

            "Perhaps surprisingly, private construction projects in  
            California are much more likely to use PLAs than are public  
            projects? nearly three-quarters (of the projects reviewed for  
            the report) were private sector agreements.  In addition, 22  
            out of 23 private cogeneration electricity plants recently  
            built or under construction in California used PLAs.

            "The legality of PLAs has been extensively tested in both  
            federal and state courts, and with respect to both private and  
            public construction projects.  Their validity has been upheld  
            in both federal and state cases?

            "PLAs involve some controversy, which fits within a 200  
            year-old tradition of dispute about the role of trade unions  
            in America.  In this case, the dispute comes especially from  
            non-union contractors, who object to PLA requirements that  
            they get their labor force from a union hiring hall and who  
            argue that PLAs increase construction costs.  Construction  
            firms and owners who use PLAs judge that the cost savings from  
            avoidance of labor disputes and strikes during a construction  
            project outweigh any costs of complying with the PLA.  They  
            also value a PLA's role in resolving disputes between the many  
            kinds of unions involved in a complex project over which union  
            members should be doing particular tasks.  Dispute also occurs  
            between construction firms that use and value PLAs and those  
            that do not."

            On February 6, 2009, United States President Barack Obama  
            issued an Executive Order requiring the use of PLAs on Federal  
            projects of $25 million or more.  According to the order, PLAs  
            promote efficient and timely completion of large-scale  
            construction projects and prevent many of the problems  
            inherent in such construction.

            PLAs are not mandated under California law.

          6)Related legislation.  SB 268 (Gaines), Chapter 18, Statutes of  
            2014, allows the Last Frontier Health Care District to use the  
            design-build process when contracting for the construction of  
            a building and improvements directly related to a hospital or  
            health facility building at the Modoc Medical Center.

            SB 785, repeals existing law authorizing the Department of  








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            General Services (DGS), the Department of Corrections and  
            Rehabilitation (CDCR), and local agencies to use the  
            design-build (DB) procurement process, and enacts uniform  
            provisions authorizing DGS, CDCR, and local agencies to  
            utilize the DB procurement process for specified public works  
            projects.  SB 785 is pending in the Assembly.

            SB 1433 (Hill) of the current legislative session, repeals the  
            sunset date on transit operators' authority to use DB for  
            transit projects, expands the number of entities eligible to  
            exercise this authority, eliminates minimum cost thresholds,  
            and deletes reporting requirements.  SB 1433 is pending in the  
            Assembly.
           
           7)Prior legislation.  SB 829 (Rubio), Chapter 11, Statutes of  
            2012, prohibited the use of state funds for any charter city  
            public works projects if the charter city has banned the  
            consideration of the use of PLAs.

            SB 922 (Steinberg), Chapter 431, Statutes of 2011, required  
            PLAs for public works projects to include specified  
            provisions, and prohibited the use of state funds for public  
            works projects of charter cities that have ordinances banning  
            the use of PLAs, beginning January 1, 2015.
           
           8)Arguments in support.  The Monterey County Board of  
            Supervisors, in support, writes, "?capturing high Nacimiento  
            River flows and diverting those flows to San Antonio Reservoir  
            increases the overall storage capacity and effectiveness of  
            the reservoir system.  AB 155 provides the opportunity for  
            expedited construction in the wake of the California drought.   
            The drought has resulted in low reservoir levels, thus  
            lowering drilling and construction costs since these  
            activities will not be conducted underwater."

          9)Arguments in opposition.  The Western Electrical Contractors  
            Association, the Plumbing-Heating-Cooling Contractors  
            Association of California, the Associated Builders and  
            Contractors - San Diego Chapter, and the Air Conditioning  
            Trade Association, in opposition, state, "Unfortunately, (this  
            bill includes) a mandate 'that the design-build entity  
            selected for the project enters into a project labor agreement  
            that will bind all of the contractors performing work on the  
            project'? PLAs are very controversial in the construction  
            industry.  For the first time, (this) bill mandates that a  








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            local agency insist upon a PLA for a local construction  
            project - a decision heretofore left to the local agency to  
            decide."

          10)Substantially amended.  The subject matter of this bill has  
            not been heard in any Assembly policy committee this  
            legislative session.
           

          Analysis Prepared by  :    Angela Mapp / L. GOV. / (916) 319-3958 


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