BILL ANALYSIS Ó
AB 155
Page 1
Date of Hearing: August 27, 2014
REVISED
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 155 (Alejo) - As Amended: August 12, 2014
SUBJECT : Monterey County Water Resources Agency: design-build.
SUMMARY : Allows the Monterey County Water Resources Agency
(Agency) to use design-build contracting to construct a pipeline
or tunnel that will connect two reserviors that the Agency owns
and operates. Specifically, this bill :
1)Allows the Agency, upon approval by its Board of Directors
(Board) to use the design-build (DB) procedure 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)Specifies 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)Requires 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)Provides 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)Provides definitions for the authority granted under this bill
and makes a number of findings and declarations regarding the
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)Declares that a special law is necessary because of the unique
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circumstances of the Agency.
7)Provides chaptering language that allows the Agency to use
instead the DB procedure for local agencies as established by
SB 785 (Wolk) of 2014, if that bill is enacted and takes
effect on or before January 1, 2015.
EXISTING LAW :
1)Requires local officials, under the Local Agency Public
Construction Act (LAPC Act), to invite bids for construction
projects and then award contracts to the lowest responsible
bidder under the traditional design-bid-build project delivery
system.
2)Authorizes counties, until July 1, 2016, to use the
design-build method for projects costing more than $2.5
million and to award the project using either the lowest
responsible bidder or by best value.
3)Prohibits 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.
4)Requires PLAs for public works projects to include specified
provisions, and prohibits the use of state funds for public
works projects of charter cities that have ordinances banning
the use of PLAs, beginning January 1, 2015.
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
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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.
"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 area's 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
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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
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
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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
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)Project labor agreements . 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 works 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,
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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,
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, U.S. 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.
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PLAs are not mandated under California law.
6)Recent Agency actions . The Agency's board of directors on
July 28, 2014, voted to request that this bill be pulled,
after determining that its requirements will not assist the
Agency in meeting its objective of an expedited procurement
process.
7)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 (Wolk) of 2014 repeals existing law authorizing the
Department of 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 2014 extends the sunset date on transit
operators' authority to use DB for transit projects, from
January 1, 2015, to January 1, 2017. SB 1433 is pending in
the Assembly.
8)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.
SB 908 (Denham) of 2003 would have allowed the Agency to use
the DB procedure authorized for counties to build an $11.5
million seasonal diversion dam on the lower Salinas River. SB
908 was held in the Senate Local Government Committee.
9)Arguments in support . The Monterey County Board of
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Supervisors, in support, writes, "?capturing high Nacimiento
River flows and diverting those flows to San Antonio Reservior
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."
10)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
local agency insist upon a PLA for a local construction
project - a decision heretofore left to the local agency to
decide."
11)Gut and amend . The subject matter of this bill has not been
heard in any Assembly policy committee this legislative
session.
REGISTERED SUPPORT / OPPOSITION :
Support
California American Water
CH2M HILL
Monterey County Board of Supervisors
State Building and Construction Trades Council
One individual
Opposition
Air Conditioning Trade Association
Associated Builders and Contractors - San Diego Chapter
Associated Builders and Contractors of California
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
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Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958