BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 195
                                                                  Page  1

          Date of Hearing:  May 1, 2013

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                           K.H. "Katcho" Achadjian, Chair
                   AB 195 (Hall) - As Introduced:  January 28, 2013
           
          SUBJECT  :   Counties: construction projects: design-build.

           SUMMARY  :   Extends the sunset for the use of design-build by  
          counties from July 1, 2014, to July 1, 2020.

           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, 2014, 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)Allows a county, in lieu of reimbursing the Department of  
            Industrial Relations (DIR) for its reasonable and directly  
            related costs of performing monitoring and enforcement on  
            public works projects, to continue operating an existing  
            previously approved labor compliance program to monitor and  
            enforce prevailing wage requirements on the project if: it has  
            not contracted with a third party to conduct its labor  
            compliance program and requests and receives approval from DIR  
            to continue its existing program; or, it enters into a  
            collective bargaining agreement that binds all of the  
            contractors performing work on the project and that includes a  
            mechanism for resolving disputes about the payment of wages.

          4)Defines "design-build" as a procurement process in which both  
            the design and construction of a project are procured from a  
            single entity.

          5)Defines "best-value" as a value determined by objective  
            criteria related to price, features, functions, and life cycle  
            costs.









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          6)Defines "project" as the construction of a building and  
            improvements directly related to the construction of a  
            building, and county sanitation wastewater treatment  
            facilities, but does not include the construction of other  
            infrastructure, including, but not limited to, streets and  
            highways, public rail transit, or water resources facilities  
            and infrastructure.

          7)Requires counties to prepare documents describing the project  
            and its specifications; prepare a detailed request for  
            proposals that invites competitive bids; establish a detailed  
            procedure to pre-qualify design-build entities; and, establish  
            the procedures to select the design-build entity.

          8)Requires counties to establish and enforce labor compliance  
            programs, as specified.

          9)Requires counties that use design-build contracting to submit  
            a report to the Legislative Analyst's Office (LAO) by  
            September 1, 2013, containing specified information and  
            requires the LAO to report to the Legislature by January 1,  
            2014, on counties' use of design-build, as specified.

           FISCAL EFFECT  :  Unknown

           COMMENTS  :   

          1)This bill extends the sunset date on the authority of counties  
            to use the design-build method of contracting for projects  
            costing more than $2.5 million.  This authority is limited to  
            the construction of a building and improvements directly  
            related to the construction of a building, and to county  
            sanitation wastewater treatment facilities.  This bill is  
            jointly sponsored by the California State Association of  
            Counties, the Counties of Los Angeles, San Bernardino, San  
            Diego, and Solano, and the Urban Counties Caucus.

          2)According to the author's office, "In 2010, the (LAO)  
            investigated five design-build projects and found that four of  
            those projects were completed under budget.  Further, their  
            findings cited that the counties that have used design-build  
            generally expressed favorable opinions of the process.  Almost  
            all reported that compared to the traditional design-bid-build  
            process, it took less staff time to construct a project and  
            resulted in fewer claims and less litigation.  Unless this  








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            authorization is extended, counties will no longer be able to  
            use this successful, cost effective project delivery system in  
            the state."

          3)The LAPC Act generally 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.  

            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.

            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 design-build can deliver  
            public works faster and cheaper.

            Detractors of design-build 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.

          4)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  








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            opponents and reviewing the experience of counties that were  
            authorized to use design-build at the time, the 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 2010 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  
            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)Current law requires counties that use design-build  
            contracting to submit a report to the LAO by September 1,  
            2013, containing specified information such as project costs,  
            completion times, change orders, any written protests, an  
            assessment of the pre-qualification process and the labor  
            force compliance program, and other elements.  The law also  
            requires the LAO to report to the Legislature by January 1,  
            2014, on counties' use of design-build.  The LAO must also  
            complete a fact-based analysis of the use of design-build by  
            counties and compile the analyzed information into a report  
            for the Legislature.  This analysis must include conclusions  
            describing the actual cost of design-build projects, whether  
            project schedules were met, and whether projects needed or  
            used change orders.  These reports have yet to be completed.   
            The Committee may wish to consider whether an extension on  
            counties' use of design-build should be granted before these  
            reports are reviewed, and whether similar reporting should be  
            required in the future.

          6)According to the California State Association of Counties,  








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            "The design-build method is an approach to delivering public  
            works projects which counties find beneficial?There are a  
            number of advantages to design-build, when compared to the  
            traditional design-bid-build method:

             a)   Projects can be completed faster, as construction can  
               commence during the design phase;

             b)   Contractors are provided with more flexibility over  
               project design, materials and construction methods.  This  
               promotes project design and construction innovation, which  
               can ultimately result in higher quality, as well as cost  
               savings; and,

             c)   Time-consuming and costly disputes between designer and  
               contractor are reduced, because both parties are affiliated  
               with the same entity."
          7)The Professional Engineers in State Government argue that  
            "there is ample evidence that design-build has been a failure  
            for California taxpayers?Historically, on state highways and  
            other public works projects, public inspectors have ensured  
            that construction and seismic standards are met, that projects  
            meet safety requirements and that the materials used will  
            stand the test of time?This crucial function should not be  
            performed by a private inspector whose primary obligation is  
            to the success and profitability of his company or business  
            partners?

            "Additionally, in 2009, legislative leaders negotiated an  
            agreement (SB X2 4 - Cogdill)?to provide broad design-build  
            authority for transportation projects," which include a  
            requirement that the Department of Transportation perform  
            inspection services on state highway projects.  The courts  
            have determined that this provision is no longer required.   
            "PECG does not believe it is appropriate to clarify existing  
            design-build authority for other government entities unless  
            and until we restore the original intent of SB X2 4."

          8)The Air Conditioning Trade Association, the  
            Plumbing-Heating-Cooling Contractors Association of  
            California, and the Western Electrical Contractors Association  
            take issue with current law that exempts counties from  
            reimbursing DIR "for its reasonable and directly related costs  
            of performing monitoring and enforcement" if "it enters into a  
            collective bargaining agreement that binds all of the  








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            contractors performing work on the project and that includes a  
            mechanism for resolving disputes about the payment of wages."   
            They argue that this exemption "denies DIR of vitally needed  
            funds to enforce State law and puts at risk the workers on  
            these construction jobs who will be potentially denied the  
            protection of the State Labor Commissioner."

           9)Support arguments  :  Supporters argue that design-build  
            authority for counties is an effective method of completing  
            construction projects on time and within or under budget, and  
            that it has been a useful tool that counties should be able to  
            continue using in the future.

             Opposition arguments  :  Opponents contend that design-build  
            does not guarantee cost savings, reduces competitive bidding,  
            and lacks impartial inspection procedures, which can put the  
            public at risk for failed construction projects.

           















          REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California State Association of Counties [CO-SPONSOR]
          County of Los Angeles [CO-SPONSOR]
          County of San Bernardino [CO-SPONSOR]
          County of San Diego [CO-SPONSOR]
          County of Solano [CO-SPONSOR]
          Urban Counties Caucus [CO-SPONSOR]
          Associated General Contractors








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          California State Sheriffs' Association
          Counties of Kern, Merced, Napa, Orange, Sacramento, Santa Clara,  
          Sonoma, and Stanislaus
          Design-Build Institute of America
          Rural County Representatives of California
          San Francisco Unified School District

           Opposition 
           
          Air Conditioning Trade Association
          Plumbing-Heating-Cooling Contractors Association of California
          Professional Engineers in California Government
          Western Electrical Contractors Association

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