BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 195 HEARING: 6/12/13
AUTHOR: Hall FISCAL: Yes
VERSION: 5/20/13 TAX LEVY: No
CONSULTANT: Weinberger
DESIGN BUILD CONTRACTING
Extends, from July 1, 2014 to July 1, 2016, the date on
which the statutes authorizing counties to use the
design-build contracting method expire.
Background and Existing Law
The Local Agency Public Construction Act requires local
officials to invite bids for construction projects and then
award contracts to the lowest responsible bid-der. This
design-bid-build method is the traditional and most
widely-used approach to public works construction. This
approach splits construction projects into two distinct
phases: design and construction. During the design phase,
the local agency prepares detailed project plans and
specifications using its own employees or by hiring outside
architects and engineers. Once project designs are
complete, local officials invite bids from the construction
community and award the contract to the lowest responsible
bidder.
By contrast, state law also allows state and local
officials to use the design-build method to procure both
design and construction services from a single company
before the development of complete plans and
specifications. Under design-build, the owner contracts
with a single entity - which can be a single firm, a
consortium, or a joint venture - to design and construct a
project. Before inviting bids, the owner prepares
documents that describe the basic concept of the project,
as opposed to a complete set of drawings and specifications
of the final product. In the bidding phase, the owner
typically evaluates bids on a best-value basis,
incorporating technical factors, such as qualifications and
design quality, in addition to price.
AB 195 -- 5/20/13 -- Page 2
All counties can use the design-build method to construct
buildings and related improvements and wastewater treatment
facilities that cost more than $2.5 million (SB 416,
Ashburn, 2007). State law requires each county that uses
the design-build method on a public works project procured
and completed between November 1, 2009 and August 1, 2013
to submit a report to the Legislative Analyst's Office
(LAO) before September 1, 2013. On or before January 1,
2014, the LAO must submit a report to the Legislature on
counties' use of the design-build method. The report must
contain specified information, including:
A fact-based analysis utilizing the information
provided in the reports submitted by counties and any
independent information provided by the public or
interested parties.
Conclusions describing the actual cost of projects
procured pursuant to this section, whether the project
schedule was met or altered, and whether projects
needed or used project change orders.
Under current law, the statutes authorizing counties to use
the design-build method expire on July 1, 2014 (SB 879,
Cox, 2010). County officials want to give the Legislature
more time, after receiving the LAO report, to consider
whether to extend or eliminate this statutory sunset date.
Proposed Law
Assembly Bill 195 extends, from July 1, 2014 to July 1,
2016, the date on which the statutes authorizing counties
to use the design-build contracting method expire.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . In 2010, the Legislative
Analyst's Office investigated five design-build projects
and found that four of those projects were completed under
budget. The LAO noted that counties that have used
design-build generally expressed favorable opinions of the
AB 195 -- 5/20/13 -- Page 3
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. After considering the LAO's findings
and holding a hearing on counties' use of design-build
contracting, legislators passed a bill extending the county
design-build statutes until mid-2014. That bill also
required the LAO to provide the Legislature with updated
information on county design-build projects by the end of
2013. With just six months between the date the LAO report
is due and the date that the statutes expire, county
officials worry that legislators won't have enough time to
consider another extension next year. AB 195 ensures that
counties won't lose their ability to use this successful,
cost-effective project delivery system.
2. What's the rush ? The requirement for design-bid-build
contracts was a reaction to the favoritism, corruption, and
waste associated with major public works projects in the
19th Century. Ever since the reforms that separated the
design and construction phases at the turn of the 20th
Century, design-bid-build contracts became the norm.
Responding to local officials' requests for more
flexibility, legislators have loosened the statutes to
allow experiments with design-build contracts. AB 195's
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. In its last review, the LAO
learned that five counties completed five design-build
projects in recent years, with 10 more projects still
underway. This small sample of county design-build
projects may not be enough to justify a two-year extension
before the LAO provides the updated report that is due by
January 1, 2014. The Committee may wish to consider
whether it is premature to extend counties' design-build
statute before considering the pending report from the LAO.
3. Related legislation . At its May 1, 2013 hearing, by a
vote of 7-0, the Senate Governance & Finance Committee
approved SB 785 (Wolk), which enacts new, uniform statutes
governing public agencies' design-build contracts. The
bill is currently on the Senate Floor Inactive File.
Assembly Actions
AB 195 -- 5/20/13 -- Page 4
Assembly Local Government Committee: 7-1
Assembly Appropriations Committee:16-1
Assembly Floor: 59-9
Support and Opposition (6/6/13)
Support : California State Association of Counties;
Counties of Kern, Los Angeles, Merced, Napa, Orange,
Sacramento, San Bernardino, San Diego, Santa Clara, Solano,
Sonoma, and Stanislaus; Urban Counties Caucus; Associated
General Contractors; California Chapter of the National
electrical Contractors Association; California Legislative
Conference of the Plumbing, Heating, and Piping Industry;
California State Sheriffs' Association; CH2M Hill;
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.