BILL ANALYSIS Ó
AB 401
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ASSEMBLY THIRD READING
AB 401 (Daly)
As Amended May 20, 2013
Majority vote
TRANSPORTATION 13-2 APPROPRIATIONS 16-1
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|Ayes:|Lowenthal, Linder, |Ayes:|Gatto, Harkey, Bigelow, |
| |Achadjian, Ammiano, | |Bocanegra, Bradford, Ian |
| |Blumenfield, Bonta, | |Calderon, Campos, Eggman, |
| |Buchanan, Daly, Frazier, | |Gomez, Hall, Rendon, |
| |Gatto, Holden, Nazarian, | |Linder, Pan, Quirk, |
| |Quirk-Silva | |Wagner, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Morrell, Patterson |Nays:|Donnelly |
| | | | |
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SUMMARY : Authorizes the Orange County Transportation Authority
(OCTA) to use design-build for the Interstate 405 (I-405)
Improvement Project. Specifically, this bill :
1)Authorizes OCTA to use design-build procurement for the I-405
Improvement Project, based on either best value or lowest
responsible bidder.
2)Provides that the California Department of Transportation
(Caltrans) is to perform construction inspection services on
the project, including specific tasks, such as material source
testing, surveying, independent quality control testing and
inspection, and quality assurance audits.
3)Prescribes a direct reporting relationship between project
inspectors and senior Caltrans engineers responsible for all
inspectors and construction inspection services.
4)Explicitly states that the senior Caltrans engineer
responsible for construction inspection services is
responsible for acceptance or rejection of work on the
project.
5)Provides, notwithstanding any other provision of law, that
Caltrans will retain the authority to stop the contractor's
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operations on the project in the event public safety is
jeopardized.
6)Directs Caltrans to ensure that public safety and convenience
is maintained for work performed under an encroachment permit
within state highway rights-of-way.
7)Prescribes the process by which Caltrans is to document
project deficiencies and to direct remedies.
8)Provides that Caltrans may use employees or consultants it
contracts with to perform prescribed services, consistent with
Article 22 of the State Constitution; requires that resources
necessary to perform the services are reflected in the
Caltrans capital outlay support program budget.
9)Requires OCTA to report to the Legislature on the project's
progress and compliance with the provisions of this bill.
10)Directs the California Transportation Commission (CTC) to
develop conflict-of-interest guidelines for transportation
entities entering into design-build contracts.
11)Requires transportation entities that are authorized to use
design-build to establish and enforce a labor compliance
program or contract with a third party to operate a labor
compliance program; alternatively, allows the transportation
entities to enter into a collective bargaining agreement.
12)Imposes other requirements related to the Department of
Industrial Relations (DIR), apprenticeship programs, and
skilled labor force availability.
13) Sets forth processes and procedures to govern the
design-build procurement process.
14)Includes a January 1, 2018, sunset date.
EXISTING LAW :
1)Sets forth provisions governing public works contracting.
These provisions generally prohibit public agencies from
contracting with the same firm for both the design and the
construction phases of a project.
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2)Requires, generally, public works construction contracts to be
awarded to the lowest responsible bidder.
3)Establishes the Design-Build Demonstration Program that
provides for a limited use of design-build contracts for
transportation; sets forth criteria and procedures governing
the program, including:
a) Authorizes local transportation entities, if authorized
by the CTC, to use design-build for up to five projects
that may be for local street or road, bridge tunnel, or
public transit projects within the jurisdiction of the
entity;
b) Authorizes Caltrans, if authorized by the CTC, to use
design-build on up to 10 state highway, bridge, or tunnel
projects;
c) Limits the total number of projects authorized in the
demonstration program to 15; and,
d) Sunsets the demonstration program on January 1, 2014.
4)Authorizes transit agencies, until January 1, 2015, to use
design-build for their projects.
5)Provides, within the State Constitution, that all government
agencies must be allowed to contract with qualified private
entities for architectural and engineering services for all
public works of improvement; specifically provides that the
choice and authority to contract extends to all phases of
project development, including permitting and environmental
studies, rights-of-way services, design phase services and
construction phase services.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)The responsibilities assigned in this bill to Caltrans
generally represent normal project-related oversight
activities, costs of which are included in the project budget.
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Any costs to DIR will be reimbursed.
2)OCTA estimates use of design-build on the project would reduce
the project duration by at least two years, at a savings in
project costs in the range of $30 million per year.
COMMENTS : For decades, the traditional process for procuring
public works projects has been the design-bid-build process.
This process relies on: 1) a design entity preparing complete
project design specifications and estimates; 2) the project
owner putting the complete package out to bid for construction;
and, 3) awarding the construction contract to the lowest
responsible bidder. The design-bid-build process was developed
to protect taxpayers from extravagance, corruption, and other
improper practices by public officials as well as to secure a
fair and reasonable price for public works construction by
injecting competition amongst bidders into the process.
Although design-bid-build generally results in the lowest cost
construction contract, it is not without its drawbacks,
including:
1)Projects generally take longer to complete because designs
must be entirely completed, permits obtained, and right-of-way
acquired before the construction contract can be bid and
awarded.
2)Designs prepared for a competitive low-bid procurement are
developed to allow for a broad range of construction
approaches. As a result, low-bid designs do not always equate
to the most efficient design possible, depending on a
particular contractor's particular strengths or capabilities.
3)Because the project designer does not have the benefit of
consulting with the entity that will ultimately be responsible
for construction of the project, there may be significant
issues that the designer does not anticipate, particularly
constructability issues. This can result in change orders
that ultimately drive up the price of the contract.
4)Low-bid is not always the least expensive option, once change
orders and contractor claims are factored into the overall
project costs.
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In the early 1990s, public works agencies grew frustrated with
design-bid-build and began experimenting with more innovative
project delivery methods, namely design-build. Design-build is
an alternate method for procuring design and construction
services that provides for the delivery of public works projects
from a single entity. Design-build combines project design,
permit, and construction schedules in order to streamline the
traditional design-bid-build environment.
Design-build differs from design-bid-build in some key areas,
including:
1)Shorter overall elapsed project delivery time because
construction can begin before final design is complete.
2)Project costs and schedule risks are more heavily borne by the
design-build contractor.
3)Construction claims and change orders are minimized.
4)Designs can be developed to take advantage of particular
contractor's strengths and abilities, thereby reducing the
need to "over-design" for generic use as in design-bid-build.
5)Project specifications are typically based on definitive
performance criteria (which may or may not be well established
by the project owner) rather than established specifications.
6)Contracts are awarded based on best-value analyses rather than
low-bid.
Design-build contracts are not without their drawbacks as well.
For example, with a design-build project, the project owner must
give up a good deal of control over the details of the project
design. Additionally, design-build contractors are typically
selected using qualifications-based selection criteria or best
value analysis. These approaches are more subjective than a
low-bid approach, potentially subjecting the public works owner
to greater contract challenges and higher costs.
Existing law allows selected state agencies and local
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governments to use design-build but does not generally allow
agencies to use design-build for highways. In 2009, however,
the Legislature passed and the Governor signed SB 4 2X
(Cogdill), Chapter 2, Statutes of 2009-10 Second Extraordinary
Session, that authorizes, among other things, the Design-Build
Demonstration Program. This program provides for limited use of
design-build for transportation-10 for projects on the state
highway system and five for projects on local streets. SB 4 2X
sets forth processes and procedures by which design-build
projects are approved under the demonstration project, which
sunsets January 1, 2014.
To date, CTC has authorized 10 state highway projects. No
approvals to use design-build on local streets have been
requested.
This bill authorizes an additional design-build project on
I-405, beyond the 10 state highway projects authorized in the
demonstration program. I-405 was built in the 1960s and is the
primary freeway serving coastal communities in northwest Orange
County. It carries approximately 300,000 vehicles per day and
traffic along the corridor is expected to grow by about 35-40%
by 2040. Currently, both general purpose and high occupancy
vehicle lane traffic demand exceeds available capacity during
peak periods. Additional lanes are being proposed to reduce
congestion, enhance operations, increase mobility, improve trip
reliability, maximize throughput, and optimize operations while
minimizing environmental impacts and right-of-way acquisitions.
The I-405 Project Improvement Project will provide one
additional general purpose lane in each direction of the 12-mile
stretch of I-405, from Euclid Street, at the border of Los
Angeles County, and I-605. The primary source of funding for
the $1.3 billion project comes from Orange County's sale tax
measure for transportation. According to the author, the
project is estimated to generate over 22,000 jobs.
This bill borrows heavily from provisions of the existing
Design-Build Demonstration Program and particularly from
provisions that were amended into the demonstration program to
provide design-build authority unique for Riverside County
Transportation Commission's State Route 91 Corridor Improvements
Project. Provisions related to that project specifically
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delineate the construction inspection functions required to be
within Caltrans purview on the project.
The I-405 Improvement Project is not eligible under the
demonstration program authorized under SB 4 X2 for two reasons:
1) all of the 10 authorized projects on state highways have been
granted design-build authority already; and, 2) the I-405
Improvement Project is not advanced enough to go out to bid
prior to the January 1, 2014, sunset date of the demonstration
program.
In theory, it would behoove the Legislature to evaluate the
results of the Design-Build Demonstration Program prior to
granting additional authorization to use design-build for
transportation. However, experiences to date for those limited
transportation projects authorized to use design-build here in
California, as well as others from around the nation, suggest
that design-build has the potential to expedite project
delivery. In the case of the I-405 Improvement Project, the
author asserts that using design-build on this project could
deliver the project two or three years earlier, meaning that
jobs can be created that much earlier as well.
All things considered, the prospect of creating new jobs
probably outweighs the risk of proceeding with this design-build
authority prior to knowing the final results of the original
Design-Build Demonstration Program.
Writing in opposition to this bill, the American Council of
Engineering Companies of California (ACEC CA) contends that this
bill violates the State Constitution, specifically Proposition
35 (2000). ACEC CA argues that under Proposition 35, the
Legislature cannot compel OCTA to use Caltrans services. Other
opponents of the bill argue that, among other things, the bill's
labor provisions impede the awarding of construction contracts
on a fair and open basis and discriminate against some
construction apprentices, journey workers, and their employers.
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093
FN: 0000642
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