BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 401
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: daly
VERSION: 5/20/13
Analysis by: Eric Thronson FISCAL: yes
Hearing date: July 9, 2013
SUBJECT:
Design-build on Interstate 405 in Orange County
DESCRIPTION:
This bill authorizes the Orange County Transportation Authority
to use the design-build procurement method for its Interstate
405 Improvement Project.
ANALYSIS:
Existing law conveys to the California Department of
Transportation (Caltrans) full possession and control of all
state highways and requires Caltrans to perform all improvement
and maintenance work, unless that responsibility is otherwise
delegated to another entity in statute.
Design-build (DB) refers to a procurement process in which both
the design and construction of a project are procured from a
single entity. DB stands in contrast to the traditional
design-bid-build contracting method whereby work on a project is
divided into two separate phases: design and construction.
Under design-bid-build, the government agency is responsible for
the design of the project, either by designing it itself or by
contracting with a private entity to do so. When designs are
completed, the agency solicits bids from the construction
industry and hires the responsible low bidder to build the
project. DB combines these two phases into a single,
comprehensive contract.
In 2000, voters approved Proposition 35 (Prop 35), amending the
California Constitution and eliminating several restrictions
preventing state and local governments from contracting with
private entities for particular services. Prior to Prop 35,
existing law required state civil service employees to perform
certain services provided by state agencies. Prop 35 added
Article XXII to the California Constitution, which states that
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state and local government are allowed to contract with
qualified private entities for architectural and engineering
services for all public works projects. Prop 35 also defined in
statute the term "architectural and engineering service" to
include, among other things, construction inspection services.
Senate Bill 4 (Cogdill), Second Extraordinary Session, Chapter
2, Statutes of 2009 (SB 4XX), authorized Caltrans to utilize DB
procurement for 10 state highway, bridge, or tunnel projects,
and it authorized a local transportation agency to utilize DB on
5 local street or road, bridge, tunnel, or public transit
projects within the jurisdiction of the local agency if approved
by the California Transportation Commission (CTC). The DB
authority granted by SB 4XX sunsets January 1, 2014.
In 2010, the Legislature passed and the governor signed AB 2098
(Miller), Chapter 250, which authorized Riverside County
Transportation Commission (RCTC) to utilize DB for the State
Route 91 Corridor Improvement Project (SR 91), thereby
increasing the number of DB projects authorized under SB 4XX
from 15 to 16. AB 2098 included a requirement that Caltrans "be
the agency responsible for the performance of construction
inspection services" on the SR 91 project. This requirement was
modeled after language in SB 4XX that made Caltrans the agency
responsible for the performance of project development services
on projects procured through another alternative method called a
public private partnership.
This bill authorizes the Orange County Transportation Authority
(OCTA) to use the DB method of procurement for its Interstate
405 Improvement Project (I-405) similar to RCTC's authority for
SR 91, with a few important differences. First, this bill
requires Caltrans to perform construction inspection services,
as opposed to requiring that Caltrans be the agency responsible
for the performance of such services. Second, this bill sunsets
OCTA's DB authority on
January 1, 2018.
COMMENTS:
1.Purpose . The I-405 project will provide one additional
general purpose lane in each direction to the most congested
12 mile stretch of the freeway in Orange County. According to
the author, this bill is necessary to move the project forward
quickly and increase freeway capacity, improve traffic and
interchange operations, and enhance road safety to meet state
AB 401 (DALY) Page 3
and federal standards. The author contends that DB authority
will allow OCTA to pursue the I-405 project more quickly than
otherwise, and this bill is necessary for OCTA to use DB
procurement on this project.
2.Background . In September 2009, CTC adopted guidelines to
implement DB under SB 4XX that allowed local agencies to
develop projects on the state highway system. When RCTC
applied to CTC for DB authority on the SR 91 project, the
Professional Engineers in California Government (PECG)
objected on the premise that SB 4XX only authorized Caltrans
to use design-build on the state highway system. In order to
resolve the concerns, the Legislature passed AB 2098, which
included the language making Caltrans responsible for certain
duties and allowed the parties to negotiate a "hybrid" model
of construction management unlike traditional DB procurement.
Under this model, Caltrans, rather than the local agency, is
responsible for performing what are referred to as
"boots-on-the-ground" construction inspections. These
inspectors, whether Caltrans personnel or consultants under
contract with Caltrans, will report directly to a senior
Caltrans engineer and the resident engineer, who is employed
by or under contract with RCTC, as opposed to reporting only
to the local agency resident engineer.
Most who were involved in the negotiation process of AB 2098
agree that the SR 91 project is a unique circumstance and this
"hybrid" model should not necessarily be considered a model to
deploy on future projects. One of the many benefits of DB
procurement is that by contracting with a private entity early
in the development of the project, the public entity can
transfer many of the risks to successful completion of the
project to the private contractor. When statute delineates
what roles must belong to the public, it reduces the amount of
risk a public agency can transfer and therefore undermines
this benefit of DB.
In 2010, PECG filed a preliminary injunction (PECG v.
Caltrans) seeking to prevent Caltrans from entering into
certain agreements for further work on the Presidio Parkway
Project in San Francisco. Among other concerns, the
injunction alleged that Caltrans did not follow the
requirement in SB 4XX that Caltrans be the agency responsible
for a wide range of project services on state highway projects
because some of the work was performed by a private entity
through contract with the local government rather than under
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supervision and control of Caltrans. Ultimately, the Superior
Court judge ruled that the requirement that Caltrans be the
"responsible agency" for the performance of certain services
does not require that Caltrans or Caltrans consultants
actually do the work. This language only requires Caltrans to
ensure the work is completed and done correctly, whether by
Caltrans or by another entity.
Presumably in order to avoid ambiguity, this bill does not
include the "responsible agency" language that was in AB 2098
and SB 4XX, but instead specifically authorizes only Caltrans
employees or consultants under contract with Caltrans to
perform construction inspection services for the I-405
project.
3.Unconstitutional . On June 12, 2013, Legislative Counsel
issued a written opinion that found that the section of this
bill requiring Caltrans to perform construction inspection
services for the I-405 project violates Prop 35 and is
therefore unconstitutional. The opinion states that courts
have previously held that statutes requiring a governmental
entity to use only civil service employees for particular
architectural and engineering services violate Prop 35.
Therefore, the provision of this bill which requires Caltrans
to perform construction inspection services violates the
section of Prop 35 that expressly authorizes a local agency
such as OCTA to contract with a private entity to perform
these services. The committee may consider amending the bill
to include the "responsible for" language in AB 2098 in order
to overcome the constitutionality concerns of this bill.
4.Sponsors disagree with unconstitutional finding . Supporters
of the bill have provided alternative opinions from their own
attorneys to the question of this bill's constitutionality.
These opinions suggest that the question is whether Prop 35
makes the Legislature's allocation of responsibilities to
different entities unconstitutional, and includes the
following logic: The Legislature is empowered to specify
through statute what services Caltrans and OCTA are
respectively authorized to perform. This bill authorizes OCTA
to procure the design and construction of this project from a
single entity. If OCTA utilizes DB procurement for this
project, then this bill authorizes only Caltrans employees or
consultants to perform construction inspection services. It
is only after the Legislature has established what services
each respective entity is authorized to perform that Prop 35
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provisions apply. In other words, the Legislature has
assigned duties to OCTA and to Caltrans, and now Prop 35
ensures that both OCTA and Caltrans can use either public
employees or contractors in the pursuit of those duties.
5.Opponents . Opponents argue that the sponsors' argument
considers issues farther up the decision-making tree than the
opinion from Legislative Counsel. As written, this bill
grants OCTA authority to move a project forward through a
particular procurement method, and it assigns duties to
Caltrans. If assigning work responsibilities was the end of
the process for developing projects, then this would not
violate the Constitution. But once duties are assigned,
someone has to do the work and someone has to pay. If OCTA
does not pursue this project, then Caltrans has no duties to
perform regardless of the authority this bill grants. But if
OCTA moves forward with this project as authorized by this
bill, then Caltrans (or its consultants) is the only entity
that can perform specified duties. In other words, the only
way OCTA builds this project utilizing DB is if OCTA pays
Caltrans for construction inspection services. OCTA does not
have the authority to perform construction inspection
services, pursuant to this bill, but the work must be
accomplished on the project, Caltrans is the only entity
authorized to do the work, and therefore OCTA must pay
Caltrans for the work. In this way, opponents argue, this
bill violates Prop 35 provisions that allow OCTA to contract
with private entities for various services, including
construction inspection.
6.Litigation . Notwithstanding the merits of either position on
the constitutionality of this bill, opponents suggest that
should the governor sign this bill into law. there will be
lawsuits filed to sort out these questions in court.
Assembly Votes:
Floor: 68-3
Appr: 16-1
Trans: 13-2
POSITIONS: (Communicated to the committee before noon on
Wednesday, July 3,
2013.)
SUPPORT: Orange County Transportation Authority
(co-sponsor)
AB 401 (DALY) Page 6
Professional Engineers in California Government
(co-sponsor)
American Federation of State, County and
Municipal Employees
American Society of Civil Engineers Region 9
Association of California Cities - Orange County
Glendale City Employees Association
Imperial County Transportation Authority
Los Angeles County Metropolitan Transportation
Authority
Organization of SMUD Employees
Riverside County Transportation Commission
San Bernardino Association of Governments
San Bernardino Public Employees Association
San Luis Obispo County Employees Association
Santa Rosa City Employees Association
Southern California Association of Governments
Ventura County Transportation Commission
OPPOSED: Air Conditioning Trade Association
American Council of Engineering Companies of
California
Associated Builders and Contractors of California
Associated General Contractors
California Conference of Carpenters
California-Nevada Conference of Operating
Engineers
California State Council of Laborers
Plumbing-Heating-Cooling Contractors Association
of California
State Building and Construction Trades Council
Western Electrical Contractors Association