BILL ANALYSIS Ó
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: ab 401
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: daly
VERSION: 8/12/13
Analysis by: Eric Thronson FISCAL: yes
Hearing date: August 20, 2013
SUBJECT:
Design-build procurement of transportation projects
DESCRIPTION:
This bill authorizes the California Department of Transportation
(Caltrans) and regional transportation agencies to use the
design-build procurement method for transportation projects in
California, while requiring Caltrans to oversee construction
inspection of these projects on the state highway system.
ANALYSIS:
Existing law conveys to 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 by 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
that prevented 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
AB 401 (DALY) Page 2
Article XXII to the California Constitution, which states that
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 ten state highway, bridge, or tunnel projects,
and it authorized a local transportation agency to utilize DB on
five 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.
SB 4XX also authorized Caltrans and regional transportation
agencies to use another procurement method, called a
public-private partnership or PPP. Generally speaking, with PPP
procurement, a public entity contracts with a private consortium
to finance, design, construct, maintain, and operate a new
facility for a period of time necessary to repay the financing
of the project. For the purposes of PPP authorization, SB 4XX
defined regional transportation agencies as transportation
planning agencies, county transportation commissions, or joint
powers authorities with consent of their local transportation
planning agency. While this definition includes many of the
counties that have chosen to raise additional sales taxes for
transportation purposes (so-called "self-help" counties), it
does not include all self-help counties. The PPP authority
included in SB 4XX sunsets January 1, 2017.
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 local DB projects authorized under SB
4XX from 5 to 6. 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 PPP projects.
This bill broadly authorizes DB in a manner similar to how AB
2098 did for RCTC, with some notable exceptions. Specifically
different from provisions in AB 2098, this bill:
AB 401 (DALY) Page 3
Declares the Legislature's intention to authorize the
use of DB on the state highway system, as well as assuring
that Caltrans or its consultants perform the construction
inspection services for all projects on the system.
For purposes of both PPP and DB procurement, expands the
definition of a regional transportation agency to include
Santa Clara County Valley Transportation Authority and
other self-help counties.
Authorizes Caltrans to utilize DB procurement for up to
ten projects on the state highway system until January 1,
2024. These are in addition to the ten authorized under SB
4XX.
Authorizes regional transportation agencies to utilize
DB procurement for an unlimited number of projects on
streets, roads, or the state highway system until January
1, 2024.
Specifies that the DB authority granted to regional
transportation authorities does not include the authority
to perform construction inspection services for projects on
or where projects interface with the state highway system.
Requires a regional transportation agency and Caltrans
to enter into a cooperative agreement reflecting each
party's roles and responsibilities for any DB project on or
where projects interface with the state highway system.
The cooperative agreement must include a requirement that
the parties develop an issue resolution process to ensure
the project stays on schedule.
Assigns to Caltrans or its consultants the
responsibility to perform construction inspection services
for any DB projects on or where projects interface with the
state highway system.
Sunsets the DB authority if a court determines that the
section of law that assigns to Caltrans the performance of
construction inspection services is invalid. This sunset
occurs roughly one year following the date the court makes
its determination.
COMMENTS:
AB 401 (DALY) Page 4
1.Purpose . The author originally introduced this bill to
provide DB authority to Orange County in order to complete an
expansion project on Interstate 405. 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 and federal
standards. Because the state's transportation needs are so
great, and DB procurement is a tool that could help address
more of those needs without requiring additional resources,
this bill has greatly expanded DB authority to both Caltrans
and regional transportation agencies.
2.Who's responsible ? In 2010, the Professional Engineers in
California Government (PECG) filed a preliminary injunction
(PECG v. Caltrans) seeking to prevent Caltrans from entering
into a PPP agreement 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 a private entity performed some of the work pursuant
to a contract with the local government rather than under the
supervision and control of Caltrans.
During the court's deliberation of this issue, the Legislature
passed and the governor signed AB 2098 into law containing the
same "responsible agency" language as SB 4xx.
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.
In order to avoid future 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 DB projects
authorized by this bill.
3.Constitutionality . On June 12, 2013, Legislative Counsel
issued a written opinion that found that the section of the
previous version of this bill requiring Caltrans to perform
construction inspection services for their project violated
AB 401 (DALY) Page 5
Prop 35 and was therefore unconstitutional. The opinion
stated 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 required OCTA to reimburse Caltrans for performance
of 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.
Working with Legislative Counsel, the author has amended the
bill in a way that Counsel no longer believes it to be
unconstitutional. The previous version of this bill
authorized OCTA to procure the design and construction of
their project from a single entity, and at the same time
required OCTA to reimburse only Caltrans for particular work
done on the project. In the Legislative Counsel opinion, this
contradiction violated Prop 35. Recognizing that the
Legislature is empowered to specify through statute what
entity is authorized to perform any particular type of work on
the state highway system, the bill now assigns different roles
to different parties of any DB project. If Caltrans or a
regional transportation agency utilizes DB procurement for any
project, then this bill authorizes only Caltrans employees or
its consultants to perform construction inspection services,
while leaving the rest of the design and construction work to
a contracted entity.
4.Caltrans should do this work . There is good reason for the
Legislature to assign Caltrans the responsibility to oversee
the construction inspection of projects on the state highway
system. A private company or consortium will complete the
design and construction work on a DB-procured project. When
construction is complete, however, Caltrans will be
responsible for maintaining the new facility in perpetuity, as
well as liable for any potential flaws or failures of the
facility. It is important that the state maintain oversight
of the construction in order to ensure the project meets state
standards and is built to the quality necessary for the
expected life of the facility. If Caltrans does not oversee
this work, the state could be left with significant future
costs.
5.Regional transportation agency definition . In order to be
efficient, this bill amends an existing definition of
AB 401 (DALY) Page 6
"regional transportation agency" and then references that
definition for the purposes of this DB authorization.
Unfortunately, by amending this existing definition, this bill
unintentionally expands PPP authority to public entities not
currently authorized to use PPP procurement. In order to
resolve this unintentional consequence, the committee may wish
to amend the bill to define "regional transportation agency"
separate from the existing, amended definition and remove the
expansion of PPP authority currently included in the bill.
6.Letter of support and opposition . A previous version of this
bill generated a number of letters of support and opposition.
Recent amendments significantly change the scope of this bill.
The committee has only received the letters noted below
reflecting the newest version of the bill, but it is likely
others will take positions on the new version.
7.Technical amendment .
Page 16, line 2, insert "Division 12.5 (commencing with
Section 131000) or" before "Division"
Assembly Votes:
Floor: 68-3
Appr: 16-1
Trans: 13-2
AB 401 (DALY) Page 7
POSITIONS: (Communicated to the committee before noon on
Wednesday, August
14, 2013.)
SUPPORT: Orange County Transportation Authority
(co-sponsor)
Professional Engineers in California Government
(co-sponsor)
Santa Clara Valley Transportation Authority
OPPOSED: American Council of Engineering Companies of
California