BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 401| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 401 Author: Daly (D), et al. Amended: 9/3/13 in Senate Vote: 21 SENATE TRANSPORTATION & HOUSING COMMITTEE : 10-1, 8/20/13 AYES: DeSaulnier, Gaines, Beall, Cannella, Galgiani, Hueso, Lara, Liu, Pavley, Roth NOES: Wyland SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/30/13 AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg ASSEMBLY FLOOR : 68-3, 5/24/13 - See last page for vote SUBJECT : Design-build procurement of transportation projects SOURCE : Orange County Transportation Authority Professional Engineers of California Government DIGEST : This bill authorizes the Department of Transportation (Caltrans) and regional transportation agencies (RTPAs) to use the design-build (DB) 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 CONTINUED AB 401 Page 2 responsibility is otherwise delegated to another entity by statute. 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 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. SB 4XX (Cogdill, Second Extraordinary Session, Chapter 2, Statutes of 2009) 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. The DB authority granted by SB 4XX sunsets January 1, 2014. SB 4XX also authorized Caltrans and RTPAs to use another procurement method, called a public-private partnership (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 CONTINUED AB 401 Page 3 purposes of PPP authorization, SB 4XX defined RTPAs 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 authorizes Caltrans to use DB procurement for up to ten projects on the state highway and expressway system, and provides specified RTPAs with unlimited authority to use DB procurement for projects on or adjacent to the state highway system including related non-highway portions of the project. In addition, this bill: 1.Requires a RTPA and Caltrans to enter into a cooperative agreement governing the roles and responsibilities of each entity and a conflict resolution process, for projects on or interfacing with the state highway system. Allows a RTPA to use DB based on either best value or lowest responsible bid, to design and construct projects on expressways that are not on the state highway system, as specified. Specifies the entity responsible for the maintenance of the local streets and roads with the jurisdiction of the expressway is responsible for the maintenance of the expressway. 2.Requires a transportation entity to submit an annual progress report to the Legislature on each DB project, commencing on July 1, two years after the contract is awarded until four years after the first report. CONTINUED AB 401 Page 4 3.Requires a transportation entity to either establish a labor compliance program, or contract with the Department of Industrial Relations (DIR) for monitoring and enforcing prevailing wages on DB projects, as specified. All DIR costs are reimbursed by the transportation entity. 4.Prohibits and city, county or city and county from utilizing the DB method pursuant to this bill, and prohibits a RTPA from using the DB method on behalf of a city, county, or city and county. 5.Prescribes the process for awarding a contract using DB, which generally follows existing procedures for the DB demonstration program and AB 2098 (Miller, 2010), including authorization to award contracts using either best value or lowest responsible bid. 6.Requires Caltrans to perform construction inspection services for projects that are on or interface with the state highway system, using department employees or consultants. Inspection services include material source testing, certification testing, surveying, monitoring of environmental compliance, quality control testing and inspection, and quality assurance audits. 7.Requires construction inspection services to include a direct reporting relationship between the inspectors and senior department engineers, as specified. 8.Requires Caltrans employee and consultant resources for conducting construction inspection services to be included in Caltrans' capital outlay support program in the annual Budget Act, and specifies that "construction inspection services" does not include surveying work performed as part of DB contracts. 9.Sunsets the DB procurement authority on January 1, 2024, or one year after provisions requiring Caltrans to conduct all construction inspection services is deemed invalid by a court of competent jurisdiction. Background In 2010, the Professional Engineers in California Government CONTINUED AB 401 Page 5 (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. 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 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 the Orange County Transportation Authority (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 CONTINUED AB 401 Page 6 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. FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: Unknown fiscal impacts, but potentially overall project cost savings, related to the use of design-build on transportation projects (State Highway Account, local funds, federal funds). Caltrans could incur costs to hire, train, and transfer construction inspection staff among its twelve districts, to the extent that design-build projects occur in a district that has a shortage of available staff (State Highway Account). In addition, if a district is overstaffed when a project concludes, these positions will either be reduced or shifted to other districts. Staff notes, however, that shortages could be addressed by increased contracting for inspection services. Unknown costs to Caltrans to the extent that resources identified in the annual Budget Act are lower than actual costs related to inspection services on RTPA projects (State Highway Account). Unknown costs to DIR to monitor and enforce prevailing wage requirements for DB projects (State Public Works Enforcement Fund). These costs will be reimbursed in arrears by the transportation entity. CONTINUED AB 401 Page 7 SUPPORT : (Verified 9/3/13) Orange County Transportation Authority (co-source) Professional Engineers in California Government (co-source) American Society of Civil Engineers Region 9 Association of California Cities - Orange County Automobile Club of Southern California California School Employees Association 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 Clara Valley Transportation Authority Santa Rosa City Employees Association Southern California Association of Governments Ventura County Transportation Commission OPPOSITION : (Verified 9/3/13) Air Conditioning Trade Association American Council of Engineering Companies of California Associated Builders and Contractors of California Associated General Contractors, California Chapters Plumbing-Heating-Cooling Contractors Association of California Service Employees International Union Local 1000 Service Employees International Union State Council Western Electrical Contractors Association ASSEMBLY FLOOR : 68-3, 5/24/13 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Bigelow, Bloom, Blumenfield, Bocanegra, Bonilla, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chesbro, Conway, Cooley, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gordon, Gorell, Gray, Hagman, Hall, Harkey, Roger Hernández, Jones, Jones-Sawyer, Levine, Linder, Lowenthal, Maienschein, Mansoor, Medina, Melendez, Mitchell, Morrell, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Patterson, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Salas, Stone, Ting, Wagner, Wieckowski, Williams, Yamada, John CONTINUED AB 401 Page 8 A. Pérez NOES: Chávez, Donnelly, Logue NO VOTE RECORDED: Bonta, Grove, Holden, Skinner, Waldron, Weber, Wilk, Vacancy, Vacancy JA:ej 9/3/13 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED