BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 401
Author: Daly (D), et al.
Amended: 9/6/13 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.
Senate Floor Amendments of 9/6/13 make technical and conforming
changes.
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Senate Floor Amendments of 9/5/13 clarify that, during the bid
evaluation process, the transportation agency may either
prequalify bidders or use a process called "short list."
According to federal regulation, a short list process is one in
which the agency narrows the field of bidders through a
predetermined selection process based on the bidder's
qualifications.
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.
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
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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
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
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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.
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
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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
(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
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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
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, and 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
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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.
SUPPORT : (Verified 9/9/13)
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 9/9/13)
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
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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
A. Pérez
NOES: Chávez, Donnelly, Logue
NO VOTE RECORDED: Bonta, Grove, Holden, Skinner, Waldron,
Weber, Wilk, Vacancy, Vacancy
JA:ej 9/9/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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