BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 268 HEARING: 1/15/14
AUTHOR: Gaines FISCAL: No
VERSION: 1/6/14 TAX LEVY: No
CONSULTANT: Weinberger
DESIGN-BUILD CONTRACTING FOR THE LAST FRONTIER
HEALTHCARE DISTRICT (URGENCY)
Allows the Last Frontier Health Care District to use
design-build contracting.
Background and Existing Law
The Local Agency Public Construction Act requires local
officials to invite bids for construction projects and then
award contracts to the lowest responsible bidder. This
design-bid-build method is the traditional, and most
widely-used, approach to public works construction. This
approach splits construction projects into two distinct
phases: design and construction. During the design phase,
the local agency prepares detailed project plans and
specifications using its own employees or by hiring outside
architects and engineers. Once project designs are
complete, local officials invite bids from the construction
community and award the contract to the lowest responsible
bidder.
State law also allows state and local officials to use the
design-build method to procure both design and construction
services from a single company before the development of
complete plans and specifications. Under design-build, a
public agency contracts with a single entity - which can be
a single firm, a consortium, or a joint venture - to design
and construct a project. Before inviting bids, the agency
prepares documents that describe the basic concept of the
project, as opposed to a complete set of drawings and
specifications of what will be constructed. In the bidding
phase, the agency typically evaluates bids on a best-value
basis, incorporating technical factors, such as
qualifications and design quality, in addition to price.
All counties can use the design-build method to construct
SB 268 -- 1/6/14 -- Page 2
buildings and related improvements and wastewater treatment
facilities that cost more than $2.5 million (SB 416,
Ashburn, 2007). Similarly, all cities can use the
design-build method to construct buildings and related
improvements worth more than $1 million (AB 642, Wolk,
2008). A pilot program also permits cities, counties, and
special districts to use the design-build method to
construct 20 local wastewater treatment facilities, local
solid waste facilities, or local water recycling facilities
(AB 642, Wolk 2008).
The Legislature also has passed a number of bills
authorizing some special districts to construct projects
using the design-build method, including the Sonoma Valley
Health Care District (SB 1699, Wiggins, 2008). Following
SB 1699's enactment, the Sonoma Valley Health Care
District's voters approved a $35 million bond to finance
earthquake safety improvements to bring the hospital's
emergency room into compliance with the state's seismic
safety standards for hospitals. The District's upgraded
facility, which was constructed using design-build
contracts, opened last year.
The Last Frontier Health Care District operates the Modoc
Medical Center in Alturas (Modoc County). The medical
center is comprised of a critical access hospital, a
skilled nursing facility, and a rural health clinic
providing vital health services to a sparsely populated
rural community. State law requires the District to move
its hospital into a building that meets the state's seismic
safety standards. District officials are in the early
stages of planning the construction of a new building that
is expected to be a single-story, 10 bed, 40,000 square
foot facility. Last Frontier Health Care District
officials want the Legislature to grant it the same
authority to use design-build contracting for its hospital
construction project that the Legislature granted to the
Sonoma Valley Healthcare District.
Proposed Law
Senate Bill 268 allows the Last Frontier Health Care
District's board of directors, notwithstanding any other
law, to use the design-build procedure to construct a
building or improvements directly related to the
construction of a hospital or health facility building at
SB 268 -- 1/6/14 -- Page 3
the Modoc Medical Center. SB 268 specifies that the
District must use the design-build procedure that current
law establishes for counties and provides that statutory
references to a "county" and a "board of supervisors" also
mean the Last Frontier Health Care District and its board
of directors.
SB 268 requires that a hospital building project using the
design-build process authorized by the bill must be
reviewed and inspected in accordance with the standards and
requirements of the Alfred E. Alquist Hospital Facilities
Seismic Safety Act of 1983.
The bill finds and declares the Legislature's intent that
health care districts use the design-build process solely
for buildings associated with hospitals and health care and
not for other infrastructure, including, streets, highways,
public rail transit, roads, bridges, and water resources
facilities.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . When it comes to public works
projects, taxpayers want local officials to hold down
costs, but they also want to be sure that their tax dollars
are spent wisely. While the traditional contracting
process minimizes opportunities for public officials to
award construction contracts based on subjective factors,
it also can be more time consuming and more expensive than
the design-build method. Faced with a seismic retrofit
deadline, the Last Frontier Health Care District wants to
use design-build contracting to gain more control over the
bidding process and the final outcomes of its anticipated
hospital construction project. The District anticipates
that the design-build method will shorten the construction
process and reduce the project's overall costs, thereby
benefitting taxpayers and helping to ensure that the
District will meet its retrofit deadline.
2. Not so simple . Legislators have been cautious about
allowing local governments, and special districts in
particular, to use the design-build contracting method. SB
SB 268 -- 1/6/14 -- Page 4
1699 (Wiggins, 2008) provided the Sonoma Valley Health Care
District with the sole authorization for a health care
district to use the design-build contracting method. A
2005 Legislative Analyst's Office (LAO) report questioned
whether design-build is the best construction delivery
process for specialized buildings like hospitals. The LAO
suggested that design-build is best suited for
"straightforward" design and construction projects, but not
for complex projects that require builders to accommodate
more unique design preferences. A 2014 LAO report on how
counties have used design-build contracting finds that some
counties prefer using design-build for simple projects
while others indicate that design-build is useful for
specialty projects and large, complex projects. Because
hospitals are highly specialized structures that must meet
complex construction and seismic standards, the Committee
may wish to consider whether the design-build contracting
method is appropriate for constructing hospital buildings.
3. Weighty questions . In its new report on design-build
contracting, the LAO recommends that the Legislature
reconsider the weights given to the various "best value"
criteria that state law requires agencies to use in
evaluating design-build bids. Specifically, the LAO
suggests that the Legislature consider making price a more
heavily-weighted factor and either eliminating or reducing
the weight of other criteria that counties have identified
as being less useful. For example, the report notes that
using safety record as a weighted criterion in evaluating
bids may be unnecessary and redundant because safety record
is already required to be considered as part of the bidder
pre-qualification process. The Committee may wish to
consider amending SB 268 to require that the Last Frontier
Health Care District give price a weight of at least 20% as
a best-value criterion and allow the District to choose not
to use safety record as a best-value criterion.
4. Related legislation . Last year, the Governance &
Finance Committee approved SB 785 (Wolk, 2013), which
repeals state laws authorizing state and local government
agencies to use design-build contracting and enacts new,
uniform statutes governing agencies' design-build
contracts. That bill is currently awaiting a vote on the
Senate Floor. If SB 785 passes, it will delete the county
design-build statute that SB 268 cross-references. The
Committee may wish to consider amending SB 268 to add
SB 268 -- 1/6/14 -- Page 5
language that, contingent upon SB 785's enactment, would
insert the correct cross-reference into the Last Frontier
Health Care District's new statute.
5. Special legislation . The California Constitution
prohibits special legislation when a general law can apply
(Article IV, §16). SB 268 contains findings and
declarations explaining the need for legislation that
applies only to the Last Frontier Healthcare District.
6. Urgency . Regular statutes take effect on January 1
following their enactment; bills passed in 2014 take effect
on January 1, 2015. The California Constitution allows
bills with urgency clauses to take effect immediately if
they're needed for the public peace, health, and safety. SB
268 contains an urgency clause declaring that it is
necessary for its provisions to go into effect immediately
to comply with health regulations and meet increasing
demand for health care services.
7. Gut-and-amend . When it was introduced, SB 268
contained several provisions relating to the Political
Reform Act of 1974. The Committee never heard that version
of the bill. The January 6, 2014 amendments deleted the
bill's contents and inserted language relating the to Last
Frontier Health Care District's contracting powers.
Support and Opposition (1/9/14)
Support : Last Frontier Health Care District.
Opposition : Unknown.