BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  SB 268
                                                                  Page  1

          Date of Hearing:   May 7, 2014

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                           K.H. "Katcho" Achadjian, Chair
                   SB 268 (Gaines) - As Amended:  January 27, 2014

           SENATE VOTE  :   35-0
           
          SUBJECT  :   Health care districts: public contracts:  
          design-build.

           SUMMARY  :  Allows the Last Frontier Health Care District to use  
          the design-build process when contracting for the construction  
          of a building and improvements directly related to a hospital or  
          health facility building at the Modoc Medical Center.   
          Specifically,  this bill  :   

          1)Allows, upon approval by the board of directors of the Last  
            Frontier Health Care District (District), the design-build  
            procedure authorized for counties in existing law to be used  
            to assign contracts for the construction of a building or  
            improvements directly related to construction of a hospital or  
            health facility building at the Modoc Medical Center.

          2)Provides that statutory references to a "county" and a "board  
            of supervisors" in existing law authorizing counties to use  
            design-build also mean the Last Frontier Health Care District  
            and its board of directors.

          3)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 (Act).

          4)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, but not limited to, streets,  
            highways, public rail transit, roads, bridges, water  
            resources, and related infrastructure.

          5)Contains an urgency clause and provides that the facts  
            constituting the necessity are: in order to comply with health  
            regulations and meet increasing demand for health care  








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            services, it is necessary that this act take effect  
            immediately

          6)Contains chaptering language to resolve conflicts with SB 785  
            (Wolk) of 2013.

           EXISTING LAW  :

          1)Requires local officials, under the Local Agency Public  
            Construction Act (LAPC Act), to invite bids for construction  
            projects and then award contracts to the lowest responsible  
            bidder under the traditional design-bid-build project delivery  
            system.

          2)Authorizes counties, until July 1, 2016, to use the  
            design-build method for projects costing more than $2.5  
            million and to award the project using either the lowest  
            responsible bidder or by best value.

          3)Authorizes cities to use the design-build method for projects  
            costing more than $1 million.
          4)Authorizes the Sonoma Valley Health Care District to use  
            design-build contracting for the construction of buildings and  
            improvements in excess of $2.5 million directly related to a  
            hospital or health facility building at the Sonoma Valley  
            Hospital, which is required to be reviewed and inspected  
            according to the standards of the Act.

          5)Provides for local health care districts, which govern certain  
            health care facilities.  Each health care district has  
            specific duties and powers respecting the creation,  
            administration, and maintenance of the districts, including  
            the authority to purchase, receive, take, hold, lease, use,  
            and enjoy property of every kind and description of property  
            within and without the limits of the district.

          6)Establishes, pursuant to the Act, timelines for hospital  
            compliance with seismic safety standards.

           FISCAL EFFECT  :   None

           COMMENTS  :   

           1)Purpose of this bill  .  This bill allows the Last Frontier  
            Health Care District to use the design-build process when  








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            contracting for the construction of a building and  
            improvements directly related to a hospital or health facility  
            building at the Modoc Medical Center.  This bill is  
            author-sponsored.

           2)Author's statement  .  According to the author, "Modoc Medical  
            Center is currently working on a USDA loan package and is  
            contemplating the Preliminary Architectural Report (PAR).  The  
            new facility will be a single-story, 8- or 10-bed, +/- 35,000  
            sq. ft. (pending feasibility analysis) facility.

            "The Health Resources and Services Administration (HRSA)  
            identifies Modoc County as a Medically Underserved and Health  
            Professional Shortage Area with 20 percent of persons below  
            poverty and 18 percent of residents enrolled in Medi-Care.   
            With the increase in new patients under the Affordable Care  
            Act and healthcare costs going up while reimbursement rates  
            continue to decline, savings on construction are critical.   
            The Design-Build method of project delivery can provide  
            significant cost savings that will benefit the entire  
            community."

           3)Background  .  The LAPC Act generally 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 approach to public  
            works construction.  

            Under the design-build method, a single contract covers the  
            design and construction of a project with a single company or  
            consortium that acts as both the project designer and builder.  
             The design-build entity arranges all architectural,  
            engineering, and construction services, and is responsible for  
            delivering the project at a guaranteed price and schedule  
            based upon performance criteria set by the public agency.  The  
            design-build method can be set by the public agency.  The  
            design-build method can be faster and, therefore, cheaper,  
            than the design-bid-build method, but it requires a higher  
            level of management sophistication since design and  
            construction may occur simultaneously.

            Advocates for the design-build method of contracting for  
            public works contend that project schedule savings can be  
            realized because only a single request for proposals is needed  
            to select the project's designer and builder.  The more  








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            traditional design-bid-build project approach requires the  
            separate selection of the design consultant or contractor,  
            completion of design, and then advertising for bids and  
            selection of the construction contractor.  Proponents add that  
            design-build allows the overlap of design and construction  
            activities, resulting in additional time savings and lower  
            project costs.  By avoiding the delays and change orders that  
            result from the traditional design-bid-build method of  
            contracting, proponents argue that design-build can deliver  
            public works faster and cheaper.

            Detractors of design-build contend that it eliminates  
            competitive bidding, allows the private contractor or  
            consortium to inspect and sign off on their own work, and  
            increases project delivery costs.

            All counties can use the design-build method to construct  
            buildings and related improvements and wastewater treatment  
            facilities that cost more than $2.5 million.  Similarly, all  
            cities can use the design-build method to construct buildings  
            and related improvements worth more than $1 million.  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.  The Legislature also has  
            passed a number of bills authorizing some special districts to  
            construct projects using the design-build method.

           4)Design-Build and Healthcare Districts  .  California currently  
            has 80 health care districts.  Health care districts were  
            known as hospital districts prior to 1994.  Health care  
            districts are formed to "establish, maintain, and operate  
            health care facilities," including, but not limited to,  
            hospitals.  Health care districts are governed by elected  
            boards of directors.  Health care districts throughout the  
            state need to retrofit existing buildings or build new  
            facilities in order to comply with the Act.  These districts  
            are faced with escalating construction costs and are looking  
            for the most cost-efficient ways to meet seismic standards and  
            provide well-designed and built state-of-the-art facilities to  
            provide health care to the people of the state.  One of these  
            is design-build contracting.

            SB 1699 (Wiggins), Chapter 415, Statutes of 2008, authorized  
            the use of design-build for the Sonoma Valley Health Care  








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            District (SVHCD).  Following SB 1699's enactment, the SVHCD'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 SVHCD's upgraded facility, which was  
            constructed using design-build contracts, opened last year.

            The District operates the Modoc Medical Center in Alturas, in  
            Modoc County.  The medical center is comprised of a critical  
            access hospital, a skilled nursing facility, and a rural  
            health clinic providing 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.  


           5)Related legislation  .  SB 785 (Wolk) of 2013 repeals existing  
            law authorizing the Department of General Services (DGS), the  
            Department of Corrections and Rehabilitation (CDCR), and local  
            agencies to use the design-build procurement process, and  
            enacts uniform provisions authorizing DGS, CDCR, and local  
            agencies to utilize the design-build procurement process for  
            specified public works projects.  This bill contains language  
            to avoid chaptering out problems with SB 785.  
           
           6)Previous legislation .  SB 1005 (Cox) of 2010 would have  
            authorized the Tahoe Forest Health Care District and a health  
            care district authorized by the Office of Statewide Health  
            Planning and Development to use a design-build procedure when  
            assigning contracts for the construction of a hospital or  
            health facility building.  SB 1005 was held in the Assembly  
            Appropriations Committee.

            SB 1699 (Wiggins), Chapter 415, Statutes of 2008, authorized  
            the use of design-build for the SVHCD.  

           7)Arguments in support  .  The Modoc Medical Center, in support,  
            writes, "SB 268 would allow the Last Frontier Healthcare  
            District to use the design-build process to construct a  
            replacement facility for Modoc Medical Center, a Critical  
            Access Hospital (CAH).  The new facility is crucial to  
            complying with the State's Seismic Mandate deadline.  This  








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            mandate was enacted to make sure that California hospitals are  
            safe in the likely event of an earthquake?This (bill) would  
            create cost saving benefits by shifting the liability and risk  
            for cost containment and project completion to the  
            design-build entity."

           8)Arguments in opposition  .  None on file.

           9)Urgency clause  .  This bill contains an urgency clause and  
            requires a two-thirds vote on the Assembly Floor.

           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Association of California Healthcare Districts
          California Association of Rural Health Clinics
          California Special Districts Association
          Design-Build Institute of America, Western Pacific Region
          Modoc County Board of Supervisors
          Modoc Medical Center
           
            Opposition 
           
          None on file

           Analysis Prepared by  :    Angela Mapp / L. GOV. / (916) 319-3958