BILL ANALYSIS Ó
SB 328
Page 1
Date of Hearing: June 12, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
SB 328 (Knight) - As Amended: April 9, 2013
SENATE VOTE : 37-0
SUBJECT : Counties: public works contracts.
SUMMARY : Authorizes, until January 1, 2021, counties to use
construction manager at-risk contracts for projects in excess of
$1 million on county-owned or leased buildings. Specifically,
this bill :
1)Allows a county, with approval of the board of supervisors, to
utilize construction manager (CM) at-risk construction
contracts for the erection, construction, alteration, repair,
or improvement of any building owned or leased by the county.
A CM at-risk construction contract may only be used for
projects in the county in excess of $1 million and may be
awarded using either the lowest responsible bidder or best
value method.
2)Requires subcontractors that were not listed by a CM at-risk
entity as partners, general partners, or association members
in a partnership, limited partnership, or association in the
entity's CM at-risk bid submission to be awarded by the CM
at-risk entity in accordance with the process set forth by the
county.
3)Requires all subcontractors bidding on contracts pursuant to
this bill to be afforded the protections contained in the
Subletting and Subcontracting Fair Practices Act, and requires
the CM at-risk entity to do both of the following:
a) Provide public notice of the availability of work to be
subcontracted in accordance with the publication
requirements applicable to the competitive bidding process
of the county; and,
b) Provide a fixed date and time on which the subcontracted
work will be awarded in accordance with the procedure
established pursuant to this bill.
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4)Requires a county that elects to proceed under this bill and
uses a CM at-risk contract for a building project to submit to
the office of the State Controller, in electronic format, a
copy of the CM at-risk contract.
5)Requires the State Controller to make the copies of contracts
it receives pursuant to this bill available for public
inspection on its Internet Web site.
6)Repeals this bill's provisions on January 1, 2021, unless a
later enacted statute, that is enacted before January 1, 2021,
deletes or extends that date.
7)Provides the following definitions:
a) "Best value" means a value determined by objective
criteria related to the experience
of the entity and project personnel, project plan, financial
strength of the entity, safety record of the entity, and
price; and,
b) "CM at-risk contract" means a competitively procured
contract by a county with an individual, partnership, joint
venture, corporation, or other recognized legal entity,
that is appropriately licensed in this state and that
guarantees the cost of a project and furnishes construction
management services, including, but not limited to,
preparation and coordination of bid packages, scheduling,
cost control, value engineering, evaluation,
preconstruction services, and construction administration.
EXISTING LAW :
1)Requires local officials, under the Local Agency Public
Construction 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, 2014, 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)Requires counties that use design-build contracting to submit
a report to the Legislative Analyst's Office by September 1,
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2013, containing specified information and requires the LAO to
report to the Legislature by January 1, 2014, on counties' use
of design-build, as specified.
4)Allows state and local agencies and the University of
California (UC) to contract for construction project
management services on state or university construction
projects, as specified.
FISCAL EFFECT : Unknown
COMMENTS :
1)This bill allows counties to use the CM at-risk method of
contracting for public works costing more than $1 million,
until January 1, 2021. The bill provides protections for
subcontractors that bid on CM at-risk contracts, and requires
counties to submit their CM at-risk contracts to the State
Controller, who must post the contracts online for public
inspection. The bill provides a mechanism for legislative
review by including a repeal date of January 1, 2021.
According to the author, "SB 328 will equip counties with an
additional construction delivery method in furtherance of good
stewardship of public funds." This bill is sponsored by the
County of San Bernardino.
2)Current law requires local agencies to use the
design-bid-build method for public works contracts, which
provides separate contracts for design and construction.
Local agencies can also use the design-build method to procure
both design and construction services from a single vendor.
Existing law also allows local officials to contract with
construction project management firms, which provide services
in construction project design review and evaluation,
construction mobilization and supervision, bid evaluation,
project scheduling, cost benefit analysis, claims review and
negotiation, and general management and administration of a
construction project. Local officials award contracts based
on demonstrated competence and qualifications. Construction
project management services can be used with any project
delivery method.
3)According to the American Institute of Architects,
"Construction management at-risk is a process that allows the
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client of a project to choose the CM before the design stage
is complete. The CM is chosen based on qualifications, and
then the entire operation is centralized under a single
contract. The architect and CM work together in order to
cultivate and assay the design. Then, the CM gives the client
a guaranteed maximum price, and coordinates all subcontract
work. The architect/engineer (A/E) is hired separately from
the CM at-risk and the traditional client - A/E relationship
is maintained. However, A/Es can generally perform the CM
role, with various restrictions imposed based on state.
"Proponents have cited many advantages to construction
management at-risk over traditional methods of procurement.
These advantages are:
a) Increases the speed of the project and can also
strengthen coordination between the A/E and the CM;
b) The client hires the CM based on qualifications, thus
better ensuring a CM with a strong allegiance to the
client, because their business relies on references and
repeat work;
c) CMs, A/Es, and the client all collaborate. This creates
enhanced synergies throughout the process; and,
d) Transparency is enhanced, because all costs and fees are
in the open, which diminishes adversarial relationships
between components working on the project, while at the
same time eliminating bid shopping."
According to a report entitled, "Commissioning Large Public
Projects Using Construction Manager at Risk (CM@R)," which was
presented at the National Conference on Building Commissioning
in 2005, "Design-bid-build (D-B-B), design-build (D-B), and CM
at-risk (CM@R) are delivery systems that have evolved to move
a project from early design development to substantial
completion and building occupancy. All are delivery options
that are essentially designed to assign responsibility (risk)
for providing design and construction services to one or more
parties, either residing with the owner in D-B-B, residing
with the contractor + designer in D-B, or with the
construction manager as in CM@R.
"Delivery alternatives began to gain favor in the private
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sector due to the real or perceived notion that low-bid
contracts too often result in inferior buildings. D-B became
popular in the mid-1990s as clients responded to pressures to
get the product to market quickly and cheaply; issues no less
important today, as evidenced by the popularity of D-B in
private and public arena. D-B project delivery has grown from
5% of U.S. construction in 1985 to 33% in 1999, and has been
projected to surpass D-B-B as early as 2005.
"Throughout the 1990s, federal, state and local governments
were able to de-construct procurement from the regulated
environment and began to recognize the value of
non-traditional delivery, desiring to shift as much risk to a
third party as possible. Relaxing government regulations,
allowing D-B and later CM@R for public sector projects, has
helped public agencies and the construction industry as a
whole.
"Over the past five years, enacted laws and industry support
has paved the way for CM@R in the public sector. New York,
Florida, Texas, California and Arizona are just a few states
that have passed legislation favorable to CM@R. The American
Institute of Architects, typically a conservative group, has
also publicly supported the method where appropriate. In
school construction, CM@R has become the preferred delivery
system in some states. In California, for example, the U.C.'s
Office of the President recently created a set of contracts to
assist UC Campus Facility Managers develop projects using
CM@R. Texas has been particularly active, with nearly a third
of its projects now using CM@R, representing $300-$500 million
per year in construction. Across the U.S., CM@R has been
estimated to account for more than $48 billion on average each
year in construction contracts between 2001 and 2004."
4)CM at-risk has been used by the California Administrative
Office of the Courts, the UC, the California State University
System, school districts, and some cities. State law is
silent on counties' use of CM at-risk contracting.
5)AB 195 (Hall, 2013) extends the sunset for the use of
design-build by counties from July 1, 2014, to July 1, 2016.
This Committee approved AB 195 on a 7-1 vote on May 1, 2013.
AB 195 is pending in the Senate Governance and Finance
Committee.
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6)Support arguments : Supporters argue that counties and
taxpayers benefit from the cost-savings associated with the
use of the CM at-risk procurement method.
Opposition arguments : Opponents could argue that this bill
should contain more rigorous provisions for legislative
review, given the new authority it grants to counties.
7)This bill is double-referred to the Accountability and
Administrative Review Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
County of San Bernardino [SPONSOR]
California State Association of Counties
Rural County Representatives of California
Stanislaus County
Urban Counties Caucus
Opposition
None on file
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958