BILL ANALYSIS Ó
SB 328
Page 1
SENATE THIRD READING
SB 328 (Knight)
As Amended August 12, 2013
Majority vote
SENATE VOTE :37-0
LOCAL GOVERNMENT 9-0 ADMINISTRATIVE REVIEW
12-0
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|Ayes:|Achadjian, Levine, Alejo, |Ayes:|Frazier, Achadjian, |
| |Bradford, Gordon, | |Allen, Buchanan, Ian |
| |Melendez, Mullin, Rendon, | |Calderon, Cooley, Hagman, |
| |Waldron | |Lowenthal, Medina, Olsen, |
| | | | |
| | | |Quirk-Silva, Salas |
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APPROPRIATIONS 17-0
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|Ayes:|Gatto, Harkey, Bigelow, | | |
| |Bocanegra, Bradford, Ian | | |
| |Calderon, Campos, | | |
| |Donnelly, Eggman, Gomez, | | |
| |Hall, Holden, Linder, | | |
| |Pan, Quirk, Wagner, Weber | | |
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SUMMARY : Authorizes, until January 1, 2018, 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 to a CM at-risk entity that possesses or that
obtains sufficient bonding to cover the contract amount for
construction services and risk and liability insurance as may
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be required by the county. Any payment or performance bond
written for the purposes of this bill shall be written using a
bond form developed by the county.
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.
4)Requires a county that elects to proceed under this bill and
uses a CM at-risk contract for a building project to make a
copy of the contract available for public inspection on its
Internet Web site and notify the appropriate policy committees
of the Legislature with instructions on finding and accessing
the stored contract.
5)Provides that, if a county elects to award a project pursuant
to this bill, retention proceeds withheld by the county from
the CM at-risk entity shall not exceed 5% if a performance and
payment bond issued by an admitted surety insurer is required
in the solicitation of bids.
6)Provides that, in a contract between the CM at-risk entity and
any subcontractor, and in a contract between a subcontractor
and any subcontractors thereunder, the percentage of the
retention proceeds withheld may not exceed the percentage
specified in the contract between the county and the CM
at-risk entity. If the CM at-risk entity provides written
notice to any subcontractor that is not a member of the CM
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at-risk entity, prior to or at the time the bid is requested,
that a bond may be required and the subcontractor subsequently
is unable or refuses to furnish a bond to the CM at-risk
entity, then the CM at-risk entity may withhold retention
proceeds in excess of the percentage specified in the contract
between the county and the CM at-risk entity from any payment
made by the CM at-risk entity to the subcontractor.
7)Provides that, if a county elects to award a project pursuant
to this bill, contracts entered into under the provisions of
this bill between a county and a CM at-risk entity, and
between a CM at-risk entity and a contractor or subcontractor,
are subject to current law governing indemnification
agreements in private commercial and public works construction
contracts, as specified.
8)Repeals this bill's provisions on January 1, 2018, unless a
later enacted statute, that is enacted before January 1, 2018,
deletes or extends that date.
9)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, including a
contractor's license issued by the Contractors' State
Licensing Board, 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 :
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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 (LAO) by
September 1, 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 : According to the Assembly Appropriations
Committee, there are minor costs to the State Controller of
approximately $50,000, depending on the number of contracts.
COMMENTS : This bill allows counties to use the CM at-risk
method of contracting for public works costing more than $1
million, until January 1, 2018. The bill provides protections
for subcontractors that bid on CM at-risk contracts, specifies
the amount of retention proceeds that may be withheld under
these contracts, and requires counties to make a copy of such
contracts available on their Internet Web sites and notify the
appropriate policy committees of the Legislature with
instructions on finding and accessing the stored contract. The
bill provides an additional mechanism for legislative review by
including a repeal date of January 1, 2018.
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.
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
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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.
According to the American Institute of Architects, "Construction
management at-risk is a process that allows the 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: 1) Increases the speed of the project and
can also strengthen coordination between the A/E and the CM; 2)
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; 3) CMs,
A/Es, and the client all collaborate. This creates enhanced
synergies throughout the process; and, 4) 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
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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 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."
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.
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AB 195 (Hall) of 2013, extends the sunset for the use of
design-build by counties from July 1, 2014, to July 1, 2016.
The Assembly Local Government Committee approved AB 195 on a 7-1
vote on May 1, 2013.
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: None
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958
FN: 0001607