BILL ANALYSIS Ó
Bill No: SB
785
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2013-2014 Regular Session
Staff Analysis
SB 785 Author: Wolk
As Amended: April 1, 2013
Hearing Date: April 9, 2013
Consultant: Paul Donahue
SUBJECT
Design-Build construction project delivery
DESCRIPTION
This bill would repeal 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 would
enact uniform provisions authorizing DGS, CDCR and local
agencies to utilize the design-build procurement process
for specified public works projects. Specifically, this
bill :
1)Defines "design-build" as a project delivery process in
which both the design and construction of a project are
procured from a single entity.
2)Authorizes DGS, CDCR, cities and counties, special
districts operating wastewater, water recycling, or solid
waste management facilities to procure design-build
public works contracts, in excess of $1 million, using
either a low bid or best value process.
3)Specifically excludes state highway system and school
construction projects.
4)Defines "best value" as the value determined by
evaluation of proposals according to specific criteria,
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including: price, quality of technical proposals,
qualifications of key personnel, and other criteria the
awarding authority deems appropriate. A best value
determination may entail any of the following:
a) Selection of the lowest priced technically
acceptable proposals;
b) Selection of the best proposal for a fixed price
established by the procuring agency; or
c) A tradeoff between price and other specified
factors.
5)Defines "construction subcontract" as a subcontract
awarded by the design-build entity to a subcontractor
that will perform work or labor or render service to the
design-build entity in connection with the project, or a
subcontractor that specially fabricates and installs a
portion of the work or improvement according to detailed
drawings contained in the plans and specifications
produced by the design-build team.
6)Directs the awarding authority to develop guidelines for
a standard organizational conflict-of-interest policy in
connection with design-build projects.
7)Directs the awarding authority to reimburse the
Department of Industrial Relations for its costs of
performing prevailing wage monitoring and enforcement on
public works projects. Alternatively, allows the agency
to continue operating an existing previously approved
labor compliance program to monitor and enforce
prevailing wage requirements on the project under
specified circumstances.
8)Outlines a standardized design-build procurement process
in which the awarding authority may prepare a list of
qualified or short-listed entities, based on specified
criteria.
9)Once a list of qualified or short-listed entities is
complete, the awarding authority may prepare a request
for proposals (RFP) that invites prequalified or
short-listed entities to submit competitive sealed
proposals in the manner prescribed by the awarding
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authority.
a) Low bid : On projects utilizing low bid as the
selection method, the competitive bidding process
involves in lump-sum bids by the prequalified or
short-listed design-build entities. Awards are made to
the design-build entity that is the lowest responsible
bidder.
b) Best value : For those projects utilizing best value
as a selection method, proposals are to be evaluated
using only the criteria and selection procedures
specifically identified in the RFP.
i) The awarding authority may reserve the right to
request revisions and conduct negotiations with
responsive proposers, if the authority specifies in
the RFP how it will ensure that negotiations are
conducted in good faith.
ii) The authority may hold discussions or
negotiations with responsive proposers using the
process specified in the RFP.
iii) Responsive proposers are ranked based on value
provided.
iv) The contract award is made to the responsible
design-build entity whose proposal is determined by
the authority to have offered the best value to the
public.
v) Upon issuance of a contract award, the awarding
authority shall publicly announce its award,
identifying the design-build entity to which the
award is made, along with a written decision
supporting its contract award and stating the basis
of the award.<1>
10)Requires the design-build entity to provide payment and
performance bonds for the project in the form and in the
amount required by the awarding authority. The amount of
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<1> The written decision supporting the contract award and
the contract file shall provide sufficient information to
satisfy an external audit.
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the payment bond shall not be less than the amount of the
performance bond.
11)Requires the design-build contract to provide errors and
omissions insurance coverage for the design elements of
the project.
12)Requires the awarding authority to develop a standard
form of payment and performance bond for its design-build
projects.
13)Specifies that agencies may identify specific types of
subcontractors that must be included in the design-build
entity statement of qualifications and proposal.
14)Provides that the retention proceeds withheld by the
agency from the design-build entity shall not exceed 5
percent, except as otherwise specified.
15)Deletes existing laws requiring design-build reporting
to the Legislative Analyst.
16)Provides that the provisions of the bill do not affect,
expand, alter or limit any rights or remedies otherwise
available at law.
BACKGROUND
For most of the last century state and local officials have
been required 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. The state used this approach
almost exclusively to build its roads and freeways, public
buildings, prisons, universities, hospitals, and water
infrastructure.
By contrast, the design-build method allows agency
officials to procure both design and construction services
from a single company before the development of complete
plans and specifications.
1) Purpose of bill : According to the author, SB 785
is intended to consolidate existing local and state
design-build statutes and eliminate inconsistencies in
statutory language by adopting authority of general
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application to identified agencies and repeal
superseded sections. The author notes that the
Legislative Analyst has recommended enactment of a
uniform design-build contracting statute.
2) "Types" of subcontractors : Under this bill,
agencies may identify the types of subcontractors that
must be included in proposal, and are not required to
list specific trades. Some existing statutes require
mechanical, electrical and plumbing subcontractors to
be part of each initial design-build team. The
supporters and the author note that this requirement
is generally not relevant in civil works projects, and
may not be relevant for certain types of building
projects. They contend that it is appropriate to allow
the agency to determine which trades and types of
subcontractors are significant to the selection.
i) April 1, 2013 amendments to SB 785 : Recent
amendments to this bill attempt to strike a balance
on this issue by specifying that members of the
design-build team "shall include the general
contractor, and if utilized in the design of the
project, all electrical, mechanical and plumbing
contractors."<2>
3) Exclusions : This bill pertains only to DGS, CDCR,
and most local agencies. It specifically excludes
projects on the state highway system and school
construction projects from its scope and
applicability. In 2009, SB 2X4 (Cogdill) was enacted
as part of a budget agreement, which authorized
design-build contracting for up to 15 transportation
projects. The California Transportation Commission
recently approved the final CalTrans project
authorized in the pilot program. Reportedly, CalTrans
will allow the authority to sunset before seeking
additional authorization from the Legislature.
With regard to school construction projects, SB 1509
(Simitian), enacted in 2012, extends the sunsets
authorizing K-12 California Community College
districts to utilize design-build contracts for the
design and construction of education facilities, from
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<2> See AB 785, as Amended in Senate April 1, 2013: Page 4,
lines 9-13; Page 12, lines 6-10
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January 1, 2014, to January 1, 2020.
4) Staff notes : This bill redefines "best value" by
incorporating existing practices of local agencies.
The term "construction subcontract" is defined to
conform to the Subcontractor listing statutes. Under
the bill, agencies can select a shortlist of the most
qualified firms. The author and supporters note that
this is considered an industry best practice because
it ensures that the agency will receive quality
proposals and it avoids unnecessary expense by firms
who are not likely to be selected.
The bill adds LLCs to design-build entities because
LLCs can now obtain contractors licenses. Agencies are
required to adopt a standard organizational conflict
of interest policy, replacing previous statutes
applicable only to architects and engineers.
5) Support : Supporters note that this bill would
rewrite design-build statutes to eliminate
inconsistencies in existing law and provide agencies
with a general authorization to develop projects using
design-build. They support the bill because it
consolidates the various statutes into a single
"boilerplate" for use by state agencies, counties,
cities, water municipalities, transit operators and
others.
6) Opposition : Although generally supportive of
statutory streamlining, opponents object to the
perpetuation of provisions that "favor a special
interest group" and serve no valid public policy.
Specifically, they object to re-enactment in the bill
of so-called safety language. According to opponents,
there is no evidence that the existence of a workers'
compensation alternative dispute resolution system
equates to the existence of a safe workplace.
Additionally, opponents disfavor provisions in the
bill requiring that apprentices be affiliated with
programs that have graduated apprentices for the
preceding 5 years. Also, they object to provisions in
the bill that give deference to project labor
agreements.
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It should be noted that the above provisions are
included in many existing design-build statutes.
Other opponents object to design-build contracting on
principle, suggesting that the design-build process
eliminates competitive bidding, allows the private
contractor or consortium to inspect and sign off on
their own work, and has greatly increased project
delivery costs on some projects.
PRIOR/RELATED LEGISLATION
SB 1509 (Simitian) Chapter 736, Statutes of 2012. Extended
the sunsets authorizing kindergarten through grade 12
(K-12) and California Community Colleges (CCC) districts to
utilize design-build contracts for the design and
construction of education facilities, from January 1, 2014,
to January 1, 2020
SB 879 (Cox) Chapter 629, Statutes of 2010. Extended the
sunset for the use of design-build by counties from January
1, 2011, to July 1, 2014, and aligns the design-build
statutes for cities and counties.
SB 2X4 (Cogdill) Chapter 2, Statutes of 2009. Allowed (1)
design-build contracting for up to five state office
facilities, prison facilities, or court facilities; (2)
design-build contracting for up to 15 transportation
projects (five local projects; 10 state projects); (3)
design-build contracting for up to 10 redevelopment public
works projects; (4) an unlimited number of public-private
partnerships for transportation projects, deleting
then-existing statutory limits.
AB 642 (Wolk) Chapter 314, Statutes of 2008. Authorized
any city to enter into design-build contracts according to
specified provisions until January 1, 2016.
SB 416 (Ashburn) Chapter 585, Statutes of 2007. Authorized
all counties to use the design-build method until January
1, 2011.
SB 614 (Simitian) Chapter 471, Statutes of 2007.
Authorized school districts and all community colleges to
utilize design-build construction contracts for projects
exceeding $2.5 million, rather than the $10 million floor
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previously authorized.
AB 1329 (Wolk) Chapter 228, Statutes of 2005. Permitted
cities in the Counties of Solano and Yolo to enter into
design-build contracts.
AB 958 (Scott) Chapter 541, Statutes of 2000. Authorized
transit districts to enter into design-build contracts
AB 896 (W. Brown) Chapter 429, Statutes of 1993.
Authorized DGS to enter into design-build contracts in
connection with renovation of specified office buildings in
Los Angeles.
SUPPORT:
Associated General Contractors of California
California State Association of Counties
Design-Build Institute of America, Western Pacific Region
Los Angeles County Board of Supervisors
OPPOSE:
Air Conditioning Trade Association
Associated Builders and Contractors of California
Plumbing-Heating-Cooling Contractors Association of
California
Professional Engineers in California Government
Western Electrical Contractors Association
DUAL REFERRAL: Senate Governance and Finance Committee
FISCAL COMMITTEE: Senate Appropriations Committee
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