BILL ANALYSIS Ó
SB 785
Page 1
SENATE THIRD READING
SB 785 (Wolk)
As Amended August 13, 2014
Majority vote
SENATE VOTE :35-0
LOCAL GOVERNMENT 7-2 APPROPRIATIONS 13-4
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|Ayes:|Achadjian, Levine, Alejo, |Ayes:|Gatto, Bocanegra, |
| |Bradford, | |Bradford, |
| |Gordon, Frazier, Rendon | |Ian Calderon, Campos, |
| | | |Eggman, Gomez, Holden, |
| | | |Linder, Pan, Quirk, |
| | | |Ridley-Thomas, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Melendez, Waldron |Nays:|Bigelow, Donnelly, Jones, |
| | | |Wagner |
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SUMMARY : Repeals existing law authorizing the Department of General
Services (DGS), the California Department of Corrections and
Rehabilitation (CDCR), and specified local agencies to use the
design-build (DB) procurement process, and enacts more uniform
provisions authorizing DGS, CDCR, and most local agencies to utilize
the DB procurement process for specified public works projects.
Specifically, this bill :
1)Repeals statutes governing the use of DB by DGS, CDCR, and a
number of local agencies, and, instead, revises and recasts those
statutes to allow DGS, CDCR, cities, counties, and specified
special districts and transit agencies (awarding authorities) to
use DB for their public works contracts in excess of $1 million
using either a low bid or best value process, until January 1,
2025.
2)Maintains an existing exception to the cost threshold in 1) above,
that allows transit agencies to use DB for the acquisition and
installation of technology applications or surveillance equipment
designed to enhance safety, disaster preparedness, and homeland
security efforts, regardless of cost.
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3)Requires specified notification to the State Public Works Board
before DB can be used for DGS or CDCR projects.
4)Prohibits DGS and CDCR from using DB for projects on the state
highway system.
5)Requires the awarding authority to develop guidelines for a
standard organizational conflict-of-interest policy in connection
with DB projects.
6)Specifies the procurement process that DB projects must follow,
including:
a) Preparation of documents setting forth scope and estimated
price, as specified;
b) A prohibition against design-build-operate contracts, except
that documents may include operations during a training or
transition period but shall not include long-term opeartions
for any project;
c) Preparation and issuance of a request for qualifications
(RFQ) in order to pre-qualify bidders. The RFQ must contain
specified elements, including (among other things) a standard
template request for statements of qualifications that requires
an acceptable safety record, which shall be deemed acceptable
if:
i) The proposer's experience modification rate for the most
recent three-year period is an average of 1.00 or less, and
its average total recordable injury or illness rate and
average lost work rate for the most recent three-year period
does not exceed the applicable statistical standards for its
business category; or,
ii) The proposer is a party to an alternative dispute
resolution system as provided for in a specified section of
the Labor Code, which governs workers' compensation and
insurance.
7)Prohibits a DB entity from being prequalified or shortlisted
unless the entity provides an enforceable commitment to the
director of DGS or CDCR or the local agency that the entity and
its subcontractors at every tier will use a skilled and trained
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workforce to perform all work on the project or contract that
falls within an apprenticeable occupation in the building and
construction trades, as specified.
8)Requires the awarding authority to 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 authority.
9)Requires the RFP to include certain elements, as specified,
including project scope, cost, evaluation and awarding methods,
relative weight of selection factors, and procedures for
negotiations on best value selections.
10)Requires, for projects utilizing low bid as the selection method,
the competitive bidding process to result in lump-sum bids by the
prequalified or short-listed DB entities, and awards to be made to
the DB entity that is the lowest responsible bidder.
11)Requires projects utilizing best value as a selection method to
follow a specified process that requires proposals to be evaluated
by using only the criteria and selection procedures specifically
identified in the RFP, with the following minimum factors that
must be weighted as deemed appropriate by the awarding entity:
price, unless a stipulated sum is specified; technical design and
construction experience; and, life-cycle costs over 15 or more
years.
12)Allows the awarding authority to hold discussions or negotiations
with responsive proposers, and requires proposers to be ranked
based on a determination of value provided, with a limit of three
proposers required to be ranked, as specified.
13)Requires the award of the contract to be made to the responsible
DB entity whose proposal is determined to have offered the best
value to the public, and requires the awarding authority to
publicly announce its award, as specified.
14)Requires the DB entity to provide payment and performance bonds
for the project in the form and in the amount required by the
awarding authority, and issued by a California admitted surety.
The amount of the payment bond shall not be less than the amount
of the performance bond.
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15)Requires the DB contract to provide errors and omissions
insurance coverage for the design elements of the project, and
requires the awarding authority to develop a standard form of
payment and performance bond for its DB projects.
16)Specifies that awarding authorities may identify specific types
of subcontractors that must be included in the DB entity statement
of qualifications and proposal, as specified, and outlines
procedures for awarding subcontracts with a value exceeding 0.5%
of the contract price allocable to construction work.
17)Prohibits retention proceeds withheld by an agency from a DB
entity from exceeding 5%
if a performance and payment bond, issued by an admitted surety
insurer, is required in the solicitation of bids, and specifies
the retention proceeds for subcontracts.
18)Deletes language in existing statutes governing the use of DB
that requires awarding authorities to reimburse the Department of
Industrial Relations (DIR) for its costs of performing prevailing
wage monitoring and enforcement on public works projects, and that
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.
19)Deletes existing laws requiring specified DB reporting to the
Legislative Analyst's Office (LAO).
20)Allows the Marin Healthcare District to use the DB method
established for local agencies under this bill to assign contracts
for the construction of a building or improvements directly
related to construction of a hospital or health facility building
at the Marin General Hospital, until January 1, 2025.
21)Continues to allow the Sonoma Valley Health Care District to use
DB to assign contracts for the construction of a building or
improvements directly related to construction of a hospital or
health facility building at the Sonoma Valley Hospital, but
requires the Sonoma Valley Health Care District to use the DB
procedure this bill establishes for local agencies rather than the
DB procedure that current law allows for counties, as specified.
22)Defines "best value" to mean the value determined by evaluation
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of objective criteria related to price, features, functions, life
cycle costs, experience, and past performance. A best value
determination may involve the selection of the lowest cost
proposal meeting the interests of DGS, CDCR, or the local agency
and meeting the objectives of the project, selection of the best
proposal for a stipulated sum established by the procuring agency,
or a tradeoff between price and other specified factors.
23)Defines "construction subcontract" to mean each subcontract
awarded by the DB entity to a subcontractor that will perform work
or labor or render service to the DB entity in or about the
construction of the work or improvement, or a subcontractor
licensed by the State of California that, under subcontract to the
DB entity, specially fabricates and installs a portion of the work
or improvement according to detailed drawings contained in the
plans and specifications produced by the DB team.
24)Defines "design-build" to mean a project delivery process in
which both the design and construction of a project are procured
from a single entity.
25)Defines "design-build entity" to mean a corporation, limited
liability company, partnership, joint venture, or other legal
entity that is able to provide appropriately licensed contracting,
architectural, and engineering services as needed pursuant to a DB
contract.
26)Defines "design-build team" to mean the DB entity itself and the
individuals and other entities identified by the DB entity as
members of its team. Members shall include the general contractor
and, if utilized in the design of the project, all electrical,
mechanical, and plumbing contractors.
27)Defines "local agency" to mean the following:
a) A city, county, or city and county;
b) A special district that operates wastewater facilities,
solid waste management facilities, water recycling facilities,
or fire protection facilities; and,
c) Any transit district, included transit district, municipal
operator, included municipal operator, any consolidated agency,
as specified, any joint powers authority formed to provide
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transit service, any county transportation commission, as
specified, or any other local or regional agency, responsible
for the construction of transit projects.
28)Defines, for cities or counties, "project" to mean the
construction of a building or buildings and improvements directly
related to the construction of a building or buildings, county
sanitation wastewater treatment facilities, and park recreational
facilities, but does not include the construction of other
infrastructure, including, but not limited to, streets and
highways, public rail transit, or water resources facilities and
infrastructure. For cities or counties that operate wastewater
facilities, solid waste management facilities, or water recycling
facilities, "project" also means the construction of regional and
local wastewater treatment facilities, regional and local solid
waste facilities, or regional and local water recycling
facilities.
29)Defines, for special districts, "project" to mean the
construction of regional and local wastewater treatment
facilities, regional and local solid waste facilities, regional
and local water recycling facilities, or fire protection
facilities.
30)Defines, for transit agencies, "project" to mean a transit
capital project, but does not include state highway construction
or local street and road projects.
31)Makes findings and declarations regarding the DB method of
project delivery.
32)Makes additional technical and conforming changes.
EXISTING LAW :
1)Requires public entities to comply with certain procedures in
soliciting and evaluating bids and awarding contracts for the
construction of public works, and generally requires agencies to
invite bids based on a completed set of engineering plans and then
award the bid to the lowest bidder, also called design-bid-build.
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2)Allows limited use of DB, which allows public agencies to procure
both design and construction services from a single entity before
the development of complete plans and specifications. DB
contracts may be awarded on the basis of best value or lowest
responsible bidder, as specified in existing law.
3)Allows DGS and CDCR to utilize DB to construct specified
structures, including state office buildings and prison
facilities, for projects with a budget of at least $10 million on
a best value basis, using criteria such as proposed design
approach, life-cycle costs, project features and functions, while
contracts for projects with a budget of at least $250,000 may be
awarded to the lowest responsible bidder.
4)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.
5)Allows local agencies to use DB as follows:
a) Allows counties to use DB to construct buildings and related
improvements and wastewater treatment facilities that cost more
than $2.5 million, until July 1, 2016;
b) Allows cities to use DB to construct buildings and related
improvements worth more than $1 million, until January 1, 2016;
c) Allows cities, counties, and special districts to use DB to
construct a statewide total maximum of 20 local wastewater
facilities, solid waste management facilities, or water
recycling facilities that cost more than $2.5 million each;
d) Allows specified special districts to construct projects
using the DB method; and,
e) Allows transit agencies to use DB and requires them to
establish a procedure for final selection of the DB entity,
subject to the following conditions:
i) In no case shall the transit operator award a contract
to a DB entity for a capital maintenance or
capacity-enhancing rail project unless that project exceeds
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$25 million in cost;
ii) For non-rail transit projects that exceed $2.5 million,
the transit operator may award the project to the lowest
responsible bidder or by using the best value method; and,
iii) For the acquisition and installation of technology
applications or surveillance equipment designed to enhance
safety, disaster preparedness, and homeland security efforts,
there shall be no cost threshold and the transit operator may
award the contract to the lowest responsible bidder or by
using the best value method.
6)Generally requires awarding authorities to reimburse the DIR for
its costs of performing prevailing wage monitoring and enforcement
on public works projects, and that 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.
7)Requires reporting to the LAO under specified DB statutes.
8)Requires, pursuant to a county's authority to use DB, a bidder's
safety record to be deemed acceptable if:
a) Its experience modification rate for the most recent
three-year period is an average of 1.00 or less, and its
average total recordable injury/illness rate and average lost
work rate for the most recent three-year period does not exceed
the applicable statistical standards for its business category;
or,
b) The bidder is a party to an alternative dispute resolution
system as provided for in a specified section of the Labor
Code.
FISCAL EFFECT : According to the Assembly Appropriations Committee:
1)Unknown impact on DGS and CDCR contracting costs as a result of
revising the thresholds for which a design-build contract may be
used, and authorizing the awarding of contracts on a "best value"
rather than "lowest responsible bidder" basis for more projects
General Fund ((GF) and various special funds). To the extent that
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more contracts are awarded on a "best value" basis and contracts
are awarded to bidders who may not have the lowest bid price,
overall contracting costs may increase. On the other hand,
overall contracting costs may be lower to the extent that
efficiencies are gained by using the design-build method on more
projects.
2)Unknown, but likely minor costs to DGS to ensure compliance with
labor requirements.
3)Minor savings (GF) to the Legislative Analyst's Office by deleting
reporting requirements.
COMMENTS :
1)Purpose of this bill. This bill repeals existing law authorizing
DGS, CDCR, and local agencies to use the DB procurement process,
and enacts more uniform provisions authorizing DGS, CDCR, and
local agencies to utilize the DB procurement process for specified
public works projects costing more than $1 million, with a limited
cost threshold exception for specified local transit agency public
safety projects. This bill pertains only to DGS, CDCR, and most
local agencies. It does not include projects on the state highway
system or school construction projects. This bill includes a
sunset date of January 1, 2025, thereby retaining a degree of
legislative oversight over the use of DB by these state and local
agencies. This bill is sponsored by the Associated General
Contractors and the Design-Build Institute of America.
2)Author's statement. According to the author, "Under the
traditional design-bid-build method of delivery the design and
construction work is assigned to two separate entities. On the
other hand, under the design-build project delivery method the
general contractor is responsible for both the design and
construction of the project. The benefits of a design-build
contract project delivery system include an accelerated project
completion, cost containment, reduction of construction
complexity, and reduced risk exposure by shifting the liability
and risk for cost containment and project completion to the
design-build entity.
"Current design build authorization is based on a compromise
struck in 2000 among local officials, labor groups, and
contractors. Further changes to the language, consistent with the
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principles of the 2000 compromise, were made by: SB 287 (Cox),
Chapter 376, Statutes of 2005; SB 416 (Ashburn), Chapter 585,
Statutes 2007, which extended this authority to use design-build
contracting for the construction of buildings and directly related
improvements to all 58 counties in the state; and, AB 642 (Wolk),
Chapter 314, Statues 2008, which extended this authority to use
design-build contracting for the construction of buildings and
directly related improvements to all cities in the state."
3)Background. State law generally requires public agencies 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 DB 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 DB 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 DB method can be set by the public
agency. The DB 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 DB 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 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 DB 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 DB can deliver public works
faster and cheaper.
Detractors of DB 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.
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4)LAO reports and recommendations. The LAO issued a report to the
Legislature on
February 3, 2005, titled Design-Build: An Alternative Construction
System, which reported on all DB authorities granted to various
types of government entities. After analyzing the claims of
proponents and opponents and reviewing the experience of local
agencies that were authorized to use DB at the time, the LAO
recommended that, "the Legislature grant design-build authority
only to buildings and directly related infrastructure. There are
more complex issues associated with other public works projects
such as transportation, public transit, and water resources
facilities. Evaluation of design-build as a construction delivery
option for these other infrastructure facilities is beyond the
scope of this report."
In January of 2010, the LAO issued a second report, this time
updating the Legislature on the use of DB by counties in
California, based on data received from counties that utilized
this methodology. In the report, LAO states that "although it was
difficult to draw conclusions from the reports received about the
effectiveness of design-build compared to other project delivery
methods, we do not think that the reports provide any evidence
that would discourage the Legislature from granting design-build
authority to local agencies on an ongoing basis. In doing so,
however, we recommend the Legislature consider some changes such
as creating a uniform design-build statute, eliminating cost
limitations, and requiring project cost to be a larger factor in
awarding the design-build contract."
5)Policy considerations. This bill raises some questions the
Legislature may wish to consider:
a) Uniformity. The stated intent of this bill is to provide
uniform statutes to govern the use of DB by state and local
agencies. However, it does not repeal and recast all existing
DB statutes. It also creates a statute that applies to transit
operators that is in addition to, and inconsistent with, the
provisions of SB 1433 (Hill) of the current legislative
session, which makes a number of changes to transit operators'
existing authority to use DB (see "Related legislation,"
below). In addition, this bill provides an exception to the DB
rules it mandates for local agencies by waiving the cost
threshold for transit agencies when they use DB to acquire and
install technology applications or surveillance equipment
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designed to enhance safety, disaster preparedness, and homeland
security efforts. While this language exists in current law
and this bill merely maintains this authority, this provision
and remaining untouched statutes appear to present an
inconsistency with the stated intent of this bill. The
Legislature may wish to consider whether this bill achieves an
objective of uniformity.
b) LAO reporting. This bill also repeals statutes requiring
specified DB reporting to the LAO. The Legislature may wish to
consider whether continued LAO reporting is prudent, or whether
it is no longer necessary.
6)Related legislation. SB 1433 repeals the sunset date on transit
operators' authority to use DB for transit projects, expands the
number of entities eligible to exercise this authority, eliminates
minimum cost thresholds, and deletes reporting requirements.
7)Arguments in support. The Design-Build Institute of America,
co-sponsor of this bill, states, "SB 785 which will help
streamline, consolidate and simplify design-build in California.
Over the years far too many design-build statutes have become law
causing confusion, inconsistency, inefficiency and wasted costs.
SB 785 will bring these various statutes into a single 'boiler
plate' for use by state agencies, counties, cities, water
municipalities, transit operators and others.
"The design-build project delivery process has become a standard
tool for public agencies in the United States over the past 30
years. The Federal Government has been utilizing this method of
project delivery extensively for 20 years within the United States
and at its locations all over the world. The vast majority of
states have granted design-build authority to state and local
agencies in order to speed up the overall time required for
project delivery, reduction in costs, enhanced quality, and
dramatic reductions in litigation.
"California legislation allowing design-build project delivery was
first adopted in 1993 with the passage of AB 896 [(Brown), Chapter
429] and SB 772 [(Petris), Chapter 430] (both applicable to the
Department of General Services). Since that time numerous
statutes have been passed with varying provisions for different
public agencies. This has created inconsistencies and
inefficiencies for agencies and industry practitioners trying to
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effectively utilize this project delivery process.
"SB 785 will integrate the design-build project delivery process
by repealing existing statutes, and replacing them with two new
chapters in the Public Contract Code. It will create a common
template for statewide use of the design-build project delivery
process for those agencies currently authorized to use
design-build. This bill will help create common administrative
guidelines which will improve efficiencies and reduce costs to
taxpayers on projects where design-build delivery is utilized."
8)Arguments in opposition. The Associated Builders and Contractors
[ABC] of California, in opposition, write, "SB 785, as currently
written, seeks to change Public Contract Code Section 10191
(b)(2)(G) and Section 22164 (b)(2)(G): A proposer's safety record
shall be deemed acceptable if its experience modification rate for
the most recent three-year period is an average of 1.00 or less,
and its average total recordable injury or illness rate and
average lost work rate for the most recent three-year period does
not exceed the applicable statistical standards for its business
category or if the proposer is a party to an alternative dispute
resolution system as provided for in Section 3201.5 of the Labor
Code. Only union contractors are able to establish an ADR
program, under the referenced Labor Code Section 3201.5.
"ABC California does not believe it is appropriate public policy
to provide an exception for demonstration of safety. Workplace
safety does not depend on whether or not you have a collective
bargaining agreement. All prospective bidders should have to
place in the public record their experience modification rate and
other safety standards in the section to meet the requirements of
Section 10191 (b)(2)(G) and Section 22164 (b)(2)(G). We believe
that ensuring a company's safety record is part of their bid
information is the best and only way to demonstrate contractor
commitment to workplace safety. There shouldn't be exceptions for
any bidder on safety.
"(In addition,) (p)olicymakers need to ensure that all state and
federally approved apprenticeship training programs are able to
provide trained apprentices and journeymen under the skilled and
trained workforce requirements? Our apprentice training programs
are recognized and approved by California's Department of
Industrial Relations? and the U.S. [United States] Department of
Labor and cover a wide variety of skilled trades. SB 785 seeks to
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bar apprenticeship programs approved by the federal DOL
[Department of Labor] if those programs are located within
California. This provision raises the core question as to why
legislators believe it is appropriate to bar skilled, trained,
hardworking California-based apprentices with the same skill set
as those dispatched from union programs from working on projects
funded with their tax dollars."
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958
FN: 0004599