BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 785| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- UNFINISHED BUSINESS Bill No: SB 785 Author: Wolk (D) and Hill (D), et al. Amended: 8/22/14 Vote: 21 SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 10-0, 4/9/13 AYES: Wright, Nielsen, Berryhill, Calderon, Cannella, Correa, De León, Galgiani, Hernandez, Lieu NO VOTE RECORDED: Padilla SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 5/1/13 AYES: Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu SENATE APPROPRIATIONS COMMITTEE : 5-0, 5/20/13 AYES: De León, Walters, Gaines, Hill, Steinberg NO VOTE RECORDED: Lara, Padilla SENATE FLOOR : 35-0, 1/27/14 AYES: Beall, Block, Calderon, Cannella, Corbett, Correa, De León, DeSaulnier, Evans, Fuller, Gaines, Galgiani, Hancock, Hernandez, Hill, Hueso, Huff, Jackson, Knight, Lara, Leno, Lieu, Liu, Mitchell, Monning, Padilla, Pavley, Roth, Steinberg, Torres, Vidak, Walters, Wolk, Wyland, Yee NO VOTE RECORDED: Anderson, Berryhill, Nielsen, Wright, Vacancy ASSEMBLY FLOOR : 68-5, 8/26/14 - See last page for vote SUBJECT : Design-build SOURCE : Associated General Contractors of California Design Build Institute of America CONTINUED SB 785 Page 2 DIGEST : This bill repeals existing law authorizing the Department of General Services (DGS), the 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. Assembly Amendments add a sunset date of January 1, 2025, on DB authorizations; authorize the San Diego Unified Port District (SDUPD) to use DB; provide a two-year extension for transit operators, as specified; delete the requirement that monies be deposited into the State Public Works Enforcement Fund; add Senator Hill as an author; and make clarifying and technical changes. ANALYSIS : Existing law: 1. Authorizes DGS, the CDCR, and various local agencies to use the DB procurement process for specified public works under different laws. 2. Authorizes the formation of special districts, including the Marin Healthcare District and SDUPD. 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. 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 SB 785 Page 3 cost. 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 DB-operate contracts; C. Preparation and issuance of a request for qualifications (RFQ) in order to pre-qualify bidders. The RFQ must contain specified elements, including a standard template request for statements of qualifications that requires an acceptable safety record that shall be deemed acceptable if: (1) 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 (2) 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. Provides that a DB entity shall not be prequalified or shortlisted unless the entity provides an enforceable commitment to the director that the entity and its subcontractors at every tier will use a skilled and trained workforce to perform all work on the project or contract that falls within an apprenticeable occupation in the building and construction trades, as specified. SB 785 Page 4 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. 15.Requires the DB contract to provide errors and omissions SB 785 Page 5 insurance coverage for the design elements of the project. 16.Requires the awarding authority to develop a standard form of payment and performance bond for its DB projects. 17.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. 18.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. 19.Deletes language in existing statutes governing the use of DB that requires awarding authorities to reimburse the Department of Industrial Relations 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. 20.Deletes existing laws requiring specified DB reporting to the Legislative Analyst's Office (LAO). 21.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. 22.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 SB 785 Page 6 agencies rather than the DB procedure that existing law allows for counties, as specified. 23.Extends the sunset date on provisions of law governing the use of DB by transit operators, from January 1, 2015, to January 1, 2017, and provides that those provisions apply only to transit operators that begin a project solicitation before January 1, 2015. Transit operators that begin a project solicitation on or after January 1, 2015, are subject to this bill's provisions governing the use of DB by local agencies. 24.Allows SDUPD to procure DB contracts in excess of $1 million for the construction of buildings and improvements directly related to the construction of buildings, as specified. 25.Finds and declares that, due to the unique circumstances of, and the potential costs faced by, SDUPD, a general statute cannot be made applicable within the meaning of California Constitution Article IV, Section 16 and that the special legislation contained in #23 above, is applicable only to SDUPD. 26.Repeals an uncodified section of law that does the following: A. Requires a specified peer review committee (committee) established by the California Transportation Commission (Commission) to operate until it has fulfilled its reporting requirements, as outlined below; B. Requires the committee to evaluate all transportation projects using DB as authorized pursuant to SB 4X2 (Cogdill, Chapter 2, Statutes of 2009-10 Second Extraordinary Session) which allowed local transportation entities to use DB on up to five projects and the Department of Transportation to use DB on up to 10 projects, as specified; C. Requires the committee's evaluation to examine the procurement method, comparing low bid and best value, and to consider whether the projects were on time and on budget. The evaluation must also compare the DB projects to similar transportation projects that used SB 785 Page 7 design-bid-build procurement; and D. Requires the Commission to submit to the Legislature a mid-term report of its findings by June 30, 2012, and a final report by June 30, 2015. 1. Defines "best value" to mean the value determined by evaluation of objective criteria that may include, but not be limited 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. 2. 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. 3. 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. 4. 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. 5. 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. 6. Defines "local agency" to mean the following: SB 785 Page 8 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 transit service, any county transportation commission, as specified, or any other local or regional agency, responsible for the construction of transit projects. 7. 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. 8. 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. 9. Defines, for transit agencies, "project" to mean a transit capital project that begins project solicitation on or after January 1, 2015. A project that begins the solicitation process before January 1, 2015, is subject to existing law governing the use of DB by transit operators. "Project" does not include state highway construction or local street and road projects. SB 785 Page 9 10.Makes findings and declarations regarding the DB method of project delivery. 11.Makes additional technical and conforming changes. Comments According to the author's office, this bill is intended to consolidate existing local and state DB statutes and eliminate inconsistencies in statutory language by adopting authority of general application to identified agencies and repeal superseded sections. The author's office notes that the Legislative Analyst has recommended enactment of a uniform DB contracting statute. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Assembly Appropriations Committee: 1. Updated information from CDCR indicates increased project costs of approximately 5 to 10% depending upon geographic location of the project. 2. Unknown impact on DGS and CDCR contracting costs as a result of revised thresholds for which a DB contract may be used, and 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 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 DB method on more projects. 3. Unknown, but likely minor costs to DGS to ensure compliance with labor requirements. 4. Minor savings (GF) to the LAO by deleting reporting requirements. SUPPORT : (Verified 8/26/14) SB 785 Page 10 Associated General Contractors of California (co-source) Design Build Institute of America (co-source) Air Conditioning & Refrigeration Contractors Association Air Conditioning Sheet Metal Association Building & Construction Trades Council of Marin California Legislative Conference of the Plumbing, Heating & Piping Industry California State Association of Counties California State Council of Laborers California Transit Association CH2M Hill Counties of Lassen, Los Angeles, Orange, San Bernardino, San Diego, and Santa Clara East Valley Water District Finishing Contractors Association of Southern California Infrastructure Delivery Council Marin Healthcare District National Electrical Contractors Association Northern California Carpenters Regional Council Santa Clara Valley Transportation Authority Sonoma-Marin Area Rail Transit District State Building and Construction Trades Council of California Unified Port of San Diego Urban Counties Caucus OPPOSITION : (Verified 8/26/14) Associated Builders and Contractors of California ARGUMENTS IN SUPPORT : Supporters note that this bill rewrites DB statutes to eliminate inconsistencies in existing law and provide agencies with a general authorization to develop projects using DB. They support this bill because it consolidates the various statutes into a single "boilerplate" for use by state agencies, counties, cities, water municipalities, transit operators and others. ARGUMENTS IN OPPOSITION : The Associated Builders and Contractors of California write: SB 785, as currently written, seeks to change Public Contract Code §10191 (b)(3)(G) and §22164 (b)(3)(G): "A proposer's safety record shall be deemed acceptable if its experience modification rate for the most recent three-year period is an SB 785 Page 11 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." By statute, 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 §10191 (b)(3)(G) and §22164 (b)(3)(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. ASSEMBLY FLOOR : 68-5, 8/26/14 AYES: Achadjian, Alejo, Ammiano, Bloom, Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon, Campos, Chau, Chesbro, Conway, Cooley, Dababneh, Dahle, Daly, Dickinson, Eggman, Fong, Fox, Frazier, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gray, Hagman, Hall, Harkey, Roger Hernández, Holden, Jones, Jones-Sawyer, Levine, Linder, Lowenthal, Maienschein, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Nestande, Olsen, Pan, Perea, John A. Pérez, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Weber, Wieckowski, Wilk, Williams, Yamada, Atkins NOES: Allen, Bigelow, Chávez, Donnelly, Grove NO VOTE RECORDED: Beth Gaines, Gorell, Logue, Mansoor, Patterson, Waldron, Vacancy MW:k 8/27/14 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** SB 785 Page 12