BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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                                 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





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           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  







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             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.








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           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  







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             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  







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             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  







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                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: 







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              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.








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           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)








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          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  







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            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  ****







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