BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                            



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          |SENATE RULES COMMITTEE            |                       SB 1433|
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                                 UNFINISHED BUSINESS


          Bill No:  SB 1433
          Author:   Hill (D)
          Amended:  8/22/14
          Vote:     21


           SENATE TRANSPORTATION & HOUSING COMMITTEE  :  10-0, 4/22/14
          AYES:  DeSaulnier, Gaines, Beall, Cannella, Galgiani, Hueso,  
            Lara, Liu, Pavley, Roth
          NO VOTE RECORDED:  Wyland

           SENATE APPROPRIATIONS COMMITTEE  :  6-0, 5/5/14
          AYES:  De León, Walters, Gaines, Hill, Lara, Steinberg
          NO VOTE RECORDED:  Padilla

           SENATE FLOOR  :  35-0, 5/8/14
          AYES:  Anderson, Beall, Berryhill, Block, Cannella, Corbett,  
            Correa, De León, DeSaulnier, Evans, Fuller, Galgiani, Hancock,  
            Hernandez, Hill, Hueso, Huff, Jackson, Lara, Leno, Lieu, Liu,  
            Mitchell, Monning, Morrell, Nielsen, Padilla, Pavley, Roth,  
            Steinberg, Torres, Vidak, Walters, Wolk, Wyland
          NO VOTE RECORDED:  Calderon, Gaines, Knight, Wright, Yee

           ASSEMBLY FLOOR  :  78-0, 8/28/14 - See last page for vote


           SUBJECT  :    Design-build procurement for transit capital  
          projects

           SOURCE  :     California Transit Association


           DIGEST  :    This bill extends the sunset date on statutory  
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          authority for transit operators to use design-build (DB)  
          procurement for transit projects from January 1, 2015 to January  
          1, 2017.

           Assembly Amendments  extend the sunset date for two years on the  
          authority for transit operators to use DB rather than repeal the  
          sunset date entirely; and delete all other provisions from the  
          bill as it passed the Senate.

           ANALYSIS  :    Generally, DB refers to a procurement process in  
          which both the design and construction of a project are procured  
          in a single contract from one entity.  DB stands in contrast to  
          the traditional design-bid-build contracting method whereby work  
          on a project is divided into two separate phases: design and  
          construction.  Under design-bid-build, the government agency is  
          responsible for the design of the project, either by designing  
          it itself or by contracting with a private entity to do so.   
          When designs are completed, the agency solicits bids from the  
          construction industry and hires the responsible low bidder to  
          build the project.  DB combines these two phases into a single,  
          comprehensive contract.

          Various sections of existing law authorize a number of different  
          state and local agencies, including transit operators, to  
          utilize the DB process for procuring capital projects.  Further,  
          existing law prescribes the specific process transit operators  
          must follow when developing and constructing a transit project  
          through this procurement method.  Existing law defines a transit  
          operator eligible to utilize DB as any transit district,  
          municipal operator, transit development board, or joint powers  
          authority formed to provide transit service.  Existing law also  
          limits eligible capital projects for DB procurement to those  
          exceeding $25 million in cost.  Finally, existing law requires  
          transit operators exercising DB procurement to report on the  
          outcome of the experience to the Legislative Analyst's Office  
          (LAO).  Statutory authority specific to transit operators' use  
          of DB expires January 1, 2015.

          This bill extends the sunset date on the statutory authority for  
          transit operators to use DB procurement for transit projects in  
          California from January 1, 2015 to January 1, 2017.

           Background
           

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           DB procurement is no longer a new concept  .  In 2000, the  
          Legislature passed and the Governor signed into law AB 958  
          (Scott, Chapter 541), which originally authorized transit  
          operators to use DB procurement.  At the time, DB was relatively  
          new in California, and therefore that initial bill included  
          reporting requirements and a sunset date of January 1, 2005.  AB  
          372 (Nation, Chapter 262, Statutes of 2006), extended the  
          original sunset date, and then in 2009, AB 729 (Evans, Chapter  
          466), extended the sunset date further to January 1, 2015.   
          Unlike in 2000, the state and many local and regional agencies  
          today have had significant experience with DB procurement.  It  
          is now a widely understood method of procuring large capital  
          projects, and results from using DB for project delivery across  
          the state have largely been favorable.  For example, in a recent  
          report, the LAO found that the DB projects reviewed for the  
          report were generally successful at staying on budget and  
          schedule.  It seems reasonable to no longer include the sunset  
          date in existing law, and instead grant transit operators  
          unlimited access to DB procurement. 

           LAO reporting  .  As previously noted, the Legislature authorized  
          transit operators to use DB, when there was still some  
          uncertainty about the appropriateness of this procurement method  
          for transit projects.  Therefore, the original legislation  
          included a requirement that any transit operator utilizing DB  
          under this authorization report its experience to the LAO.   
          Since enactment of the original authorization, LAO staff states  
          that they have received few, if any, reports from transit  
          operators.  This bill eliminates the LAO reporting requirement  
          from existing law.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes    
          Local:  Yes

          According to the Assembly Appropriations Committee:

           Unknown overall contracting costs or savings to transit  
            operators.  By extending DB authority, any future transit  
            projects may be awarded on a "best value" rather than "lowest  
            responsible bidder" basis.  Overall contracting costs may  
            increase, to the extent contracts are awarded to bidders who  
            may not have the lowest bid price.  On the other hand, overall  
            contracting costs may be lower to the extent that efficiencies  
            are gained by using DB, such as expedited project delivery.   

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            Transit project funding could be from any combination of  
            local, federal, and state funds (Public Transportation Account  
            and potentially bond funds).

           Likely minor fiscal impacts on Department of Industrial  
            Relations related to the department's monitoring and  
            enforcement of prevailing wage requirements, reimbursed by  
            transit operators (State Public Works Enforcement Fund).  The  
            Assembly Appropriations Committee notes that by extending the  
            deposit of funds into this continuously appropriated fund,  
            this bill makes an appropriation.

           SUPPORT  :   (Verified  8/28/14)

          California Transit Association (source)
          Orange County Transportation Authority
          Peninsula Corridor Joint Powers Board
          San Mateo County Transit District
          San Mateo County Transportation Authority
          Santa Clara Valley Transportation Authority
          Ventura County Transportation Commission

           ARGUMENTS IN SUPPORT :    According to the author, because  
          specific statutory authority for transit operators to utilize DB  
          sunsets at the end of this year, this bill is necessary in order  
          to maintain an innovative and valuable tool transit operators  
          can use to deliver critical capital projects.  In 2011, Santa  
          Clara Valley Transportation Authority awarded a $900 million DB  
          contract to extend the Bay Area Rapid Transit system toward San  
          Jose.  According to bill proponents, this project is currently  
          10 months ahead of schedule and $100 million under budget.   
          Projects experiencing results similar to this suggest DB can be  
          a successful way to deliver important transportation  
          infrastructure within limited means.  As transit operators  
          continue to wrestle with the challenge of revenue growth not  
          keeping pace with increasing costs, the author believes this  
          tool could help maintain transit ridership and presence in the  
          state.

           ASSEMBLY FLOOR :  78-0, 8/28/14
          AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,  
            Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian  
            Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,  
            Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,  

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            Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,  
            Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández,  
            Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,  
            Maienschein, Mansoor, Medina, Melendez, Mullin, Muratsuchi,  
            Nazarian, Nestande, Olsen, Patterson, Perea, John A. Pérez, V.  
            Manuel Pérez, Quirk, Quirk-Silva, Rendon, Ridley-Thomas,  
            Rodriguez, Salas, Skinner, Stone, Ting, Wagner, Waldron,  
            Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
          NO VOTE RECORDED:  Pan, Vacancy


          JA:ed  8/29/14   Senate Floor Analyses 

                           SUPPORT/OPPOSITION:  SEE ABOVE

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