BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | SB 1433| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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 CONTINUED SB 1433 Page 2 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 CONTINUED SB 1433 Page 3 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. CONTINUED SB 1433 Page 4 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, CONTINUED SB 1433 Page 5 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 **** END **** CONTINUED