BILL ANALYSIS Ó
AB 1290
Page 1
Date of Hearing: May 13, 2015
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Brian Maienschein, Chair
AB 1290
(Dahle) - As Amended March 26, 2015
SUBJECT: Health care districts: public contracts: design-build.
SUMMARY: Allows the Mayers Memorial Hospital District
(District) to use the design-build contracting method for the
construction of a building or improvements directly related to
construction of a hospital or health facility building at the
District. Specifically, this bill:
1)Allows the District, upon approval by its Board of Directors
(Board), to use the design-build procedure described in
existing law governing the use of design-build by local
agencies to assign contracts for the construction of a
building or improvements directly related to construction of a
hospital or health facility building at the District.
2)Requires a hospital building project utilizing the
design-build process authorized by this bill to be reviewed
and inspected in accordance with the standards and
requirements of the Alfred E. Alquist Hospital Facilities
Seismic Safety Act (Hospital Seismic Safety Act) of 1983.
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3)States legislative intent that the design-build process be
used by health care districts solely for buildings associated
with hospitals and health care and not for other
infrastructure, including, but not limited to, streets,
highways, public rail transit, roads, bridges, water resources
facilities, and related infrastructure.
4)Finds and declares the following:
a) Utilizing a design-build contract requires a clear
understanding of the roles and responsibilities of each
participant in the process;
b) Cost benefits for health care districts are achieved by
shifting the liability and risk for cost containment and
project completion to the design-build entity; and,
c) A special law is necessary and a general law cannot be
made applicable within the meaning of Section 16 of Article
IV of the California Constitution because of the unique
circumstances of the Mayers Memorial Hospital District.
EXISTING LAW:
1)Requires, pursuant to the Local Agency Public Construction Act
(LAPC Act), local officials to invite bids for construction
projects and then award contracts to the lowest responsible
bidder under the traditional design-bid-build project delivery
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system.
2)Authorizes, until January 1, 2025, cities, counties, and
specified special districts and transit agencies to use
design-build for their public works contracts in excess of $1
million using either a low bid or best value process.
3)Provides for local health care districts, which govern certain
health care facilities. Each health care district has
specific duties and powers respecting the creation,
administration, and maintenance of the districts, including
the authority to purchase, receive, take, hold, lease, use,
and enjoy property of every kind and description of property
within and without the limits of the district.
4)Establishes, pursuant to the Hospital Seismic Safety Act,
timelines for hospital compliance with seismic safety
standards.
5)Authorizes the Sonoma Valley Health Care District, the Marin
Health Care District or the Last Frontier Health Care District
to use the design-build contracting rules specified for local
agencies in 2), above, 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, the Marin General Hospital, or the
Modoc Medical Center, respectively.
FISCAL EFFECT: None
COMMENTS:
1)Bill Summary. This bill allows the District to use the
design-build contracting method for the construction of a
building or improvements directly related to construction of a
hospital or health facility building at the District. This
bill is sponsored by the District.
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2)Author's Statement. According to the author, "With the
increase in new patients under the Affordable Care Act, and,
healthcare costs going up while reimbursement rates continue
to decline, savings on construction are critical. The
Design-Build method of project delivery can provide
significant cost savings that will benefit the entire
community.
"AB 1290 would authorize the Mayers Memorial Hospital District
to use the design-build process for buildings associated with
hospitals and healthcare and not for other infrastructure.
This would create cost saving benefits by shifting the
liability and risk for cost containment and project completion
to the design-build entity."
3)Background. The LAPC Act generally requires local officials
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 design-build 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 design-build 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
design-build method can be set by the public agency. The
design-build method can be faster and, therefore, cheaper,
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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 design-build 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
design-build 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 design-build can deliver
public works faster and cheaper.
Detractors of design-build 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.
4)Design-Build and Healthcare Districts. California currently
has 80 health care districts. Health care districts were
known as hospital districts prior to 1994. Health care
districts are formed to "establish, maintain, and operate
health care facilities," including, but not limited to,
hospitals. Health care districts are governed by elected
boards of directors. Health care districts throughout the
state need to retrofit existing buildings or build new
facilities in order to comply with the Hospital Seismic Safety
Act. These districts are faced with escalating construction
costs and are looking for the most cost-effective ways to meet
seismic standards and provide well-designed and built
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state-of-the-art facilities to provide health care to the
people of the state. One of these methods is design-build
contracting.
5)Mayers Memorial Hospital District. Mayers Memorial Hospital
(Hospital), located in Fall River Mills, offers a variety of
services, including an emergency room physician on duty
24 hours a day, obstetrics, tele-medicine and a 99-bed skilled
nursing facility. The Hospital opened as a 10-bed facility in
1956 to provide healthcare services to the Intermountain
community. In the late 1960s, various regulations and the
need for increased operational funding led the community to
establish Mayers Memorial as a District Hospital, which
provided the funding needed to draw new caregivers and
specialists to the region. From 1970 through the 1990s, the
District constructed various additions to the building and
remodeled older sections to make room for growth. In 1993,
another facility was built in the growing community of Burney.
This facility now houses additional skilled nursing rooms,
including a secure Alzheimer's unit.
The Hospital Seismic Safety Act requires acute care hospitals
be designed and constructed to withstand a major earthquake
and remain operational immediately after a quake. The
District must comply with these requirements by 2020.
According to the District, "The biggest obstacle to meeting
these requirements was, of course, lack of funds. In 2001,
Mayers Memorial Hospital District converted to a Critical
Access Hospital, which increased the reimbursement amount, and
improving operations. The Board of Directors has recognized
the need for a comprehensive strategic plan to address the
mandates and regulations that could threaten the future of the
District if nothing is done. The goal of the recently
completed Master Facility Plan was to clearly address the
pending seismic and retrofit issues and lay the foundation for
the District's capital campaign to fund the comprehensive
building reconstruction.
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"Design-Build will be a more cost effective way for us to
build/renovate our facility to be compliant with state seismic
mandates. If we use traditional (design-bid-build) it will
require more steps and take longer to complete the project.
It will also cost more. We have limited funding and limited
time. If we are approved for (design-build), once we select a
firm, they handle everything and in doing so it will
streamline the process, reduce the cost and shorten the time
frame."
6)Previous Legislation. SB 268 (Gaines), Chapter 18, Statutes
of 2014, allowed the Last Frontier Health Care District to use
the design-build process when contracting for the construction
of a building and improvements directly related to a hospital
or health facility building at the Modoc Medical Center.
SB 785 (Wolk), Chapter 931, Statutes of 2014, repealed
existing law authorizing the Department of General Services
(DGS), the Department of Corrections and Rehabilitation
(CDCR), and local agencies to use the design-build procurement
process, and enacted uniform provisions authorizing DGS, CDCR,
and most local agencies to utilize the design-build
procurement process for specified public works projects. SB
785 did not allow the use of design-build for health care
districts generally, but did include a provision allowing the
Marin Healthcare District to use the design-build method
established for local agencies under SB 785 and required the
Sonoma Valley Health Care District to use the design-build
procedure outlined in SB 785, instead of its prior
design-build authority.
SB 1005 (Cox) of 2010 would have authorized the Tahoe Forest
Health Care District and a health care district authorized by
the Office of Statewide Health Planning and Development to use
a design-build procedure when assigning contracts for the
construction of a hospital or health facility building. SB
1005 was held in the Assembly Appropriations Committee.
SB 1699 (Wiggins), Chapter 415, Statutes of 2008, authorized
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the use of design-build for the Sonoma Valley Health Care
District.
7)Arguments in Support. The Association of California
Healthcare Districts, in support, writes, "Mayers Memorial
Hospital District must rebuild its facility before 2020, in
compliance with the Alfred E. Alquist Hospital Facilities
Seismic Safety Act. As a rural critical access hospital,
Mayers Memorial Hospital faces a greater disadvantage than
larger, urban hospitals, as financing options are more
difficult to obtain in a small rural community. The
design-build method provides cost savings that is hard to
achieve with the current bid process. Given the uncertain
nature of the healthcare industry at this time, access to care
in rural areas is extremely vulnerable. Meeting this seismic
mandate is critical to the community served by the District."
8)Arguments in Opposition. None on file.
9)Urgency Clause. According to the District, "Our original plan
has not come to realization because we have not been able to
obtain the funding for the project?This has required us to
pursue a scaled back version and basically start over,
shortening our time frame to required completion. The Urgency
Clause is needed because we don't have the time to wait until
January 2016 to begin this process. We are actually waiting
on the approval of this legislation to proceed. This is the
most viable option for us financially and time wise to build
and meet the seismic requirements by January 2020 in order to
continue to provide quality healthcare to our community. We
cover a geographic area of 8000+ square miles and are the only
healthcare option for much of our population. The closest
hospital is 70 miles away."
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The author has asked to add an urgency clause to this bill for
the reasons outlined above.
REGISTERED SUPPORT / OPPOSITION:
Support
Mayers Memorial Hospital District [SPONSOR]
Association of California Healthcare Districts
Shasta County Board of Supervisors
Opposition
None on file
Analysis Prepared by:Angela Mapp / L. GOV. / (916) 319-3958
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