BILL ANALYSIS                                                                                                                                                                                                    Ó



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          ASSEMBLY THIRD READING


          AB  
          1290 (Dahle)


          As Amended  May 18, 2015


          Majority vote


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          |Committee       |Votes |Ayes                |Noes                  |
          |                |      |                    |                      |
          |                |      |                    |                      |
          |----------------+------+--------------------+----------------------|
          |Local           |9-0   |Maienschein,        |                      |
          |Government      |      |Gonzalez, Alejo,    |                      |
          |                |      |Chiu, Cooley,       |                      |
          |                |      |Gordon, Holden,     |                      |
          |                |      |Linder, Waldron     |                      |
          |                |      |                    |                      |
          |                |      |                    |                      |
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          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  








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            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.


          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 California Constitution  
               Article IV, Section 16 because of the unique circumstances of  
               the Mayers Memorial Hospital District.


          EXISTING LAW:  








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          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  
            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










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          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.


          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  








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            method can be set by the public agency.  The design-build method  
            can be faster and, therefore, cheaper, 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  








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            cost-effective ways to meet seismic standards and provide  
            well-designed and built 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,  
            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.  
             Mayers Memorial 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 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  








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            was held in the Assembly Appropriations Committee.


            SB 1699 (Wiggins), Chapter 415, Statutes of 2008, authorized 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.  




          Analysis Prepared by:                                               
                          Angela Mapp / L. GOV. / (916) 319-3958  FN:  
          0000443