BILL ANALYSIS Ó AB 1290 Page 1 ASSEMBLY THIRD READING AB 1290 (Dahle) As Amended May 18, 2015 Majority vote ------------------------------------------------------------------- |Committee |Votes |Ayes |Noes | | | | | | | | | | | |----------------+------+--------------------+----------------------| |Local |9-0 |Maienschein, | | |Government | |Gonzalez, Alejo, | | | | |Chiu, Cooley, | | | | |Gordon, Holden, | | | | |Linder, Waldron | | | | | | | | | | | | ------------------------------------------------------------------- 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 AB 1290 Page 2 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: AB 1290 Page 3 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 AB 1290 Page 4 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 AB 1290 Page 5 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 AB 1290 Page 6 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. AB 1290 Page 7 "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 AB 1290 Page 8 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." AB 1290 Page 9 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