BILL ANALYSIS                                                                                                                                                                                                    Ó




           ----------------------------------------------------------------- 
          |SENATE RULES COMMITTEE            |                       AB 1290|
          |Office of Senate Floor Analyses   |                              |
          |(916) 651-1520    Fax: (916)      |                              |
          |327-4478                          |                              |
           ----------------------------------------------------------------- 


                                   THIRD READING 


          Bill No:  AB 1290
          Author:   Dahle (R)
          Amended:  5/18/15 in Assembly
          Vote:     27  - Urgency

           SENATE GOVERNANCE & FIN. COMMITTEE:  7-0, 6/10/15
           AYES:  Hertzberg, Nguyen, Beall, Hernandez, Lara, Moorlach,  
            Pavley

           ASSEMBLY FLOOR:  75-0, 5/22/15 - See last page for vote

           SUBJECT:   Health care districts:  public contracts:   
                     design-build


          SOURCE:    Author


          DIGEST:  This bill allows the Mayers Memorial Hospital District  
          (MMHD) to use design-build contracting.


          ANALYSIS:   


          Existing law:


          1)Allows, until January 1, 2025, all counties and cities to use  
            the design-build method to construct buildings and related  
            improvements and other specified types of public works that  
            cost more than $1 million (SB 785, Wolk, Chapter 931, Statutes  
            of 2014).  










                                                                    AB 1290  
                                                                    Page  2



          2)Allows some special districts to construct projects using the  
            design-build method, including three local health care  
            districts:


             a)   The Sonoma Valley Healthcare District can 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 Sonoma Valley  
               Hospital (SB 1699, Wiggins, Chapter 415, Statutes of 2008).  
                Following SB 1699's enactment, the Sonoma Valley Health  
               Care District's voters approved a $35 million bond to  
               finance earthquake safety improvements to bring the  
               hospital's emergency room into compliance with the state's  
               seismic safety standards for hospitals. The District's  
               upgraded facility, which was constructed using design-build  
               contracts, opened in 2013.


             b)   The Last Frontier Healthcare District can 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 268, Gaines, Chapter 18, Statutes of 2014).


             c)   In addition to extending design-build contracting  
               authority for cities and counties through 2024, last year's  
               Wolk bill also authorized the Marin Healthcare 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  
               Marin General Hospital.


          This bill:


          1)Allows the MMHD's board of directors, notwithstanding any  
            other law, to use the design-build procedure to construct a  
            building or improvements directly related to the construction  
            of a hospital or health facility building at the MMHD. 








                                                                    AB 1290  
                                                                    Page  3





          2)Specifies that the MMHD must use the design-build procedure  
            that current law establishes for local agencies and provides  
            that statutory references to a "local agency" means the MMHD  
            and its board of directors. 


          3)Requires that a hospital building project using the  
            design-build process authorized by this bill must be reviewed  
            and inspected in accordance with the standards and  
            requirements of the Alfred E. Alquist Hospital Facilities  
            Seismic Safety Act of 1983.


          4)Finds and declares the Legislature's intent that health care  
            districts use the design-build process solely for buildings  
            associated with hospitals and health care and not for other  
            infrastructure, including, streets, highways, public rail  
            transit, roads, bridges, and water resources facilities.


          Background


          The Local Agency Public Construction Act 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, and most  
          widely-used, approach to public works construction.  This  
          approach splits construction projects into two distinct phases:  
          design and construction.  During the design phase, the local  
          agency prepares detailed project plans and specifications using  
          its own employees or by hiring outside architects and engineers.  
           Once project designs are complete, local officials invite bids  
          from the construction community and award the contract to the  
          lowest responsible bidder.


          State law also allows some state and local officials to use the  
          design-build method to procure both design and construction  
          services from a single company before the development of  








                                                                    AB 1290  
                                                                    Page  4



          complete plans and specifications.  Under design-build, a public  
          agency contracts with a single entity - which can be a single  
          firm, a consortium, or a joint venture - to design and construct  
          a project.  Before inviting bids, the agency prepares documents  
          that describe the basic concept of the project, as opposed to a  
          complete set of drawings and specifications of what will be  
          constructed.  In the bidding phase, the agency typically  
          evaluates bids on a best-value basis, incorporating technical  
          factors, such as qualifications and design quality, in addition  
          to price.


          MMHD serves a rural northern California area that includes  
          portions of four counties: Lassen, Modoc, Shasta and Siskiyou.   
          MMHD's hospital, located in Fall River Mills (Shasta County), is  
          more than 50 years old and does not meet state seismic safety  
          standards for hospital buildings.  To continue to provide  
          hospital services to the surrounding communities, MMHD must  
          construct a new facility by January 2020.  To speed the  
          construction process and reduce costs, MMHD officials want the  
          Legislature to grant them the same design-build contracting  
          authority that state law grants to the Sonoma, Marin, and Last  
          Frontier healthcare districts.


          Comments


          Purpose of the bill.  When it comes to public works projects,  
          taxpayers want local officials to hold down costs, but they also  
          want to be sure that their tax dollars are spent wisely.  While  
          the traditional contracting process minimizes opportunities for  
          public officials to award construction contracts based on  
          subjective factors, it also can be more time consuming and more  
          expensive than the design-build method. Faced with a seismic  
          retrofit deadline, the MMHD wants to use design-build  
          contracting to gain more control over the bidding process and  
          the final outcomes of its anticipated hospital construction  
          project.  The MMHD anticipates that the design-build method will  
          shorten the construction process and reduce the project's  
          overall costs, thereby benefitting taxpayers and helping to  
          ensure that the MMHD will meet its retrofit deadline. 








                                                                    AB 1290  
                                                                    Page  5





          Not so simple. Legislators have been cautious about allowing  
          local governments, and special districts in particular, to use  
          the design-build contracting method.  A 2005 Legislative  
          Analyst's Office (LAO) report questioned whether design-build is  
          the best construction delivery process for specialized buildings  
          like hospitals.  LAO suggested that design-build is best suited  
          for "straightforward" design and construction projects, but not  
          for complex projects that require builders to accommodate more  
          unique design preferences.  A 2014 LAO report on how counties  
          have used design-build contracting finds that some counties  
          prefer using design-build for simple projects, while others  
          indicate that design-build is useful for specialty projects and  
          large, complex projects. Sonoma Valley Health Care District is  
          the only local government to have used the design-build method  
          for hospital construction.  Because hospitals are highly  
          specialized structures that must meet complex construction and  
          seismic standards, it remains unclear whether the design-build  
          contracting method is appropriate for constructing hospital  
          buildings.


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No


          SUPPORT:   (Verified6/19/15)


          Association of California Healthcare Districts
          Mayers Memorial Hospital District
          Shasta County Board of Supervisors


          OPPOSITION:   (Verified6/19/15)


          None received

          ASSEMBLY FLOOR:  75-0, 5/22/15
          AYES:  Achadjian, Travis Allen, Baker, Bigelow, Bloom, Bonilla,  








                                                                    AB 1290  
                                                                    Page  6



            Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau,  
            Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,  
            Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  
            Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,  
            Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,  
            Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, Patterson, Perea,  
            Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Wilk, Williams,  
            Wood, Atkins
          NO VOTE RECORDED:  Alejo, O'Donnell, Olsen, Waldron, Weber

          Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
          6/19/15 14:31:32


                                   ****  END  ****