BILL ANALYSIS Ó
AB 1358
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON EDUCATION
Patrick O'Donnell, Chair
AB 1358
(Dababneh) - As Introduced February 27, 2015
SUBJECT: School facilities: design-build contracts
SUMMARY: Aligns the process for school districts awarding
contracts through the design-build method with the process
established for state and local agencies. Specifically, this
bill:
1)Repeals the existing provisions authorizing and governing the
design-build procurement process for school districts.
2)Authorizes a school district, with approval of its governing
board, to procure design-build contracts for school
construction projects in excess of $1 million, and award the
contract through the low bid or the best value method.
3)Finds and declares that there are reported benefits from the
design-build method of project delivery, using a best value
procurement methodology, including reduced project costs,
expedited project completion and design features that are not
achievable through the traditional design-bid-build method.
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Definitions:
4)Establishes the following definitions:
a) "Best value" means a value determined by evaluation of
objective criteria that may include, but are not limited
to, price, features, functions, life-cycle costs,
experience, and past performance. A best value
determination may involve the selection of the lowest cost
proposal meeting the interests of the school district and
the objectives of the project, selection of the best
proposal for a stipulated sum established by the procuring
school district, or a tradeoff between price and other
factors.
b) "Construction subcontract" means a subcontract awarded
by the design-build entity to a subcontractor that will
perform work or labor or will render service to the
design-build entity in or about the construction of the
work or improvement, or a subcontractor licensed by the
state which, under subcontract to the design-build entity,
specially fabricates and installs a portion of the work or
improvement according to detailed drawings contained in the
plans and specifications produced by the design-build team.
c) "Design-build" means a project delivery process in which
both the design and construction of a project are procured
from a single entity.
d) "Design-build entity" means a corporation, limited
liability company, partnership, joint venture, or other
legal entity that is able to provide appropriately licensed
contracting, architectural, and engineering services, as
needed, pursuant to a design-build contract.
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e) "Design-build team" means the design-build entity and
the individuals or other entities identified by the
design-build entity as members of its team. Members shall
include the general contractor and, if utilized in the
design of the project, all electrical, mechanical, and
plumbing contractors.
f) "Project" means the construction of any school facility.
Guidelines and Documents:
5)Requires the school district to develop guidelines for a
standard organizational conflict-of-interest policy,
consistent with applicable law, regarding the ability of a
person or entity that performs services for the school
district relating to the solicitation of a design-build
project, to submit a proposal as a design-build entity, or to
join a design-build team.
6)Requires the school district to prepare a set of documents
setting forth the scope and estimated price of the project.
The documents may include, but are not limited to, the size,
type, and desired design character of the project, performance
specifications covering the quality of materials, equipment,
workmanship, preliminary plans or building layouts, or any
other information deemed necessary to describe adequately the
school district's needs. The performance specifications and
any plans shall be prepared by a design professional who is
duly licensed and registered in California.
a) Prohibits the documents from including a
design-build-operate contract for a project. The documents,
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however, may include operations during a training or
transition period, but shall not include long-term
operations for a project.
Prequalification:
7)Requires the school district to prepare and issue a request
for qualifications in order to prequalify, or develop a
short-list of, the design-build entities whose proposals shall
be evaluated for final selection. The request for
qualifications shall include, but not be limited to, the
following:
a) Identification of the basic scope and needs of the
project or contract, the expected cost range, the
methodology that will be used by the school district to
evaluate proposals, the procedure for final selection of
the design-build entity, and any other information deemed
necessary by the school district to inform interested
parties of the contracting opportunity.
b) Significant factors that the school district reasonably
expects to consider in evaluating qualifications, including
technical design and construction expertise, acceptable
safety record, and all other nonprice-related factors.
c) A standard template request for statements of
qualifications prepared by the school district. In
preparing the standard template, the school district may
consult with the construction industry, the building trades
and surety industry, and other school districts interested
in using the authorization provided by this bill. The
template shall require the following information: 1) a
listing of all shareholders, partners, including, a copy of
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the organizational documents or agreement committing to
form the organization; 2) evidence of ability to complete
the project of similar size, scope or complexity; 3)
licenses, bonds and insurance; 4) information regarding
workers' compensation history and worker safety program; 5)
an acceptable safety record, as specified.
i) Requires all information to be verified under oath.
ii) Specifies that information required that is not
otherwise a public record under the California Public
Records Act shall not be open to public inspection.
8)Specifies that a design-build entity shall not be prequalified
or shortlisted unless the entity provides an enforceable
commitment to the school district that the entity and its
subcontractors at every tier will use a skilled and trained
workforce to perform all work on the project or contract that
falls within an apprenticeable occupation in the building and
construction trades.
a) Defines "apprenticeable occupation" as an occupation for
which the Chief of the Division of Apprenticeship Standards
(DAS) of the Department of Industrial Relations had
approved an apprenticeship program before January 1, 2014.
b) Defines "skilled and trained workforce" as a workforce
that meets all of the following conditions:
i) All workers are either skilled journeypersons or
apprentices registered in an apprenticeship program
approved by the Chief of the DAS.
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ii) Individuals and subcontractors at every tier
employed to perform work on the contract or project are
comprised of skilled journeypersons that are graduates of
an apprenticeship program approved by the Chief of the
DAS or located outside California and approved for
federal purposes pursuant to the apprenticeship
regulations adopted by the federal Secretary of Labor,
meeting the specified percentages and timeline:
(1) At least 20% by January 1, 2016.
(2) At least 30% by January 1, 2017.
(3) At least 40% by January 1, 2018.
(4) At least 50% by January 1, 2019.
(5) At least 60% by January 1, 2020.
iii) Specifies that for an apprenticeable occupation in
which no apprenticeship program had been approved by the
Chief of DAS before January 1, 1995, up to one-half of
the graduation percentage requirements may be satisfied
by skilled journeypersons who commenced working in the
apprenticable occupation prior to the chief's approval of
an apprenticeship program for that occupation in the
county in which the project is located.
c) Defines "skilled journeyperson" as a worker who either:
1) graduated from an apprenticeship program that was
approved by the chief of DAS or located outside California
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and approved for federal purposes pursuant to
apprenticeship regulations adopted by the Secretary of
Labor, or 2) has at least as many hours of on-the-job
experience in an applicable occupation as would be required
to graduate from an apprenticeship program for the
applicable occupation that is approved by the chief.
9)Provides that an entity's commitment that a skilled and
trained workforce will be used to perform the project or
contract may be established by any of the following:
a) The entity's agreement with the school district that the
entity and its subcontractors at every tier will comply
with the requirements of this bill and that the entity will
provide the school district with evidence, on a monthly
basis while the project or contract is being performed,
that the entity and its subcontractors are complying with
the requirements of this bill.
b) If the school district has entered into a project labor
agreement that will bind all contractors and subcontractors
performing work on the project or contract and that
includes the requirements of this bill, the entity's
agreement that it will become a party to that project labor
agreement.
c) Evidence that the entity has entered into a project
labor agreement that includes the requirements of this bill
and that will bind the entity and all its subcontractors at
every tier performing the project or contract.
Request for proposals:
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10)Requires the school district to prepare a request for
proposals that invites prequalified or short-listed entities
to submit competitive sealed proposals in the manner
prescribed by the school district. The request for proposals
shall include, but need not be limited to, the following
elements:
a) Identification of the basic scope and needs of the
project or contract, the estimated cost of the project, the
methodology that will be used by the school district to
evaluate proposals, whether the contract will be awarded on
the basis of low bid or best value, and any other
information deemed necessary by the school district to
inform interested parties of the contracting opportunity.
b) Significant factors that the school district reasonably
expects to consider in evaluating proposals, including, but
not limited to, cost or price and all nonprice-related
factors.
c) The relative importance or the weight assigned to each
of the factors identified in the request for proposals.
d) Where a best value selection method is used, the school
district may reserve the right to request proposal
revisions and hold discussions and negotiations with
responsive proposers, in which case the school district
shall so specify in the request for proposals and shall
publish separately or incorporate into the request for
proposals applicable procedures to be observed by the
school district to ensure that any discussions or
negotiations are conducted in good faith.
e) For those projects utilizing low bid as the final
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selection method, the competitive bidding process shall
result in lump-sum bids by the prequalified or short-listed
design-build entities, and awards shall be made to the
design-build entity that is the lowest responsible bidder.
f) Requires projects utilizing best value as a selection
method to follow a specified process that requires
proposals to be evaluated by using only the criteria and
selection procedures specifically identified in the request
for proposal, with the following minimum factors that must
be weighted as deemed appropriate by the awarding entity:
1) price; 2) technical design and construction experience;
and, 3) life-cycle costs over 15 or more years.
Award of the contract:
11)Authorizes the school district to hold discussions or
negotiations with responsive proposers, and requires proposers
to be ranked based on a determination of value provided, with
a limit of three proposers required to be ranked, as
specified.
12)Requires the award of the contract to be made to the
responsible design-build entity whose proposal is determined
to have offered the best value to the public, and requires the
school district to publicly announce its award, as specified.
13)Requires the design-build entity to provide payment and
performance bonds for the project in the form and in the
amount required by the awarding authority, and issued by a
California admitted surety. The amount of the payment bond
shall not be less than the amount of the performance bond.
14)Requires the design-build contract to provide errors and
omissions insurance coverage for the design elements of the
project.
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15)Requires the school district to develop a standard form of
payment and performance bond for its design-build projects.
16)Authorizes the school district, in each design-build request
for proposals, to identify specific types of subcontractors
that must be included in the design-build entity statement of
qualifications and proposal and outlines procedures for
awarding subcontracts with a value exceeding 0.5% of the
contract price allocable to construction work. Provides all
subcontractors that are identified in the proposal to be
afforded protections under the Subletting and Subcontracting
Fair Practices Act.
17)Provides that the retention proceeds withheld by the school
district from the design-build entity shall not exceed 5%, and
the retention proceeds withheld between the design-build
entity and any subcontractor may not exceed the percentage
specified in the contract between the school district and the
design-build entity.
18)Provides that nothing in this bill affects, expands, alters,
or limits any rights or remedies otherwise available by law.
19)Sunsets on January 1, 2025, and as of that date is repealed,
unless a later enacted statute, that takes effect before
January 1, 2025, deletes or extends that date.
EXISTING LAW:
1)Establishes a process, until January 1, 2020, for school
district governing boards to enter into a design-build
contract for both the design and construction of education
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facility projects over $2.5 million. (Education Code (EC)
Section 17250.20)
2)Specifies the elements required to be included in a
design-build request for proposal (including significant
factors, subfactors, methodology, rating and weighting schemes
for evaluating proposals) and establishes, among others,
prequalification, bonding and labor compliance program
requirements (EC Sections 17250.10 - 17250.50)
3)Requires the governing board of a school district to
competitively bid and award to the lowest bidder contracts
involving the following:
a) An expenditure of $50,000 or more for the purchase of
equipment, materials, or supplies, services (except for
construction services), and repairs.
b) An expenditure of $15,000 or more for a public contract
project defined as construction, reconstruction, erection,
alteration, renovation, improvement, demolition, repair,
painting or repainting of any publicly owned, leased, or
operated facility. (Public Contract Code (PCC) Sections
20111 and 22002)
4)Authorizes the governing board of a school district to require
each prospective bidder for a contract to participate in a
prequalification process that includes the submission of a
standardized questionnaire and financial statement in a form
established by the district, including a complete statement of
the prospective bidder's financial ability and experience in
performing public works. (PCC 20111)
FISCAL EFFECT: The Legislative Counsel has keyed this bill as a
state-mandated local program.
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COMMENTS: Background. Under current law, K-12 school districts
are required to competitively bid any public works contract over
$15,000 and award the contract to the lowest responsible bidder.
Under this process, a school district would first hire an
architect to design a school facility and then issue a bid for
the construction phase, awarding the contract to the lowest
bidder. This process is commonly called "design-bid-build".
AB 1402 (Simitian), Chapter 421, Statutes of 2001 established a
process called "design-build" that enables a school district to
issue a bid for both the design and construction of projects
over $10 million and authorizes school districts to consider
factors other than cost. AB 1402 had an initial sunset of
January 1, 2007 and required the Legislative Analyst's Office
(LAO) to submit a report with information on the experiences of
districts that used the design-build process and make
recommendations to the Legislature. The sunset was extended to
January 1, 2010 in 2006 (AB 127 (Nunez), Chapter 35, Statutes of
2006).
The author introduced another bill in 2002, AB 1000 (Simitian),
Chapter 637, Statutes of 2002, authorizing three California
Community Colleges (CCC) districts to utilize design-build
contracts for projects over $10 million with a sunset of January
1, 2008. SB 614 (Simitian), Chapter 471, Statutes of 2007,
reduced the threshold for eligible K-12 and CCC projects from
$10 million to $2.5 million, extended the authority to all CCC
districts, and extended the sunset dates for both K-12 and CCCs
to January 1, 2014. SB 1509 extended the sunset to January 1,
2020.
Design-build. Under a design-build process, a K-12, CCC
district, or other public or private agency issues a bid for
both design and construction of a facility. A general
contractor may collaborate with an architect/engineer to submit
a proposal, or a general contractor may submit the proposal and
subcontract with an architect/engineer. Prior to using a
design-build process for a project, a school district must make
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written findings that using the design-build method for the
project will meet at least one of the following objectives:
reduce comparable project costs, expedite the project's
completions, or provide features not achievable through the
traditional design-bid-build process. The school district must
also establish a process to prequalify design-build entities
using a standard questionnaire developed by the Department of
Industrial Relations. The questionnaire requires contractors to
provide detailed information regarding the company and its
financial status, including whether the company has been in
bankruptcy or involved in a civil lawsuit, licensing
information, prior contracting experience (whether the
contractor has completed other public works projects), whether
the contractor has been involved or has been found to have
violated any federal, state or local laws, and whether the
contractor has violated any labor and health and safety laws,
including prevailing wage.
Rather than selecting the contractor based solely on the lowest
offer, a school district may use criteria in addition to cost,
which may include qualification, experience, proposed design
approach, life cycle costs, project features and project
functions. Based on the criteria selected by a governing board,
the proposals are scored and awarded to the bidder whose
proposal is considered to be the best value to the school
district. Under a design-bid-build process, the architect works
independently on the design of the facility. Once construction
begins, any problems identified by the contractor must be
resolved, frequently with the school district acting as the
mediator. Under design-build, the architect and contractor are
working together from the beginning of the project, thereby
reducing conflicts, delays, and additional costs during the
construction phase. Design-build contracting can expedite the
construction of a project, avoid conflicts between
architects/engineers and contractors, and according to
experiences from school and CCC districts, reduce costs by
reducing change orders once construction begins.
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In addition to K-12 schools and CCC districts, a number of
design-build authorizations have been given to various cities
and counties, state building projects, and transit districts.
Last year, SB 785 (Wolk), Chapter 931, Statutes of 2014,
repealed the authorization for a number of state and local
agencies and enacted uniform provisions for the Department of
General Services, the California Department of Corrections and
Rehabilitation, and specified local agencies using the
design-build method. SB 785 did not include the authorization
for school districts.
What does this bill do? This bill repeals the provisions
authorizing school districts to utilize the design-build method
and instead re-establishes provisions that are more aligned to
SB 785. The premise and the basic structure of the current
authorization for school districts and this bill are very
similar. The differences between the existing process and this
bill include:
1)This bill lowers the threshold for participation from $2.5
million to $1 million; thereby expanding the pool of projects
eligible to be awarded through a design-build method.
2)This bill extends the sunset from January 1, 2020 to January
1, 2025, consistent with the sunset established for SB 785.
3)This bill deletes the provision requiring a school district
governing board to make written findings of the benefits by
using the design-build process for a particular project prior
to exercising the authority to use design-build (e.g., will
reduce project costs or expedite the project's completion).
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4)The process for issuing a request for proposal under the
current authorization is more prescriptive than the process
established by this bill. For example, under the existing
process, 50% of the factors used for best value selection must
include price, technical expertise, life-cycle costs over 15
years or more, skilled labor force availability and acceptable
safety record. This bill requires only price, technical
design and construction expertise, and life-cycle costs over
15 or more years to be required factors in the evaluation and
gives districts the authority to determine the weight of each
factor.
5)This bill and the current authorization require the use of
registered apprentices. However, this bill requires the
employment of specified percentages of skilled journeypersons
who are graduates of state approved apprenticeship programs by
specified dates.
6)The existing process requires a project inspector. This bill
does not include a project inspector.
Legislative Analyst's Office's (LAO) report. In February 2005,
the LAO issued a report titled Design-Build: An Alternative
Construction System in which it reported its consolidated
findings on design-build across several public works sectors.
The LAO report was based on reports provided by entities
authorized to use design-build contracting and had difficulty
finding conclusive evidence as to the benefits of the
design-build method. However, the LAO reported that the
entities that experimented with design-build were generally
pleased with the process and outcomes. The LAO concluded that
design-build is a useful alternative delivery method, but made
the following recommendations:
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1)The state should adopt a single statute applying to all public
entities (state and local governments and education
institutions);
2)Design-build should be available as an option and not a
replacement for design-bid-build;
3)Contracts for most of the project costs should be objectively
awarded based on competitive bidding;
4)No cost threshold should be imposed on the authority to use
design-build;
5)Access for small and newly established contractors should be
assured by requiring that design build contracts be awarded to
contractors with experience and qualifications that are
consistent with the needs of the project, rather than limited
to the biggest and longest-established firms. (The LAO made
this recommendation due to considerations of qualification and
experience in awarding design-build contracts, which may
disadvantage small, newly established contractors, who do not
have the range of experience of more established firms); and,
6)The authority should only be granted to construct buildings
and directly related infrastructure given the more complex
issues associated with transportation, public transit, and
water resources facilities.
Arguments in support. The State Building and Construction
Trades Council, the sponsor of the bill, states, "School
construction projects should be built to the highest standard
using a skilled and trained workforce. Because there are
limited funds available to school districts for construction it
is critical that these projects be done on time and done right
the first time. AB 1358 achieves these goals and aligns the
statutes for school design-build to the comprehensive
legislation on design-build that included cities, counties,
transit and special districts (SB 785 Wolk-2014)."
Arguments in opposition. The Air Conditioning Trade
Association, the Associated Builders and Contractors - San
Diego, the Plumbing-Heating-Cooling Contractors Association of
California, and the Western Electrical Contractors Association
have an oppose unless amended position. These organizations
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oppose the provision allowing an entity to show its commitment
to hiring a skilled and trained workforce through a project
labor agreement. The letter submitted on behalf of all of the
organizations does not specify the amendment they are seeking.
Related legislation. AB 975 (Frazier), pending in the Assembly
Local Government Committee, prohibits a public agency from
disqualifying or otherwise penalizing a prospective bidder in
the prequalification and rating system if the bidder is or has
been involved in any court claims.
Prior related legislation. SB 785 (Wolk), Chapter 931, Statutes
of 2014, aligned the design-build process for the Department of
General Services, the California Department of Corrections and
Rehabilitation, and several local agencies.
SB 1509 (Simitian), Chapter 736, Statutes of 2012, extended the
sunset for K-12 and CCC authorization to use design-build from
January 1, 2014 to January 1, 2020.
REGISTERED SUPPORT / OPPOSITION:
Support
State Building and Construction Trades Council (sponsor)
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Air-Conditioning & Refrigeration Contractors Association
Air Conditioning Sheet Metal Association
California Chapters of the National Electrical Contractors
Association
California Labor Federation
California Legislative Conference of the Plumbing, Heating and
Piping Industry
California State Association of Electrical Workers
California State Pipe Trades Council
Finishing Contractors Association of Southern California
Western States Council of Sheet Metal Workers
Opposition
Air Conditioning Trade Association (unless amended)
Associated Builders and Contractors - San Diego (unless amended)
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Plumbing-Heating-Cooling Contractors Association of California
(unless amended)
Western Electrical Contractors Association (unless amended)
Analysis Prepared by:Sophia Kwong Kim / ED. / (916) 319-2087