BILL ANALYSIS Ó
AB 1358
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ASSEMBLY THIRD READING
AB
1358 (Dababneh)
As Introduced February 27, 2015
Majority vote
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|Committee |Votes |Ayes |Noes |
| | | | |
| | | | |
|----------------+------+--------------------+--------------------|
|Education |5-2 |O'Donnell, McCarty, |Chávez, Kim |
| | |Santiago, Thurmond, | |
| | |Weber | |
| | | | |
|----------------+------+--------------------+--------------------|
|Appropriations |12-5 |Gomez, Bloom, |Bigelow, Chang, |
| | |Bonta, Calderon, |Gallagher, Jones, |
| | |Daly, Eggman, |Wagner |
| | |Eduardo Garcia, | |
| | |Holden, Quirk, | |
| | |Rendon, Weber, Wood | |
| | | | |
| | | | |
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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:
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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.
Definitions:
3)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.
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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.
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:
4)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.
5)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,
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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,
however, may include operations during a training or
transition period, but shall not include long-term operations
for a project.
Prequalification:
6)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.
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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 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; and, 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.
7)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.
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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.
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
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apprenticeable 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 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.
8)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
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that will bind the entity and all its subcontractors at every
tier performing the project or contract.
Request for proposals:
9)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 non-price-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
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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
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:
10)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.
11)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.
Other specifications:
12)Requires the design-build entity to provide payment and
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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.
13)Requires the design-build contract to provide errors and
omissions insurance coverage for the design elements of the
project.
14)Requires the school district to develop a standard form of
payment and performance bond for its design-build projects.
15)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.
16)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.
17)Provides that nothing in this bill affects, expands, alters, or
limits any rights or remedies otherwise available by law.
18)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.
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FISCAL EFFECT: According to the Assembly Appropriations
Committee, no direct costs as use of the design-build process is
voluntary and should result in potential savings. Presumably K-12
districts will choose design-build for a specific project upon
determining a potential for savings in terms of project schedule
and/or costs.
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 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
(Núńez), 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.
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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 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.
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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.
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.
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,
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and the Western Electrical Contractors Association have an oppose
unless amended position. These organizations oppose the provision
allowing an entity to show its commitment to hiring a skilled and
trained workforce through a project labor agreement.
Analysis Prepared by:
Sophia Kwong Kim / ED. / (916) 319-2087 FN:
0000335