BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1358 (Dababneh) - School facilities: design-build contracts.
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|Version: July 9, 2015 |Policy Vote: ED. 5 - 2 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: August 17, 2015 |Consultant: Jillian Kissee |
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This bill does not meet the criteria for referral to the
Suspense File.
Bill
Summary: This bill repeals the existing design-build authority
for school districts and reestablishes the authority to
generally align with that which exists for other state and local
agencies, establish extensive new skilled workforce
requirements, reduce the threshold for its use from $2.5 million
to $1 million, and to sunset this authority on January 1, 2025.
Fiscal
Impact: Ultimately, the costs of this bill are unknown as it
makes changes to the current design-build procurement process
that could result in both savings and additional costs to local
contract costs. This bill is not anticipated to have a
significant fiscal impact at the state level. See staff
comments.
The Department of General Services indicates the costs
associated with implementing this bill are minor and
absorbable.
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Background: There are two primary construction delivery systems used in
the public and private sectors, "design-bid-build" and
"design-build."
Current law requires that school districts award construction
contracts over $15,000 to the lowest responsible bidder.
Current law also allows contracts for architectural services to
be awarded on the basis of demonstrated competence and
professional qualifications to be performed at a fair and
reasonable price (not necessarily lowest bidder). These laws
have meant that schools (and most public construction work) have
been built using a "design-bid-build" methodology wherein a
separate contract is awarded for the design work by an architect
and another contract is awarded to the lowest responsible bidder
for the construction.
Existing law authorizes a school district governing board, as an
alternative to the "design-bid-build" methodology, to enter into
a design-build contract for the design and construction of a
school facility for projects in excess of $2.5 million if, after
evaluating traditional design-bid-build and design-build
processes in a public meeting, the governing board makes written
findings that use of the design-build process on a specific
project will either: (1) reduce comparable project costs; (2)
expedite the project's completion, or (3) provide features not
achievable through the traditional design-bid-build method.
Rather than awarding such a contract to the lowest responsible
bidder, it may be awarded on the basis of the experience and
qualifications of the competitors, or on a determination that a
particular competitor provides the best value to the project.
Proposed Law:
This bill deletes and revises the existing authority of a
school district to use a design-build procurement process for
public works projects effective as of July 1, 2016 until January
1, 2025.
It provides Legislative intent to provide general authorization
for school districts to use the design-build method for
projects. A "design-build" project is defined as a delivery
process in which both the design and construction of a project
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are procured from a single entity.
This bill reduces the threshold for entering into a design-build
contract for K-12 school facility projects from $2.5 million to
$1 million.
Procurement Process
Prequalification Process
The school district is required to prepare a set of documents
setting forth the scope and estimated price of the project. The
school district is required to issue a request for
qualifications to prequalify or develop a shortlist of the
entities whose proposals will be evaluated for final selection
that must include minimum elements such as:
Identification of the basic scope and needs of the project or
contract, the expected cost range, and methodology used to
evaluate proposals;
Factors that the school district will use in evaluating
qualifications, including technical design and construction
expertise and an acceptable safety record;
A standard template request for statements of qualifications
prepared by the school district including information such as
the type of legal entity of the proposed design-build entity;
evidence that the design-build team has demonstrated the
experience, training, and financial capacity to necessary to
manage and complete the design and construction of the
project; the appropriate licenses; evidence that the
design-build entity has the capacity to obtain all required
payment and performance bonding, and insurance; information
regarding workers' compensation experience history; and an
acceptable safety record. This information must be certified
under penalty of perjury by the design-build entity, as
specified.
A design-build entity is prohibited from being prequalified
unless it provides an enforceable commitment to the school
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district that it, and its subcontractors, will use a skilled and
trained workforce, as described below.
Request for Proposal Process
Based on this information, the school district is required to
prepare a request for proposal (RFP) that invites prequalified
or shortlisted entities to submit competitive sealed proposals.
The RFP must also include information such as whether the
contract will be awarded on the basis of low bid or best value.
For projects using best value as a selection method, the
proposals must be evaluated by using only the criteria and
selection procedures identified in the RFP and must weigh the
following minimum factors: price, technical design and
construction expertise, and life-cycle costs over 15 years or
more.
The award of the contract must be made to the responsible
design-build entity whose proposal is determined by the school
district to have offered the best value to the public and
publically announce the award.
Skilled and Trained Workforce Requirements
Similar to current law, this bill defines "skilled and trained
workforce" as a workforce in which all the workers are skilled
journeypersons or apprentices registered in an apprenticeship
program approved by the Chief of the Division of Apprenticeship
Standards of the Department of Industrial Relations. However,
this bill goes further by implementing the following phased-in
proportion of skilled journeypersons and subcontractors that are
apprenticeship program graduates:
At least 20 percent by July 1, 2016.
At least 30 percent by July 1, 2017.
At least 40 percent by July 1, 2018.
At least 50 percent by July 1, 2019.
At least 60 percent by July 1, 2020.
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This bill defines "skilled journeyperson" as a worker who either
graduated from an applicable apprenticeship program which met
specified state or federal approval requirements, or had at
least as many hours of on-the-job experience in an applicable
occupation as would be required for graduation from a
state-approved apprenticeship program.
An entity may establish its commitment that a skilled and
trained workforce will be used by any of the following:
An agreement between the entity and the school district
to comply with these requirements and the provision of
monthly evidence demonstrating such compliance during the
performance of the project or contract.
A project labor agreement (PLA), entered into by the
school district that includes these requirements and that
binds all contractors and subcontractors working on the
project or contract and agreement by the entity to become a
party to the PLA.
Evidence that the entity has entered into a PLA that
includes these requirements and that binds the entity and
all its subcontractors at every tier performing the project
or contract.
Related
Legislation:a) This Committee has heard other bills that implement similar
skilled workforce requirements as elements of the authority to
use procurement methods other than design-bid-build. These
include:
AB 566 (O'Donnell) which, among other things, establishes
similar skilled workforce requirements for lease/leaseback and
lease-to-own procurement contracts. AB 566 is currently
enrolled.
AB 1185 (Ridley-Thomas) establishes similar skilled workforce
requirements as a component of a pilot program to authorize the
Los Angeles Unified School District to use a best value
procurement method for public projects that exceed $1 million.
AB 1185 is pending in this Committee.
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Staff
Comments: Ultimately, the effect that this bill will have on
school facility contracts beginning in July 1, 2016 is unknown
due to a number of factors. The "design-build" method is an
alternative to the traditional "design-bid-build" method which,
based on school district needs, they may choose to pursue for
public works construction. Any fiscal impact on the state may
be realized as a cost pressure to provide state facility funding
to the extent local contract costs increase. However, this bill
changes the design-build process in ways that could result in
both savings and increased costs, making the overall impact
undeterminable. Future decisions on whether to access this
procurement method over the traditional will be ultimately
depend on school districts' determinations of which method best
meets their needs, including financial needs.
This bill is very similar in premise and basic structure to the
design-build method established in current law, but has a few
notable differences. The prescribed percentage of skilled and
trained workforce required to carry out the work of the project
will likely drive increases to contract costs as the percentage
increases over the years. However, this bill also allows a
school district to no longer have to make written findings of
the benefits of design-bid prior to its use; it makes the
process for issuing a request for proposals less prescriptive,
and no longer requires a project inspector. These changes could
result in efficiencies as compared to the design-build method
established in current law.
Lowering the project threshold for design-build school
construction projects from $2.5 million to $1 million could
result in more projects being awarded according to "best value"
which may not have the lowest bid price. Therefore, the cost of
school public works projects may increase as compared to if
those projects were otherwise procured though the traditional
design-bid-build method and subject to the lowest bid price. On
the other hand, overall contracting costs may be lower to the
extent that efficiencies are gained by using the design-build
method on more projects.
To the extent the net impact of the changes to the design-build
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method established by this bill increases contract costs at the
local level, it could create pressure to increase the per-pupil
grant amount allocated to school districts with school facility
bond funds if a future state school facility bond is approved by
voters. To the extent the per-pupil grant amount increases,
less funding would be available for other projects. However, it
is unknown whether a new bond would be approved and if it was,
whether the per-pupil amount would increase. To gain
perspective on the current utilization of design-build projects,
according to the Office of Public School Construction's tracking
of self-reported data on project delivery method of School
Facility Programs (not locally-funded projects), of the known
projects since 2005, 70 have been design-build out of 3,496.
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