BILL ANALYSIS                                                                                                                                                                                                    Ó






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          |SENATE RULES COMMITTEE            |                       AB 1358|
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                                   THIRD READING 


          Bill No:  AB 1358
          Author:   Dababneh (D)
          Amended:  7/9/15 in Senate
          Vote:     21  

           SENATE EDUCATION COMMITTEE:  5-2, 7/1/15
           AYES:  Liu, Leyva, Mendoza, Monning, Pan
           NOES:  Runner, Vidak
           NO VOTE RECORDED:  Block, Hancock

           SENATE APPROPRIATIONS COMMITTEE:  5-2, 8/17/15
           AYES:  Lara, Beall, Hill, Leyva, Mendoza
           NOES:  Bates, Nielsen

           ASSEMBLY FLOOR:  63-16, 5/14/15 - See last page for vote

           SUBJECT:   School facilities:  design-build contracts


          SOURCE:    Author
          
          DIGEST:  This bill, beginning July 1, 2016, repeals the existing  
          design-build authority for school districts and re-establishes  
          the authority to generally align with that which exists for  
          other state and local agencies, establishes extensive new  
          skilled workforce requirements, reduces the threshold for its  
          use from $2.5 million to $1 million, and sunsets this authority  
          on January 1, 2025.
          
          ANALYSIS: 

          Existing law:









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          1)Authorizes a school district governing board to enter into a  
            design-build contract for the design and construction of a  
            school facility for projects in excess of two million five  
            hundred thousand dollars ($2,500,000) 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:

             a)   Reduce comparable project costs.

             b)   Expedite the project's completion.

             c)   Provide features not achievable through the traditional  
               design-bid-build method. 

          2)Establishes specific procedures for the progression of a K-12  
            school facility design-build project, outlines the specific  
            elements to be included in a request for proposal (including  
            significant factors, subfactors, methodology, rating and  
            weighting schemes for evaluating proposals), and establishes,  
            among other things, pre-qualification, bonding, and labor  
            compliance program requirements.  (Education Code § 17250.10 -  
            § 17250.50)

          3)Provides parallel authority, procedures and requirements for  
            community college district governing boards to conduct  
            design-build projects. (EC § 81700 - § 81708)

          4)Sunsets the authority of K-12 and community college districts  
            to use design-bid procurement on January 1, 2020. 

          This bill:

          1)Deletes and revises the existing authority of a school  
            district to use a design-build procurement process for public  
            works projects.

          2)Reduces the threshold for entering into a design-build  
            contract for K-12 school facility projects from $2.5 million  
            to $1 million.

          3)Establishes the authority, procedures, bond and subcontractor  
            requirements, performance criteria and design standards, to  







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            enter into design-build contracts consistent with prior  
            statute except for the following changes:

             a)   Adds new definitions for "design-build team,"  
               "Construction subcontract," and "project."

             b)   Eliminates the requirement that a school district  
               governing board make specified written findings prior to  
               using the authority.

             c)   Requires adoption of a conflict-of-interest policy by  
               the school district.

             d)   Implements a less prescriptive process for issuing a  
               request for proposal and grants districts greater  
               discretion to determine and assign weight to factors for  
               best value selection. 

             e)   Eliminates the requirements for a project inspector.

          4)Requires that a design-build entity must meet specified  
            skilled and trained workforce requirements to be prequalified  
            or shortlisted for design-build contracts and establishes the  
            following skilled workforce requirements and related  
            definitions:

             a)   "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.  

             b)   "Apprenticeable occupation" as an occupation for which  
               the Chief of the Division of Apprenticeship Standards of  
               the Department of Industrial Relations had approved an  
               apprenticeship program before January 1, 2014.

             c)   "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 and establishes the  
               following phased-in implementation of the proportion of  







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               skilled journeypersons and subcontractors, employed at  
               every tier, that must be approved apprenticeship program  
               graduates to meet the condition of having a "skilled and  
               trained workforce":

               i)     At least 20% by January 1, 2016.

               ii)    At least 30% by January 1, 2017.

               iii)   At least 40% by January 1, 2018.

               iv)    At least 50% by January 1, 2019.

               v)     At least 60% by January 1, 2020.

             d)   Provides that, for an apprenticeable occupation with no  
               approved program prior to January 1, 1995, up to one-half  
               of the apprenticeship program graduate percentage  
               requirements may be met by skilled journeypersons who  
               commenced work in the occupation prior to the approval of  
               an applicable apprentice program in the county of the  
               project's location. 

             e)   Prohibits the prequalification or shortlisting of a best  
               value entity absent an enforceable commitment to use a  
               skilled and trained workforce for all work on the  
               project/contract as applicable and provides that this  
               commitment may be established by: 

               i)     An agreement between the entity and the school  
                 district governing board to comply with these  
                 requirements and the provision of monthly evidence  
                 demonstrating such compliance during the performance of  
                 the project/contract.

               ii)    A project labor agreement (PLA), entered into by the  
                 school district governing board, that includes these  
                 requirements and that binds all  
                 contractors/subcontractors working on the  
                 project/contract and agreement by the entity to become a  
                 party to the PLA.

               iii)   Evidence that the entity has entered into a PLA that  
                 includes these requirements and that binds the entity and  







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                 all its subcontractors at every tier performing the  
                 project/contract. 

          5)Extends the sunset on the authority to use design-bid from  
            January 1, 2020 to January 1, 2025.

          Comments
          
          1)Need for the bill.   According to the author this bill aligns  
            the statutes authorizing school districts to use design-build  
            with those recently adopted as applicable to the use of  
            design-build by cities, counties, transit and special  
            districts.  According to the sponsor, requiring the use of a  
            skilled workforce ensures on-time project delivery, on or  
            under budget, and incentivizes the use of local workers who  
            are graduates of apprenticeship programs.  

          2)What is design-build?   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.

            In the 1990's, the state began the enactment of various  
            legislation authorizing state and local entities to use a  
            "design-build" system under specified circumstances.   Under  
            this approach a single contract is awarded to a professional  
            team, a "design-build" entity, to conduct both types of work.   
            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.  








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            The authority for design-bid was first implemented for school  
            districts by AB 1402 (Simitian, Chapter 421, Statutes of  
            2001), and though originally set to sunset in 2007, was  
            extended to 2010 by AB 127 (Nunez, Chapter 35, Statutes of  
            2006), this authority is currently extended until 2020 as the  
            result of the enactment of SB 1509 (Simitian, Chapter 736,  
            Statutes of 2012).  

          3)Related Legislative Analyst's Office (LAO) reports.  In  
            February 2005, the LAO issued a report on Design-Build: An  
            Alternative Construction System in which it reported its  
            consolidated findings on design-build across several public  
            works sectors.  Among other things, the LAO recommended that  
            the state adopt a single statute applying to all public  
            entities, design-build be available as an option and not a  
            replacement for "design-bid-build" and that no cost threshold  
            be imposed on the authority to use design-build.  The LAO also  
            noted that disadvantages of design-bid included a limited  
            assurance of quality control since the building is not  
            typically defined in detail at the time of entering into the  
            contract, and a more subjective process for awarding contracts  
            and evaluating qualifications and experience, as well as  
            limited access for small contractors without the range of  
            experience of larger, long-established firms. 

            In January 2010, the LAO presented a summary of reports  
            received from California counties that had completed  
            construction projects using the design-build delivery method,  
            as required under the legislation extending design-build  
            authority to county governments (Public Contract Code Section  
            20133).  The LAO noted that although difficult to draw  
            conclusions from the reports received about the effectiveness  
            of design-build compared to other project delivery methods,  
            there was no evidence to discourage the Legislature from  
            granting design-build authority to local agencies on an  
            ongoing basis.  The LAO also recommended that the Legislature  
            consider, among other things, creating a uniform design-build  
            statute.

          4)Uniform provisions for design-build authority.  SB 785 (Wolk,  
            Chapter 931, Statutes of 2014) repealed existing law  
            authorizing the Department of General Services, the Department  
            of Corrections and Rehabilitation, and specified local  
            agencies to use the design-build procurement process and  







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            enacted more uniform provisions authorizing these entities to  
            utilize this procurement process for public works projects.   
            SB 785 also added a sunset date of January 1, 2025, on these  
            design-bid authorizations.  This bill generally establishes  
            these same provisions as applicable to school districts.

          5)How is the new authority different?  Generally, the basic  
            structure of the statute remains very similar as regards most  
            definitions, procedures, and bond and subcontractor  
            requirements.  Consistent with the provisions of SB 785 (Wolk,  
            2014), the threshold for entering into a design-build contract  
            for K-12 school facility projects is reduced to $1 million and  
            design-bid authority sunsets in 2025.  Additionally, a school  
            district no longer has to make written findings of the  
            benefits of design-bid prior to its use, the process for  
            issuing a request for proposals sis less prescriptive, no  
            project inspector is required, and the requirements for use of  
            a skilled workforce are more extensive.

          6)Apprenticeship programs.  According to the Department of  
            Industrial Relations (DIR), apprenticeship programs combine  
            training on the job with related and supplemental instruction  
            at school.  Each program operates under apprenticeship  
            training standards agreed to by labor and/or management in  
            accordance with State and Federal laws.  The period of  
            training is from 1 to 6 years, depending upon the trade with  
            most programs being about 4 years.  Apprentices attend classes  
            of related technical instruction, giving apprentices a  
            comprehensive understanding of the theoretical aspects of  
            their work.  In most cases this means attending classes at  
            night 4 hours each week, for at least 108 hours a year.   
            Instruction includes such subjects as safety laws and  
            regulations, mathematics, drafting, blueprint reading and  
            other sciences connected with the trade.

            In March 2015, the Legislative Analyst's Office reported that  
            there are more than 50,000 apprentices registered in 47  
            trades, with the vast majority in the construction trades and  
            public safety.  The recently adopted 2015-16 State Budget  
            increased funding for Apprenticeship Programs by $29 million. 

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   Yes








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          According to the Senate Appropriations Committee, the Department  
          of General Services indicates the costs associated with  
          implementing this bill are minor and absorbable. The ultimate  
          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.  




          SUPPORT:   (Verified8/19/15)


          Air Conditioning Sheet Metal Association
          Air-conditioning & Refrigeration Contractors Association
          California Legislative Conference of the Plumbing, Heating and  
          Piping Industry
          Finishing Contractors Association of Southern California
          National Electrical Contractors Association - California  
          Chapters
          Northern California Allied Trades
          State Building and Construction Trades Council
          United Contractors
          Wall and Ceiling Alliance


          OPPOSITION:   (Verified8/19/15)


          Air Conditioning Trade Association
          American Fire Sprinkler Association
          Associated Builders and Contractors - San Diego Chapter
          Associated Builders and Contractors
          Golden State Builders Exchanges
          Plumbing-Hearing-Cooling Contractors Association of California
          Western Electrical Contractors Association

          ASSEMBLY FLOOR:  63-16, 5/14/15
          AYES:  Achadjian, Alejo, Bloom, Bonilla, Bonta, Brown, Burke,  
            Calderon, Campos, Chang, Chau, Chiu, Chu, Cooley, Cooper,  
            Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Cristina Garcia,  







                                                                    AB 1358  
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            Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray,  
            Roger Hernández, Holden, Irwin, Jones-Sawyer, Lackey, Levine,  
            Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina,  
            Mullin, Nazarian, O'Donnell, Olsen, Perea, Quirk, Rendon,  
            Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark  
            Stone, Thurmond, Ting, Wagner, Weber, Wilk, Williams, Wood,  
            Atkins
          NOES:  Travis Allen, Baker, Bigelow, Brough, Chávez, Beth  
            Gaines, Gallagher, Grove, Harper, Jones, Kim, Mathis,  
            Melendez, Obernolte, Patterson, Waldron
          NO VOTE RECORDED:  Hadley

          Prepared by:Kathleen Chavira / ED. / (916) 651-4105
          8/19/15 20:45:32


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