BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 1358| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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: AB 1358 Page 2 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 AB 1358 Page 3 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 AB 1358 Page 4 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 AB 1358 Page 5 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. AB 1358 Page 6 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 AB 1358 Page 7 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 AB 1358 Page 8 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 Page 9 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 **** END ****