BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |SB 957 |Hearing |4/13/16 |
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|Author: |Hueso |Tax Levy: |No |
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|Version: |2/4/16 |Fiscal: |Yes |
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|Consultant|Weinberger |
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Health care districts: design-build process
Allows health care districts' boards of directors to use
design-build contracting for the construction of hospital or
health facility buildings.
Background
The Local Agency Public Construction Act requires local
officials to invite bids for construction projects and then
award contracts to the lowest responsible bidder. This
design-bid-build method is the traditional, and most
widely-used, approach to public works construction. This
approach splits construction projects into two distinct phases:
design and construction. During the design phase, the local
agency prepares detailed project plans and specifications using
its own employees or by hiring outside architects and engineers.
Once project designs are complete, local officials invite bids
from the construction community and award the contract to the
lowest responsible bidder.
State law also allows some state and local officials to use the
design-build method to procure both design and construction
services from a single company before the development of
complete plans and specifications. Under design-build, a public
agency contracts with a single entity - which can be a single
firm, a consortium, or a joint venture - to design and construct
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a project. Before inviting bids, the agency prepares documents
that describe the basic concept of the project, as opposed to a
complete set of drawings and specifications of what will be
constructed. In the bidding phase, the agency typically
evaluates bids on a best-value basis, incorporating technical
factors, such as qualifications and design quality, in addition
to price.
Until January 1, 2025, all counties and cities can use the
design-build method to construct buildings and related
improvements and other specified types of public works that cost
more than $1 million (SB 785, Wolk, 2014). The Legislature also
has authorized some special districts to construct projects
using the design-build method, including four local health care
districts:
The Sonoma Valley Healthcare District can use the
design-build process when contracting for the construction
of a building and improvements directly related to a
hospital or health facility building at the Sonoma Valley
Hospital (SB 1699, Wiggins, 2008). Following SB 1699's
enactment, the Sonoma Valley Health Care District's voters
approved a $35 million bond to finance earthquake safety
improvements to bring the hospital's emergency room into
compliance with the state's seismic safety standards for
hospitals. The District's upgraded facility, which was
constructed using design-build contracts, opened in 2013.
The Last Frontier Healthcare District can use the
design-build process when contracting for the construction
of a building and improvements directly related to a
hospital or health facility building at the Modoc Medical
Center (SB 268, Gaines, 2014).
The Marin Healthcare District can use the design-build
process when contracting for the construction of a building
and improvements directly related to a hospital or health
facility building at the Marin General Hospital (SB 785,
Wolk, 2014).
The Mayers Memorial Hospital District can use the
design-build process when contracting for the construction
of a building and improvements directly related to a
hospital or health facility building at the Mayers Memorial
Hospital District (AB 1290, Dahle, 2015).
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Proposed Law
Senate Bill 957 allows, until January 1, 2025, any health care
district's board of directors, notwithstanding any other law, to
use the design-build procedure to construct a building or
improvements directly related to the construction of a hospital
or health facility building.
SB 957 specifies that a health care district must use the
design-build procedure that current law establishes for local
agencies and provides that statutory references to a "local
agency" means a health care district and its board of directors.
SB 957 requires that a hospital building project using the
design-build process authorized by the bill must be reviewed and
inspected in accordance with the standards and requirements of
the Alfred E. Alquist Hospital Facilities Seismic Safety Act of
1983.
The bill finds and declares the Legislature's intent that health
care districts use the design-build process solely for buildings
associated with hospitals and health care facilities, including
clinics and skilled nursing facilities, and not for other
infrastructure, including, streets, highways, public rail
transit, roads, bridges, and water resources facilities.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . When it comes to public works projects,
taxpayers want local officials to hold down costs, but they also
want to be sure that their tax dollars are spent wisely. While
the traditional contracting process minimizes opportunities for
public officials to award construction contracts based on
subjective factors, it also can be more time consuming and more
expensive than the design-build method. Health care districts,
in particular, face unique pressures to hold down costs. They
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face market pressures to compete with other health care
providers while complying with the Brown Act, the Public Records
Act, the Political Reform Act, public contracting laws, and
other statutory restrictions that are not imposed on their
private sector competitors. The Legislature has already allowed
four health care districts to use design-build contracting to
construct new facilities. SB 957 grants the same design-build
authority to all health care districts, allowing them to keep
costs down, expedite the design and construction process, and
save taxpayer dollars while fulfilling community health care
needs.
2. Which districts ? Although SB 957 uniformly extends
design-build contracting authority to all 78 of California
health care districts, not all health care districts will
realize similar benefits from using the design-build method.
The four health care districts that have the authority under
existing law all own and operate hospitals and were granted
authority to use design-build for construction projects that are
associated with those hospitals. However, many health care
districts throughout the state do not own or operate a hospital,
clinic, or other medical facility. These districts collect
property tax revenues and, in many cases, receive rental income
from district properties that are leased to third-party medical
care providers. It is unclear why a health care district that
is only responsible for managing property should be allowed to
use design-build contracting to construct medical office
buildings or other infrastructure that will serve only to
generate rental income for the district. One protection against
the potential misuse of design-build contracting authority is
the requirement in current law that it can only be used for
projects that cost at least $1 million, but this cost threshold
may not prevent some districts from using design-build to
construct large developments that will be rented to third
parties. The Committee may wish to consider amending SB 957 to
provide greater certainty that design-build contracting will
only be used for the construction of hospitals and medical
clinics that are owned or operated by health care districts.
3. Mandate . The design-build procedures that SB 957 authorizes
all health care districts to use requires that specified
information provided by bidders in response to a request for
qualifications must be certified under penalty of perjury. By
creating a new crime, SB 957 also creates a new state-mandated
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program. But the bill disclaims the state's responsibility for
reimbursing local governments for enforcing these new crimes.
That's consistent with the California Constitution, which says
that the state does not have to reimburse local governments for
the costs of new crimes (Article XIIIB, 6[a][2]).
4. Try again . SB 957 is not the first legislative effort to
allow all health care districts to use design build contracting.
Early versions of SB 1699 (Wiggins, 2008) would have granted
all health care districts the authority to use the design-build
method, but the bill was subsequently narrowed to grant the
authority only to the Sonoma Valley Health Care District.
Similarly, early version of SB 1005 (Cox, 2010) would have
allowed all health care districts to construct projects using
the design-build contracting method. That bill died in the
Assembly Appropriations Committee.
Support and
Opposition (4/7/16)
Support : Association of California Healthcare Districts;
American Council of Engineering Companies - California; Beach
Cities Health Care District; California Labor Federation;
California Special District Association; District Hospital
Leadership Forum; Economic Development Corporation of Mariposa
County; John C. Fremont Health Care District; State Building and
Construction Trades Council.
Opposition : Unknown.
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