BILL ANALYSIS
AB 1511
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Date of Hearing: May 4, 2005
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Simon Salinas, Chair
AB 1511 (Evans) - As Amended: May 2, 2005
SUBJECT : Design-build contracting.
SUMMARY : Authorizes 19 additional counties to enter into
design-build contracts, extends the sunset of the authorization
from 2006 to 2011, and makes specified changes to the conditions
and requirements for design-build contracting by counties.
Specifically, this bill :
1)Authorizes the Counties of Butte, Del Norte, Fresno, Humboldt,
Madera, Mariposa, Mendocino, Merced, Monterey, Napa, Placer,
San Diego, San Joaquin, San Luis Obispo, Shasta, Siskiyou,
Stanislaus, Yolo and Yuba to enter into design-build
contracts.
2)Reduces the cost threshold above which a county may award
design-build contracts from
$10 million to $5 million.
3)Defines "best value" as a value determined by objective
criteria related to price, features, functions, and life-cycle
costs.
4)Defines "project" as the erection, construction, alteration,
painting, or improvements of any office facility or other
building.
5)Requires that the mandated factors of price, expertise, life
cycle costs, labor availability, and safety in a best value
design-build competition be weighed equally in the evaluation
of a proposal.
6)Extends the sunset date for authorization for counties to
employ design-build to
January 1, 2011.
EXISTING LAW :
1)Requires local officials, under the Local Agency Public
Construction Act, to invite bids for construction projects and
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then award contracts to the lowest responsible bidder under
the traditional design-bid-build project delivery system.
2)Defines "design-build" as a procurement process in which both
the design and construction of a project are procured from a
single entity.
3)Defines "best value" as a value determined by objective
criteria that may include, but not be limited to, price,
features, functions, life-cycle costs, and other criteria
deemed appropriate by the county.
4)Authorizes the counties of Alameda, Contra Costa, Sacramento,
Santa Clara, Solano, Sonoma, and Tulare to use the
design-build method under the following conditions:
a) The design-build method shall only be used for projects
with costs exceeding
$10 million;
b) For projects with costs ranging from $10 million to $20
million, the counties must award the contract to the lowest
responsible bidder, as specified;
c) For projects with costs exceeding $20 million, the
counties may award the contract to either the lowest
responsible bidder, or the bid that represents the best
value, as specified.
5)Requires county officials to prepare documents describing the
project and its specifications; prepares a detailed request
for proposals, inviting competitive bids; establishes a
detailed procedure to pre-qualify design-build entities; and
establishes the procedures to select the design-build entity.
6)Requires county supervisors to establish and enforce labor
compliance programs.
7)Requires counties to collect specified types of information
when pre-qualifying design-build entities.
8)Requires a prospective design-build entity to list its
proposed mechanical subcontractors and licenses, report past
worker safety violations, contracting problems, contract
defaults, license violations, payroll violations, and
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bankruptcies, and verify this information under oath.
9)Requires county officials to select the design-build entity by
using either a competitive bidding process in which the award
goes to the lowest responsible bidder, or a best value
competition in which county officials set the criteria.
10)Requires that at least 50% of the weight of these best value
factors must include price, expertise, life cycle costs, labor
availability, and safety records.
11)Requires the county to rank the top three responsive bidders,
award the contract to the responsible bidder whose proposal
county officials rank as "the most advantageous," and identify
the second and third ranked bidders after it publicly
announces the award.
12)Requires the winning design-build entity to be bonded and
carry errors-and-omissions insurance to cover its design and
architectural services.
13)Requires the entity to adhere to the county's performance
criteria and design standards and obtain the county's written
consent for any deviations from these standards, and
authorizes the county to hire a design professional to ensure
compliance.
14)Authorizes the winning design-build entity to use
subcontractors not listed in its original bid, but requires
the entity must award these subcontracts by following a
process set by the county, including publishing notices and
setting deadlines.
15)Permits the county to retain no more than 5% of the contract
if the county's bid request required the design-build entity
to carry a performance and payment bond.
16)Repeals the authorization for the specified counties to use
design-build contracts on
January 1, 2006.
FISCAL EFFECT : None
COMMENTS :
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1)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 approach to public
works construction.
2)Private companies often use the design-build method for
construction projects. Under the design-build method, a
single contract covers the design and construction of a
project with a single company or consortium that acts as both
the project designer and builder. The design-build entity
arranges all architectural, engineering, and construction
services, and is responsible for delivering the project at a
guaranteed price and schedule based upon performance criteria
set by the public agency. The design-build method can be
faster
(and therefore, cheaper) than the design-bid-build method, but
it requires a higher level
of management sophistication since design and construction may
occur simultaneously.
3)The Legislature has granted authority to some public agencies
to use the design-build project delivery method under
specified circumstances. Special legislation has authorized
seven counties, six cities, one special district, transit
districts, and school districts to use the design-
build project delivery method for a limited time. The
design-build language in current law is a compromise struck in
2000 among local officials, labor groups, and contractors (AB
2296 (Dutra), Chapter 594, Statutes of 2000). Local officials
wanted the flexibility and potential cost savings offered by
design-build contracts. Labor unions wanted to ensure that
counties pre-qualify employers to protect workers' interests.
Contractors wanted to be sure they had fair access to county
contracts.
4)Advocates for the design-build method of contracting for
public works contend that project schedule savings can be
realized because only a single request for proposals is needed
to select the project's designer and builder. The more
traditional design-bid-build project approach requires the
separate selection of the design consultant or contractor,
completion of design, and then advertising for bids and
selection of the construction contractor. Proponents add that
design-build allows the overlap of design and construction
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activities, resulting in additional time savings and lower
project costs. By avoiding the delays and change orders that
result from the traditional design-bid-build method of
contracting, proponents argue that officials can deliver
public works faster and cheaper.
5)By allowing local officials to pick just one company to
orchestrate an entire construction project, the design-build
method contains an implicit preference for large companies and
partnerships. The design-build method may exclude smaller,
local firms that lack the capital or expertise to compete
against big partnerships or vertically integrated companies.
However, smaller firms may still be able to participate in a
support role as a subcontractor in the design-build method.
6)Opponents of design-build in the past have contended that the
cost savings afforded by design-build are overstated and
unproven, citing cases where costs have significantly
increased because the public agency loses responsibility for
the project. Opponents also caution that design-build
endeavors are extremely complicated from a management
perspective, requiring a thorough understanding of the roles
and responsibilities of each participant in the process.
7)Past opponents have also objected to the fact that, for
projects costing over $20 million, an authorized county has
the option of awarding a contract to the lowest responsible
bidder or a bidder on a best value basis. Best value
currently may include, but not be limited to, criteria such as
price, features, functions, life-cycle costs, and "other
criteria deemed appropriate." AB 1511 tightens this
definition up significantly by requiring that price, features,
functions, life-cycle costs, and nothing else, are the
objective criteria by which best value is to be determined.
8)SB 1759 (Johannessen), Chapter 976, Statutes of 2002, placed a
moratorium on the enactment of any additional legislation
relating to design-build contracting until any reports
required by existing law have been received by the
Legislature. Local officials were required to submit reports
detailing their experience with the design-build method to the
Legislative Analyst's Office (LAO) by December 1, 2004, and
the LAO was required to report its findings to the Legislature
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by January 1, 2005. That report found that, of the counties
authorized to use design-build contracting, Alameda,
Sacramento, and Solano counties had used the design-build
statute and that Contra Costa, Santa Clara, Sonoma, and Tulare
had not. After reviewing the counties' experiences, the LAO
recommended that:
a) The Legislature should adopt an inclusive, uniform
statute.
b) Design-build should be optional and not replace
design-bid-build.
c) Contracts for most project costs should be based on
competitive bidding, not best value.
d) State law should ensure access for the greatest number
of contractors.
e) There should be no cost limitations.
f) Design-build should apply only to buildings.
9)AB 1511 fully incorporates two of these recommendations:
design-build should be optional and should apply only to
buildings. While it still includes cost limitations, it
lowers the threshold above which design-build may be employed.
It does not limit the types of contracts based on best value,
but it does tighten up the definition of best value. It
expands the number of counties that may use design-build from
seven to 26, but that is still fewer than half of the state's
counties - far from an "inclusive, uniform statute."
10)One of the principal reasons for the imposition of the
moratorium on design-build legislation was to find an
alternative to the piecemeal approach to the matter that saw
separate bills proposing to extend design-build to additional
counties, cities, districts, and even individual projects.
The LAO's report recommended that the Legislature enact a
uniform design-build statute that all local governments can
use. Proponents of this and other design-build bills may
argue that the express condition for lifting the moratorium -
the issuance of the LAO report - has been met, but the
Committee may wish to consider whether resuming the scattergun
approach to the issue that existed prior to the moratorium
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runs counter to the spirit, if not the letter, of the
moratorium, and merely returns the Legislature to the status
quo ante.
11)To illustrate the point made previously, AB 1511 is far from
the only measure before the Legislature this year seeking to
expand and extend public agencies' use of the design-build
contracting method. So far the list includes AB 1511, AB 245
(Walters), AB 508 (Richman), AB 948 (Oropeza), AB 1162
(Mullin), AB 1329 (Wolk), AB 1663 (Jones), AB 1714 (Plescia),
AB 1725 (La Malfa), SB 287 (Cox), SB 371 (Torlakson), and SB
705 (Runner). The Committee may wish to suggest that these
authors and other legislators should collaborate with
interested parties and one another in the study, drafting, and
adoption of a single bill that creates a permanent, uniform
design-build method for both state and local public works
projects as a means of actually implementing some or all of
the recommendations from the LAO report. The Committee has
received a letter from the Construction Employers'
Association, representing over 100 of the largest unionized
commercial and industrial general contractors in California,
requesting that the Legislature do precisely that.
REGISTERED SUPPORT / OPPOSITION :
Support
Counties of Napa, Solano, and Sonoma [CO-SPONSORS]
CA Association of Councils of Governments
Counties of Alameda, Butte, Contra Costa, Del Norte, Fresno,
Humboldt, Madera, Mariposa, Mendocino, Merced, Placer,
Sacramento, San Diego, San Joaquin, San Luis Obispo, Santa
Clara, Shasta, Siskiyou, Stanislaus, Tulare, Yolo, and Yuba
Opposition
None on file
Analysis Prepared by : J. Stacey Sullivan / L. GOV. / (916)
319-3958