BILL ANALYSIS
AB 1511
Page 1
ASSEMBLY THIRD READING
AB 1511 (Evans)
As Amended May 2, 2005
Majority vote
LOCAL GOVERNMENT 7-0
-----------------------------------------------------------------
|Ayes:|Salinas, Emmerson, De La | | |
| |Torre, Houston, Lieber, | | |
| |Nation, Wolk | | |
-----------------------------------------------------------------
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
AB 1511
Page 2
January 1, 2011.
EXISTING LAW :
1)Requires local officials, under the Local Agency Public
Construction Act (Act), to invite bids for construction
projects and 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; and,
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
AB 1511
Page 3
proposed mechanical subcontractors and licenses, report past
worker safety violations, contracting problems, contract
defaults, license violations, payroll violations, and
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.
AB 1511
Page 4
FISCAL EFFECT : None
COMMENTS : The 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.
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.
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.
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 activities,
resulting in additional time savings and lower project costs.
AB 1511
Page 5
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.
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.
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.
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."
This bill 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.
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 by January 1,
2005. That report found that, of the counties authorized to use
design-build contracting, Alameda, Sacramento, and Solano
AB 1511
Page 6
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; and, f) design-build should
apply only to buildings.
This bill 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."
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 runs counter to the spirit,
if not the letter, of the moratorium, and merely returns the
Legislature to the status quo ante.
To illustrate the point made previously, this bill 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 this bill, 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 Legislature may wish
AB 1511
Page 7
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
Construction Employers' Association, representing over 100 of
the largest unionized commercial and industrial general
contractors in California, has requested that the Legislature do
precisely that.
Analysis Prepared by : J. Stacey Sullivan / L. GOV. / (916)
319-3958 FN: 0010156