BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Christine Kehoe, Chair
BILL NO: AB 1511 HEARING: 6/15/05
AUTHOR: Evans FISCAL: No
VERSION: 6/8/05 CONSULTANT: Detwiler
DESIGN-BUILD FOR COUNTIES
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 approach to
public works construction. Counties must obtain bids on
projects over $4,000.
Since 1995, the Legislature has allowed seven counties to
experiment with the design-build method. Alameda, Contra
Costa, Sacramento, Santa Clara, Solano, Sonoma, and Tulare
counties can procure both design and construction services
from a single company before the development of complete
plans and specifications (AB 1771, Cortese, 1995; AB 755,
Corbett, 1999; AB 2296, Dutra, 2000).
A recent review of design-build practices by the
Legislative Analyst found that Alameda, Sacramento, and
Solano counties used the design-build statute. Santa Clara
County used design-build earlier. Contra Costa, Sonoma,
and Tulare counties did not use the authorization. After
reviewing the counties' experiences, the LAO recommended
that:
The Legislature should adopt an inclusive, uniform
statute.
Design-build should be optional and not replace
design-bid-build.
Contracts for most project costs should be based on
competitive bidding.
State law should ensure access for the greatest
number of contractors.
There should be no cost limitations.
Design-build should apply only to buildings.
The statutory authority for these counties to use the
design-build method sunsets on January 1, 2006. With the
sunset date approaching, these counties want the
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Legislature to extend and expand the design-build statute.
In addition, about 20 more counties want the statutory
authority to use the design-build method.
Existing Law
Price thresholds . For projects worth less than $10
million, counties cannot use the design-build method. For
projects worth between $10 million and $20 million, the
seven counties can use the design-build method, but they
must award contracts to the lowest responsible bidders.
For projects worth over $20 million, the seven counties can
use the design-build method; they can award contracts
either to the lowest responsible bidders, or based on best
value.
Method . County officials must follow a four-step
design-build method:
Prepare documents describing the project and its
specifications.
Prepare a detailed request for proposals, inviting
competitive bids.
Establish a detailed procedure to pre-qualify
design-build entities.
Establish the procedures to select the design-build
entity.
County supervisors must establish and enforce labor
compliance programs.
When pre-qualifying design-build entities, counties must
collect at least 11 types of information. The entity must
list its proposed mechanical subcontractors and licenses.
The entity must also report past worker safety violations,
contracting problems, contract defaults, license
violations, payroll violations, and bankruptcies. The
entity must verify this information under oath. The bill
prohibits public inspection of information that is not
public under the Public Records Act.
Awarding contracts . County officials must 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
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officials set the criteria.
At least 50% of the weight of these best value factors must
include price, expertise, life cycle costs, labor
availability, and safety records. The county must rank the
top three responsive bidders and the award goes to the
responsible bidder whose proposal county officials rank as
"the most advantageous." After the county publicly
announces the award, officials must also identify the
second and third ranked bidders.
Performance . The winning design-build entity must be
bonded and carry errors-and-omissions insurance to cover
its design and architectural services. The entity must
adhere to the county's performance criteria and design
standards. Deviations require the county's written
consent. The county may hire a design professional to
ensure compliance.
The winning design-build entity can use subcontractors who
were not listed in its original bid. The entity must award
subcontracts by following a process set by the county,
including publishing notices and setting deadlines.
If the county's bid request required the design-build
entity to carry a performance and payment bond, the county
can retain only 5% of the contract.
Evaluation . By December 1, 2004, the counties had to
report to the Legislative Analyst's Office regarding their
design-build experiences. The Legislative Analyst had to
report to the Legislature by January 1, 2005.
Proposed Law
Assembly Bill 1511 extends the automatic termination date
in the statute that allows counties to use the design-build
method of contracting, from January 1, 2006 to January 1,
2011.
AB 1511 adds 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 counties to the list of counties
that can use the design-build contracting method.
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The Legislative Analyst must report to the Legislature by
January 1, 2010 on the use of the design-build method by
counties between November 1, 2004 and November 1, 2009.
The bill lowers the minimum price threshold for
design-build projects that counties must award to the
lowest responsible bidder from $10 million to $5 million.
AB 1511 declares that it is not the Legislature's intent to
authorize the design-build process for transportation
facilities, including roads and bridges.
The bill defines a "project" as the construction of a
building and improvements directly related and necessary to
the construction of the building, but doesn't include the
construction of other facilities and infrastructure,
including streets, highways, public rail transit, and water
resources facilities and infrastructure.
AB 1511 limits the definition of "best value" to criteria
related to price, features, functions, and life cycle
costs. The bill requires county officials to give equal
weight to price, technical design and construction
expertise, life cycle costs over 15 years or more, skill
labor force availability, and acceptable safety record when
they award contracts in a best value competition.
Comments
1. Edifice complex . Taxpayers want worthy civic
structures, but they don't like spending much money on
dramatic architecture, fancy materials, and bureaucratic
delays. The traditional design-bid-build approach to
public works requires two rounds of contracts: the first to
pick the designer, the second to select the builder.
Learning from the private sector, some local officials have
used the design-build contracting method which gives them
more control over the bidding process and the final
product. Another 19 counties want the same authority to
use the design-build contracting method that seven other
counties already have.
2. Avoids dangerous mischief . The current law on
design-build contracting for projects over $20 million,
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allows counties to award contracts either to the lowest
responsible bidder or based on an open-ended list of best
value criteria. The vagueness in the current law invites
favoritism. County officials could insist that the winning
company be headquartered only in their county, cleverly
shouldering aside outsiders who don't have political
connections to local elected officials. AB 1511 avoids
that temptation by limiting the best value criteria to just
the four factors that it specifically names.
3. Almost Cox . In April, the Senate Local Government
Committee passed SB 287 (Cox) which also extended the
authorization for counties to use design-build contracting.
On June 6, Senator Cox amended his measure to add more
counties, delete the cost thresholds, redefine "project,"
and make related changes. The Cox bill and the Evans bill
are nearly identical, but for two key differences:
The Cox bill applies to 27 counties. The Evans
bill applies to 26 counties; the same as Cox, except
for Orange County.
The Cox bill deletes the statutory price
thresholds, allowing counties to use design-build on
any value of project. The Evans bill allows
design-build contracting on projects worth more than
$10 million, but inconsistently requires officials to
grant contracts to the lowest responsible bidder for
projects between $5 million and $20 million.
The Committee may wish to consider amending the Evans bill
to be the same as the Cox bill, adding Orange County and
deleting the statutory price thresholds.
4. Inconsistent thresholds . AB 1511 allows counties to
use design-build contracting on projects worth more than
$10 million. The bill requires county officials to grant
design-build contracts between $5 million and $20 million
to the lowest responsible bidder. The $10 million
threshold conflicts with the $5 million threshold. If the
Committee doesn't amend the Evans bill to match the Cox
bill and delete price thresholds (see Comment #3), then the
Committee may wish to consider an amendment that lowers the
$10 million threshold to $5 million so that AB 1511 is
internally consistent.
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5. Ready for take-off ? The Legislative Analyst's recent
report recommended limiting the use of the design-build
method just to buildings, cautioning legislators about the
complex issues associated with other types of public works
projects.
AB 1511 responds by saying that it is not the Legislature's
intent to authorize design-build procedures for
transportation projects. The bill's definition of
"project" focuses on buildings and related improvements,
excluding "other facilities and infrastructure." Some
counties own and operate airports. AB 1511 probably allows
a county to build an airport terminal and parking garages
because they are buildings and directly related
improvements. But a county can't use the bill to build the
airport's runways and other aviation improvements.
6. Related bills . On June 15, the Committee will hear
three design-build bills:
AB 245 (Walters) applies just to Orange County.
AB 1329 (Wolk) applies to cities in Solano and Yolo
counties.
AB 1511 (Evans) applies to 26 counties.
Also on June 15, the Assembly Local Government Committee
will hear SB 287 (Cox) which applies to 27 counties. The
Committee may wish to consider the need for three separate
bills authorizing counties to use the design-build method.
Isn't one bill enough?
Assembly Actions
Assembly Local Government: 7-0
Assembly Floor: 77-0
Support and Opposition (6/9/05)
Support : Counties of Alameda, Butte, Contra Costa, Del
Norte, Fresno, Humboldt, Madera, Mariposa, Mendocino,
Merced, Napa, Placer, San Diego, San Joaquin, San Luis
Obispo, Santa Clara, Shasta, Siskiyou, Stanislaus, Yolo,
Yuba; California Association of Councils of Government.
AB 1511 -- 6/8/05 -- Page 7
Opposition : La Raza Roundtable.