BILL ANALYSIS
AB 405
Page 1
Date of Hearing: April 1, 2009
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Anna Marie Caballero, Chair
AB 405 (Caballero) - As Amended: March 27, 2009
SUBJECT : Public contracts: health care districts: design-build.
SUMMARY : Authorizes a health care district, upon approval of
its board of directors, to use a design-build procedure when
assigning contracts for the construction of a building or
improvements directly related to the construction of a hospital
or health facility building.
EXISTING LAW :
1)Requires local officials, under the Local Agency Public
Construction Act, to invite bids for construction projects and
then award contracts to the lowest responsible bidder under
the traditional design-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 related to price, features, functions, and life cycle
costs.
4)Defines "project" as the construction of a building and
improvements directly related to the construction of a
building, and specifies that construction of other
infrastructure, including, but not limited to, streets and
highways, public rail transit, or water resources facilities
and infrastructure are not to be considered "projects."
5)Authorizes counties to use the design-build method for
projects costing more than $2.5 million.
6)Authorizes cities to use the design-build method for projects
costing more than $1 million.
7)Authorizes the Sonoma Valley Health Care District to use
design-build contracting for the construction of buildings and
improvements in excess of $2.5 million directly related to a
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hospital or health facility building, which is required to be
reviewed and inspected according to the standards of the
Alfred E. Alquist Hospital Facilities Seismic Safety Act of
1983.
8)Authorizes the Orange County Sanitation District to use
design-build contracting for projects, including, but not
limited to, public wastewater facilities, in excess of $6
million.
9)Authorizes the Santa Clara Valley Water District to use
design-build contracting for building contracts.
10)Requires local officials to prepare documents describing the
project and its specifications; to prepare a detailed request
for proposals that invites competitive bids; to establish a
detailed procedure to pre-qualify design-build entities; and
to establish the procedures to select the design-build entity.
11)Requires the legislative body to establish and enforce labor
compliance programs.
12)Requires local officials to collect specified types of
information when pre-qualifying design-build entities.
13)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
bankruptcies; and verify this information under oath.
14)Requires local 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 local officials set the criteria.
15)Requires that price, expertise, life cycle costs, skilled
labor force availability, and safety records account for at
least 10% each of the total weight of consideration of all
best value factors.
16)Requires the local agency to rank the top three responsive
bidders; award the contract to the responsible bidder whose
proposal county or city officials rank as "the most
advantageous;" and identify the second- and third-ranked
bidders after it publicly announces the award.
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17)Requires that skilled labor force availability be determined
by the existence of an agreement with a registered and
approved apprenticeship program.
18)Requires the winning design-build entity to be bonded and
carry errors-and-omissions insurance to cover its design and
architectural services.
19)Requires the entity to adhere to the local agency's
performance criteria and design standards and obtain the local
agency's written consent for any deviations from these
standards, and authorizes the local agency to hire a design
professional to ensure compliance.
20)Authorizes the winning design-build entity to use
subcontractors not listed in its original bid, but requires
the entity to award these subcontracts by following a process
set by the local agency, including publishing notices and
setting deadlines.
21)Permits the local agency to retain no more than 5% of the
contract if the local agency's bid request required the
design-build entity to carry a performance and payment bond.
22)Requires any local agency that uses design-build contracting
to submit a report to the Legislative Analyst's Office (LAO)
containing specified information that includes, but is not
limited to, a description of the Labor Force Compliance
Program and an assessment of the project impact of "skilled
labor force availability."
23)Repeals the authorization for counties, the Orange County
Sanitation District, the Santa Clara Valley Water District,
and the Sonoma Valley Health Care District to use design-build
contracts on January 1, 2011.
24)Repeals the authorization for cities to use design-build
contracts on January 1, 2016.
FISCAL EFFECT : Unknown
COMMENTS :
1)The Local Agency Public Construction Act requires local
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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 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)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. 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.
4)The design-build language in current law is based on a
compromise struck in 2000 among local officials, labor groups,
and contractors. 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. Further
changes to the language, consistent with the principles of the
2000 compromise were made by SB 287 (Cox), Chapter 376,
Statutes of 2005; SB 416 (Ashburn), Chapter 585, Statutes
2007, which extended this authority to use design-build
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contracting for the construction of buildings and directly
related improvements to all 58 counties in the state; SB 642
(Wolk), Chapter 314, Statues 2008, which extended this
authority to use design-build contracting for the construction
of buildings and directly related improvements to all cities
in the state; and SB 1699 (Wiggins), Chapter 415, Statutes
2008, which extended this authority to use design-build
contracting for the construction of buildings and improvements
in excess of $2.5 million directly related to a Sonoma Valley
Health Care District hospital or health facility building.
5)The LAO issued a report to the Legislature on February 3,
2005, titled "Design-Build: An Alternative Construction
System." After analyzing the claims of proponents and
opponents and reviewing the experience of counties that were
authorized to use design-build at the time, LAO recommended
"the Legislature grant design-build authority only to
buildings and directly related infrastructure. There are more
complex issues associated with other public works projects
such as transportation, public transit, and water resources
facilities. Evaluation of design-build as a construction
delivery option for these other infrastructure facilities is
beyond the scope of this report."
6)California currently has 75 health care districts. Health
care districts were known as hospital districts prior to 1994.
Health care districts are formed to "establish, maintain, and
operate health care facilities," including, but not limited
to, hospitals. Health care districts are governed by elected
boards of directors. Health care districts throughout the
state need to retrofit existing buildings or build new
facilities in order to comply with the state's seismic safety
law. These districts are faced with escalating construction
costs and are looking for the most cost-efficient ways to meet
seismic standards and provide well-designed and -built
state-of-the-art facilities to provide health care to the
people of the state. One of these is design-build
contracting.
7)AB 405 extends the design-build authorization currently
granted to the Sonoma Valley Health Care District to all
health care districts. Because this authorization only
extends to the construction of buildings and directly related
improvements, it does not exceed the scope recommended by the
LAO report. There appears to be no logical policy reason why
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this authorization, which has been thoroughly examined and
refined through a long series of compromises, studies, and
bills, should not be extended to all health care districts,
and there are significant economic reasons for encouraging it.
REGISTERED SUPPORT / OPPOSITION :
Support
Association of CA Healthcare Districts [CO-SPONSOR]
CA Special Districts Association [CO-SPONSOR]
CA Hospital Association
Coalinga Regional Medical Center
North-Kern South Tulare Hospital District
North Sonoma County Hospital District
Opposition
American Federation of State, County and Municipal Employees
(AFSCME) (unless amended)
Associated Builders and Contractors (ABC) of CA (unless amended)
Professional Engineers in CA Government
Service Employees International Union
Analysis Prepared by : Jennifer R. Klein / L. GOV. / (916)
319-3958