BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
729 (Evans)
Hearing Date: 07/13/2009 Amended: 06/30/2009
Consultant: Mark McKenzie Policy Vote: T&H 11-0
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BILL SUMMARY: SB 729 would extend the authority of transit
agencies to enter into design-build contracts until January 1,
2015, and would require transit agencies that use design-build
to report specified information to the Legislative Analyst's
Office (LAO).
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Transit design-build potential savings from expedited project
Various*
delivery, potential cost pressures
Local mandate no state costs, local crime
disclaimerLocal
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* Transit project funding could be from any combination of
local, federal, and state funds (Public Transportation Account
special funds and Proposition 1B bond funds, including Transit
System Safety, Security, and Disaster Response Acccount)
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STAFF COMMENTS:
Most capital projects are constructed using the traditional
design-bid-build approach, whereby complete plans and
specifications are prepared prior to the advertising, bidding,
and awarding of any construction contracts. Design-build is a
procurement process in which both the design and construction of
a project are procured from a single entity. The selected firm
arranges all architectural, engineering, and construction
services. The design-build entity is responsible for delivering
the project at a guaranteed price and schedule based upon
performance criteria set by the public agency. Design-build is
intended to expedite project delivery and achieve efficiencies
through collaboration between the engineering and construction
phases of project delivery.
Existing law authorizes transit agencies to use design-build as
a procurement method until January 1, 2011. For capital
maintenance and capacity enhancing rail projects, transit
operators may only use design-build for projects that cost more
than $25 million. Transit operators are prohibited from using
design-build for projects on the state highway system or local
streets and roads. Existing law requires transit operators to
make a finding at a public meeting that use of design-build on a
particular project will reduce project costs, expedite
completion, or provide features that cannot be achieved through
design-bid-build methods. When a project involves state funds,
the transit operator must include these findings in its
application for funds.
Transit operator authority to use design-build was originally
granted by AB 958 (Scott), Chapter 541 of 2000, which required
transit operators to report to the LAO on their
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AB 729 (Evans)
experience using design-build by 2005, but did not require the
LAO to compile the information and report to the Legislature.
The LAO did complete a report on local government experience
with design build in 2005, concluding that design-build can
provide state and local agencies with a useful alternative to
the more commonly used design-bid-build process to deliver
construction projects, particularly for well-defined projects
such as buildings and directly related infrastructure. The
report noted that there are more complex issues associated with
other public works projects such as transportation, public
transit, and water resources facilities, and that an evaluation
of design-build for these facilities is beyond the scope of
their report.
AB 729 would extend the existing authority for transit agencies
to use design-build on public works projects until January 1,
2015, and require agencies that exercise the authority to report
to the LAO on each project procured using design-build, as
specified.
Staff notes that there has not been a full evaluation of
design-build as a procurement method for transit agencies that
provides data on whether it is more cost-effective than the
traditional design-bid-build. There could be cost savings to
transit agencies to the extent that risk is transferred from the
project sponsor to the design-build entity chosen to deliver the
project, and to the extent that time savings achieved through
design-build translate into lower project costs due to the
avoidance of construction inflation. Design-build may be more
costly to the extent that project management costs are higher,
and project costs for more complex projects may be less certain.
Proponents of this bill assert that design-build could help
expedite delivery of certain projects, and that without the
extended authority some projects that are under time constraints
may lose funding, such as those programmed under Proposition 1B
and the American Recovery and Reinvestment Act. Staff notes
that this bill would not result in any direct state costs, and
any indirect cost pressures would only be a result of unforeseen
cost escalations on a design-build project. Since existing law
requires transit operators to demonstrate that cost savings or
time savings would be achieved before using design-build as a
procurement method, staff estimates that any potential savings
from extending design-build authority for transit operators
would likely be greater than any potential cost pressures.