BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: sb 474
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: ducheny
VERSION: 6/3/09
Analysis by: Jennifer Gress FISCAL: yes
Hearing date: June 16, 2009
SUBJECT:
Pilot programs
DESCRIPTION:
This bill requires a lead agency to make a finding regarding the
benefits of a public-private partnership (PPP) agreement or of a
design-build or design-sequencing contract before entering into
the agreement or awarding the contract. This bill also requires
the California Transportation Commission (CTC) to prepare and
submit to the Legislature, on an annual basis, a consolidated
report that describes the status of projects that involve a PPP,
design-build, or design-sequencing.
ANALYSIS:
Public-Private Partnerships (PPPs)
Existing law, as established by SB 4xx (Cogdill), Chapter 2,
Statutes of 2009, Second Extraordinary Session, allows regional
transportation agencies and the California Department of
Transportation (Caltrans) to enter into an unlimited number of
lease or concession agreements with private entities for the
design, finance, construction, maintenance, or operation of
highway, street, or rail projects, subject to specified terms
and conditions. The authority to enter into these PPPs sunsets
on January 1, 2017.
SB 4xx requires CTC, in cooperation with the Legislative
Analyst's Office (LAO), to prepare an annual report on the
progress and operation of each facility developed under this
authority. The report shall include a review of the performance
standards established in the lease agreement, a financial
analysis, and any concerns or recommendations regarding PPPs.
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Design-Build
Existing law defines design-build as a "procurement process in
which both the design and construction of a project are procured
from a single entity." SB 4xx, which was passed in conjunction
with the budget agreement in February, established the
Design-Build Demonstration Program, to permit Caltrans and local
transportation entities to utilize design-build for up to a
total of 15 transportation projects, subject to specified
conditions. The CTC is responsible for authorizing
transportation entities to use this procurement method. The
authority to use design-build expires on January 1, 2014.
With regard to reporting, SB 4xx requires that each
transportation entity that utilizes design-build submit a
progress report to CTC not later than June 30th of each year
after the contract is awarded. The progress report shall
include the following information:
A description of the project;
The design-build entity that was awarded the project;
The estimated and actual costs of the project;
The estimated and actual schedule for project
completion;
A description of any written protests concerning any
aspect of the solicitation, bid, proposal, or award of the
design-build project, including, but not limited to, the
resolution of the protests;
An assessment of the prequalification process and
criteria utilized under this chapter;
A description of the required labor compliance program
and an assessment of the impact of this requirement on a
project;
A description of the method used to evaluate the bid,
including the weighting of each factor and an assessment of
the impact of this requirement on a project;
A description of any challenges or unexpected problems
that arose during the construction of the project and a
description of the solutions that were considered and
ultimately implemented to address those challenges and
problems; and
Recommendations to improve the design-build process of
construction procurement authorized under this chapter.
The CTC is required to compile the information provided by each
transportation entity and submit a report to the Legislature on
an annual basis.
SB 474 (DUCHENY) Page 3
In addition to the reporting requirements, SB 4xx requires CTC
to establish a peer review committee to conduct an evaluation of
the 15 projects selected to utilize design-build. The peer
review committee is required to compare design-build projects to
similar transportation projects that used the design-bid-build
method of procurement (the standard method of procurement) and
shall consider whether the projects were on time and on budget.
The CTC is required to submit a midterm report of its findings
to the Legislature no later than June 30, 2012 and a final
report no later than June 30, 2015.
Design-Sequencing
Existing law defines design-sequencing as "a method of
contracting that enables the sequencing of design activities to
permit each construction phase to commence when design for that
phase is complete, instead of requiring design for the entire
project to be completed before commencing construction."
Existing law authorizes Caltrans to use design-sequencing for up
to 12 transportation projects. This authority expires on
January 1, 2010. Not later than July 1, 2006 and July 1 of each
subsequent year during which a contract is underway, Caltrans is
required to prepare a status report on its contracting methods,
procedures, costs, and delivery schedules.
Upon completion of all design-sequencing contracts, but no later
than January 1, 2010, existing law requires Caltrans to
establish a peer review committee and direct it to prepare a
report for submittal to the Legislature that describes and
evaluates the outcomes of the contracts, including the positive
and negative aspects of using design-sequencing as a contracting
method.
CTC's Annual Report to the Legislature
Existing law requires CTC to submit, by December 15th of each
year, an annual report that summarizes the commission's
prior-year decisions in allocating transportation funds and
identifies timely and relevant transportation issues facing the
state.
This bill :
Requires a lead agency, prior to awarding a contract or
entering into a lease agreement for a public-private
partnership, design-build, or design-sequencing, to make a
finding that the contract or lease agreement provides any of
SB 474 (DUCHENY) Page 4
the following benefits:
o Accelerates project completion;
o Saves personnel or financial resources;
o Lowers costs to the users of the facility developed
under the contract or lease agreement; or
o Brings financial resources to bear on the project that
would not otherwise be available.
Provides that if a project is under joint control of Caltrans
and a local agency, both agencies shall concur in the finding
before the contract may be awarded.
Requires CTC, in cooperation with Caltrans and regional
transportation agencies, to develop a methodology for
determining whether a project accelerates project delivery,
saves personnel or financial resources, lowers the costs to
users of the facility, or brings financial resources to bear
on the project that would not otherwise be available.
Requires CTC to provide, on an annual basis, a consolidated
report on the progress of projects developed through a PPP or
with design-build or design-sequencing. CTC must include in
the consolidated report information regarding any savings in
time or resources to the lead agency or to users of the
facility, as well as the information required under existing
law, and permits CTC to include this information in its annual
report to the Legislature as required by existing law.
Requires Caltrans to submit to CTC information regarding the
progress of projects constructed using design-sequencing and
requires lead agencies to provide information requested by CTC
for purposes of preparing the consolidated report.
States the intent of the Legislature that agencies seeking to
utilize an alternative contracting or financing method must
justify the use of that method by making a finding about its
expected benefits and report on the extent to which the
project produced the expected benefits.
Is an urgency measure.
COMMENTS:
1.Purpose . According to the author, the purpose of the bill is
two-fold. The first purpose is to require agencies utilizing
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an alternative financing or contracting method to justify the
use of that method by making a finding as to its expected
benefits and to assess whether or not the project is achieving
those benefits. Second, by consolidating into one annual
report information on the progress and savings of pilot
programs, the bill seeks to make it easier for the Legislature
and members of the public to access information related to
these pilot programs.
The author contends that the bill is needed because the
Governor insisted on a tremendous expansion of authority for
these contracting techniques in the 2009-10 budget
negotiations. While reporting was required for these new and
for the previous authorities to use alternative financing and
contracting mechanisms, it is more cost-effective and easier
for the public and the Legislature to exercise oversight if
these reports are consolidated into one annual document.
Furthermore, with recent successful bond sales enabling the
release of monies for state public works projects, coupled
with the Administration's statements that it is committed to
moving forward expeditiously with its new authorities, it is
important that Caltrans begin to quantify its projected
savings to justify use of these alternative financing and
contracting methods.
2.Value of consolidated reporting ? The consolidated report
established by this measure is required to contain information
about three programs: PPPs, design-build, and
design-sequencing. For two of these programs, PPPs and
design-build, CTC already provides reports to the Legislature
and is already authorized to include these reports in its
annual report required under existing law. The third program
captured by this bill, design-sequencing, already requires
Caltrans to prepare an annual progress report under existing
law, though only a final report is submitted to the
Legislature once all projects are completed. In light of
existing law, one may ask, what value is added by the
consolidated report?
Furthermore, the bill does not capture all design-build
projects authorized under current law. Existing law contains
three separate authorities for design-build and each contains
different reporting requirements. Transit operators may
utilize the design-build method of procurement for transit
projects and the Los Angeles County Metropolitan
Transportation Authority (LACMTA) is utilizing design-build
SB 474 (DUCHENY) Page 6
for a high-occupancy vehicle lane project on Interstate 405 in
Los Angeles. Because transit operators and LACMTA report to
different entities (LAO and the Legislature, respectively),
interested parties seeking information about the value of
design-build as a procurement method will continue to have to
seek that information from different sources.
RELATED LEGISLATION
AB 729 (Evans) extends the sunset date from January 1, 2011
until January 1, 2015 that transit operators may utilize the
design-build method of contracting for transit projects.
AB 732 (Jeffries) extends the sunset date from January 1, 2010
to January 1, 2012 that Caltrans may utilize the
design-sequencing method of contracting for a transportation
project.
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
June 10, 2009)
SUPPORT: None received.
OPPOSED: American Council of Engineering Companies