BILL ANALYSIS
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THIRD READING
Bill No: SB 474
Author: Ducheny (D)
Amended: 8/24/09
Vote: 27 - Urgency
SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-0, 7/7/09
AYES: Lowenthal, Ashburn, DeSaulnier, Harman,
Hollingsworth, Kehoe, Pavley, Simitian, Wolk
NO VOTE RECORDED: Huff, Oropeza
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Pilot programs
SOURCE : Author
DIGEST : 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 within 90 days of entering into
the agreement or awarding the contract. This bill also
requires the California Transportation Commission 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
CONTINUED
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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 California Transportation Commission (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.
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:
1.A description of the project.
2.The design-build entity that was awarded the project.
3.The estimated and actual costs of the project.
4.The estimated and actual schedule for project
completion.
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5.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.
6.An assessment of the prequalification process and
criteria utilized under this chapter.
7.A description of the required labor compliance program
and an assessment of the impact of this requirement on a
project.
8.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.
9.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.
10.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.
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
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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:
1. Requires a lead agency, within 90 days of 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 the following
benefits:
A. Accelerates project completion.
B. Saves personnel or financial resources.
C. Lowers costs to the users of the facility
developed under the contract or lease agreement.
D. Brings financial resources to bear on the
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project that would not otherwise be available.
2. Provides that if the lead agency on a project is not the
owner of the facility, the owner of the facility shall
concur in the finding.
3. 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.
4. 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.
5. 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.
6. 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.
7. States that the purpose of requiring the finding is
solely to assist the public and the Legislature in
evaluating the effectiveness of the alternative methods,
subsequent to award of a contract involving an
alternative method, in order to determine the extent to
which those alternative methods may or may not be
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authorized for future pilot programs.
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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
OPPOSITION : (Verified 8/21/09)
Orange County Transportation Authority
ARGUMENTS IN SUPPORT : According to the author's office,
the purpose of the bill is two-fold. The first purpose is
to require agencies utilizing 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's office 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
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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.
JJA:do 8/21/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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