BILL ANALYSIS
SB 837
Page 1
REPLACE - 08/26/10 Changes per consultant.
SENATE THIRD READING
SB 837 (Florez)
As Amended August 20, 2010
Majority vote
SENATE VOTE : Vote not relevant
UTILITIES & COMMERCE APPROPRIATIONS
(vote not relevant) (vote not relevant)
SUMMARY authorizes the Corcoran District Hospital, upon approval
of the board of directors of the hospital, to use a design-build
procedure when assigning contracts to the construction of a
building or improvements directly related to the construction of
an outpatient facility building at the hospital.
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.
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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
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)Authorizes redevelopment agencies to use design-build
contracting for 10 public improvement projects in excess of $1
million subject to approval by the State Public Works Board.
11)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.
12)Requires the legislative body to establish and enforce labor
compliance programs.
13)Requires local officials to collect specified types of
information when pre-qualifying design-build entities.
14)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.
15)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.
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16)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.
17)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.
18)Requires that skilled labor force availability be determined
by the existence of an agreement with a registered and
approved apprenticeship program.
19)Requires the winning design-build entity to be bonded and
carry errors-and-omissions insurance to cover its design and
architectural services.
20)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.
21)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.
22)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.
23)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."
24)Repeals the authorization for counties, the Orange County
Sanitation District, the Santa Clara Valley Water District,
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and the Sonoma Valley Health Care District to use design-build
contracts on January 1, 2011.
25)Repeals the authorization for cities and redevelopment
agencies to use design-build contracts on January 1, 2016.
FISCAL EFFECT : None
COMMENTS : 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.
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.
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.
The design-build language in current law is based on a
compromise struck in 2000 among local officials, labor groups,
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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 contracting for the construction
of buildings and directly related improvements to all 58
counties in the state; AB 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; SB 1699 (Wiggins),
Chapter 415, Statutes of 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; and, SB 4xx (Cogdill), Chapter 2, Statutes of 2009,
which extended this authority to use design-build contracting
for 10 redevelopment projects in excess of $1 million subject to
approval by the State Public Works Board.
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."
California currently has 80 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
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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.
This bill extends the design-build authorization currently
granted to the Sonoma Valley Health Care District to the
Corcoran District Hospital. Because this authorization only
extends to the construction of buildings, it does not exceed the
scope recommended by the LAO report.
Support arguments: Supporters believe that district hospitals
are the only hospitals, both private and public, without this
authority. Supporters believe that the design build process, if
used by district hospitals, would help hold down the cost of
seismic safety construction and expedite the design and
construction process which would save taxpayers money.
Opposition arguments: Opposition may argue that design build is
not suited for constructing hospitals. Due to the complexity of
hospital capitol outlay projects - such as health monitoring
systems and life support functions - the traditional competitive
bidding process is better designed to take into account the very
specific needs of emergency medical personnel, doctors, and
support staff.
Analysis Prepared by : Jennifer R. Klein / L. GOV. / (916)
319-3958
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