BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 879|
|Office of Senate Floor Analyses | |
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THIRD READING
Bill No: SB 879
Author: Cox (R)
Amended: 4/26/10
Vote: 21
SENATE LOCAL GOVERNMENT COMMITTEE : 3-2, 4/19/10
AYES: Cox, Aanestad, Kehoe
NOES: DeSaulnier, Price
SENATE APPROPRIATIONS COMMITTEE : 6-3, 5/10/10
AYES: Kehoe, Cox, Alquist, Walters, Wolk, Wyland
NOES: Leno, Price, Yee
NO VOTE RECORDED: Corbett, Denham
SUBJECT : Construction projects: alternative bidding
procedures:
design-build
SOURCE : Author
DIGEST : This bill make the following changes to the
authority for cities and counties to use the design-build
procurement method for contracting:
(1) Extends the authority for counties to use design-build
for five years, requires an additional report of
information to the Legislative Analyst's Office (LAO), and
requires the LAO to report to the Legislature. The
reporting requirements and sunset date for the county
authority would align with the existing sunset and
reporting requirements for cities' authority to use of
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design-build. (2) Lowers the cost threshold for county
design-build projects from $2.5 million to $1 million. (3)
Requires prospective design-build entities to disclose
detailed information if a court found that the firm
submitted a claim that violated federal or state False
Claims Acts. (4) Requires a successful design-build entity
to submit lists of subcontractors, bidders, and bid awards
within 14 days of the awarding of the contract. These
documents would be public records and available for public
inspection. (5) Makes several other changes to make the
county and city authority and requirements consistent.
ANALYSIS : 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. By contrast, the
design-build method allows local officials to procure both
design and construction services from a single company
before the development of complete plans and
specifications.
Counties can use the design-build method for projects worth
more than $2.5 million. The counties' authority sunsets on
January 1, 2011 (SB 416 [Ashburn], Chapter 585, Statutes of
2007). Cities can use the design-build method on projects
worth more than $1 million. The cities' design-build
statute sunsets on January 1, 2016 (AB 642 [Wolk], Chapter
314, Statutes of 2008).
Background
On January 20, 2010, the Senate Local Government Committee
held an oversight hearing called, "Faster, Cheaper, Better?
How Counties Use Design-Build Contracting." After a
briefing from the LAO, the Committee heard from 18 speakers
and received additional written advice. The Committee's
staff summarized the hearing's results with six staff
findings:
1. Broad support exists, especially among counties, to
repeal the sunset clause and make permanent the state
law that allows counties to use the design-build
contracting method. One labor group conditionally
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supports an extension of the sunset clause.
2. The Legislative Analyst's recommendation to eliminate
the current $2.5 million price threshold attracted
endorsements from counties and contractors, although one
group affiliated with labor interests disagreed.
3. The Legislative Analyst's recommendation to enact a
uniform design-build contracting statute that applies to
all local governments drew similar support from counties
and contractors, although one labor group is opposed.
4. Some counties want the Legislature to allow them to use
design-build contracting for any capital improvement
projects, but labor groups are opposed.
5. No consensus exists over how to define the criteria and
assign weights for the best-value selection procedures.
Most of the Legislature's debate over the future of the
counties' design-build law will need to focus on
controversies over these criteria and weights.
A. While the Legislative Analyst wants legislators to
place more emphasis on a project's cost, contractors
disagree and argue that other criteria can be more
important.
B. While the Legislative Analyst suggested that state
law explicitly allow so-called "two-envelope"
bidding, there was disagreement over its usefulness
and over the usefulness of the stipulated sum method.
C. Some counties and labor groups disagree about
retaining or eliminating consideration of life cycle
costs and contractors' safety records.
D. There is support for a new criterion that asks
prospective design-build entities about past
violations of state or federal False Claims Acts.
6. Because some counties and labor groups disagree about
the counties' faithful observance of state laws that
govern the counties' use of design-build contracts,
legislators may wish to consider creating a forum to
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investigate allegations. Legislators may wish to
consider assigning this function to the existing
California Uniform Construction Cost Accounting
Commission which already investigates allegations
regarding misuse of local public works contracts.
This bill changes the design-build statutes for both
counties and cities:
1. Project limits . Counties can use the design-build
contracting method on construction projects worth more
than $2.5 million. The statutory cost threshold for
cities' design-build projects is $1 million. This bill
lowers the cost threshold for counties' design-build
projects from $2.5 million to $1 million.
2. Evaluation factors . When counties and cities prepare
requests for proposals for design-build projects, they
must include at least 11 types of information.
Specifically, they must include the "significant
factors" which they will consider when evaluating
proposals, including cost or price and all nonprime
factors. For both counties and cities, this bill
requires these significant factors to be "objective."
3. False claims . When counties and cities prepare requests
for proposals for design-build projects, they must
include at least 11 types of information. For its
oversight hearing, the Committee received written advice
which recommended that counties and cities ask
prospective design-build entities about past violations
of the federal or state or False Claims Acts. This bill
requires prospective design-build entities to disclose
detailed information if a court found that the firm
submitted (or that the firm admitted to having
submitted) a claim that violated the federal or state
False Claims Acts.
4. Subcontractor information . When counties and cities
prepare requests for proposals for design-build
projects, they must include at least 11 types of
information, including a listing of all partners and
subcontractors. A witness at the Committee's oversight
hearing said that it was hard to obtain public records
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of subcontractors' bid lists and payroll records. This
bill requires a successful design-build entity to submit
lists of subcontractors, bidders, and bid awards within
14 days of the contract's award. This bill declares
that those documents are public records and available
for public inspection. The bill also requires the
design-build entity to provide the awarding party with
certified payroll records with 14 days of a request
under the Labor Code.
5. County reports and termination . When the Legislature
extended the design-build contracting authority to all
counties, it required counties to tell the LAO about
their experiences by December 1, 2009. The LAO had to
report on these experiences by January 1, 2010. The LAO
report came out in early January 2010. The counties'
design-build statute automatically terminates (sunsets)
on January 1, 2011. This bill extends the January 1,
2011 sunset date for the county's design-build
contracting authority to January 1, 2016.
FISCAL EFFECT : Appropriation: Yes Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12
2012-13 Fund
DIR: LCP oversight minor costs, covered by
feesSpecial*
LAO report minor costs to add county
design-buildGeneral
information to existing city design-build
report
* State Public Works Enforcement Fund (a continuously
appropriated fund)
SUPPORT : (Verified 5/11/10)
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American Institute of Architects, California Council
California Chamber of Commerce
California Special Districts Association
California State Association of Counties
California State Sheriff's Association
CH2M HILL
Counties of Imperial, Orange, Sacramento, and San Diego
Greater Riverside Chamber of Commerce
Regional Council of Rural Counties
Santa Clara Valley Water District
OPPOSITION : (Verified 5/11/10)
American Federation of State, County and Municipal
Employees AFL-CIO
California State Association of Electrical Workers
California State Pipe Trades Council
Professional Engineers in California Government
Western States Council of Sheet Metal Workers
ARGUMENTS IN SUPPORT : The California Chamber of Commerce
(CalChamber) states they support "the expanded use of
design-build and other alternative project delivery methods
by local governments. While design-build is not
appropriate in all cases, for instances that do fit, it can
get projects completed for quickly and at a lower cost than
through traditional design-bid-build contracting. The
number of change orders are lessened as is the potential of
disagreements and lawsuits among contractors, architects,
and the local government entity as the project is being
built. Essentially, design-build can put more construction
and engineering jobs on the ground faster, which is
integral to stimulating the state's economy and
rehabilitating infrastructure network. The Legislative
Analyst's Office made a series of recommendations,
including utilizing a uniform statute for all design-build
local government entities and removing any limitations to
project costs. The CalChamber supports these proposals and
would recommend broadening design-build authority to all
local governments-cities, counties and special districts.
Design-build is an important tool in local governments'
tool box that can save taxpayers' money, get projects
completed quickly and get jobs on the ground faster."
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ARGUMENTS IN OPPOSITION : The Professional Engineers in
California Government (PECG) state: "In the LAO analysis
entitled "Counties and Design-Build," the LAO noted, 'It is
difficult to find conclusive evidence as to the benefits of
the design-build method from information provided by the
counties.' The LAO report does not provide enough details
or a large enough sample size to warrant establishing
design-build as a permanent delivery method, which your
bill is attempting to do. As you know, PECG is opposed to
design-build for many reasons, including, but not limited
to:
eliminates competitive bidding
the qualification criteria are highly subjective
and can be manipulated
eliminates public inspection"
It is the opinion of PECG that "the counties' design-build
authority is ripe for abuse by the mere fact that a small
group of individuals are responsible for picking winners
and losers of huge public contracts." They also believe
strongly that "public oversight and inspection are
essential to ensuring the safety and long-term viability of
our public works." PECG is also opposed "to the expansion
of design-build authority to other project areas or
entities."
AGB:mw 5/12/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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