BILL ANALYSIS
SB 879
Page 1
SENATE THIRD READING
SB 879 (Cox)
As Amended August 16, 2010
Majority vote
SENATE VOTE :24-8
LOCAL GOVERNMENT 6-3 APPROPRIATIONS 17-0
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|Ayes:|Smyth, Arambula, Davis, |Ayes:|Fuentes, Conway, |
| |Knight, | |Bradford, Huffman, Coto, |
| |Logue, Solorio | |Davis, De Leon, Gatto, |
| | | |Hall, Harkey, Miller, |
| | | |Nielsen, Norby, Skinner, |
| | | |Solorio, Torlakson, |
| | | |Torrico |
|-----+--------------------------+-----+--------------------------|
|Nays:|Caballero, Bradford, | | |
| |Swanson | | |
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SUMMARY : Extends the sunset for the use of design-build by
counties from January 1, 2011,
to July 1, 2014, and aligns the design-build statutes for cities
and counties. Specifically,
this bill :
1)Requires the design-build standard questionnaire issued by
cities or counties to include any instance in which the entity,
or any of its members, owners, officers, or managing employees
was, during the five years preceding submission of a bid
pursuant to this section, determined by a court of competent
jurisdiction to have submitted, or legally admitted for purposes
of a criminal plea to have submitted any claim in violation of
the federal False Claims Act or the state False Claims Act.
2)Requires for city and county design-build projects, lists of
subcontractors, bidders, and bid awards relating to the project
to be submitted by the design-build entity to the awarding body
within 14 days of the award. These documents are deemed to be
public records and are required to be available for public
inspection pursuant to this chapter and the Public Records Act.
3)Removes the requirement that certain specified minimum factors
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be weighted equally when cities are evaluating competitive
proposals.
4)Requires each county that uses the design-build method on a
public works project to submit to the Legislative Analyst's
Office (LAO) before September 1, 2013, a report containing a
description of each public works project procured through the
design-build process and completed after November 1, 2009, and
before August 1, 2013.
5)Requires a county to also include in its report to the LAO
information on whether the project was met or altered and the
number and amount of the project change orders.
6)Requires the LAO, by January 1, 2014, to do another report to
the Legislature on a fact based analysis on the use of
design-build at the county level.
7)Requires the LAO to complete a fact-based analysis on the use of
design-build method by counties, utilizing the information
provided and any independent information provided by the public
or interested parties.
8)Requires the LAO to select a representative sample of projects
and review available public records and reports, media reports,
and related information in its analysis.
9)Requires the LAO to compile the information to be analyzed in a
report which shall be submitted to the Legislature.
10)Requires the report to include conclusions describing the
actual cost of projects procured through the design-build
method, whether the project schedule was met or altered, and
whether projects needed or used project change orders.
11)Requires cities that elect to use design-build to report to the
LAO the estimated and actual length of time to complete the
project.
EXISTING LAW :
1)Requires local officials, under the Local Agency Public
Construction Act (LAPC Act), to invite bids
for construction projects and then award contracts to the lowest
responsible bidder under the traditional design-build project
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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.
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)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.
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11)Requires the legislative body to establish and enforce labor
compliance programs.
12)Requires local officials to collect specified types of
information when pre-qualifying design-build entities.
13)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.
14)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.
15)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.
16)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.
17)Requires that skilled labor force availability be determined by
the existence of an agreement with a registered and approved
apprenticeship program.
18)Requires the winning design-build entity to be bonded and carry
errors-and-omissions insurance to cover its design and
architectural services.
19)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.
20)Authorizes the winning design-build entity to use
subcontractors not listed in its original bid, but requires the
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entity to award these subcontracts by following a process set by
the local agency, including publishing notices and setting
deadlines.
21)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.
22)Requires any local agency that uses design-build contracting to
submit a report to the 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."
23)Repeals the authorization for counties, the Orange County
Sanitation District, the Santa Clara Valley Water District, and
the Sonoma Valley Health Care District to use design-build
contracts on January 1, 2011.
24)Repeals the authorization for cities to use design-build
contracts on January 1, 2016.
FISCAL EFFECT : According to the Assembly Appropriations
Committee:
1)Unknown, probably minor costs to LAO to conduct review and
analyze public documents associated with sample of design-build
projects used by counties.
2)Minor and absorbable costs to the Department of Industrial
Relations, which is responsible for enforcing prevailing wage
and related labor compliance programs associated with
design-build contracts.
3)Potential fiscal benefits to counties, to the extent that use of
design-build contracting results in faster project and/or
greater certainty about costs.
COMMENTS : The LAPC 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
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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, 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; and, 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.
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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."
In January of this year the LAO issued a second report, this time
updating the Legislature on the use of design-build by counties in
California, based on data received from counties who utilized this
methodology. In the report, LAO states that "although it was
difficult to draw conclusions from the reports received about the
effectiveness of design-build compared to other project delivery
methods, we do not think that the reports provide any evidence
that would discourage the Legislature from granting design-build
authority to local agencies on an ongoing basis. In doing so,
however, we recommend the Legislature consider some changes such
as creating uniform design-build statute, eliminating cost
limitations, and requiring project cost to be a larger factor in
awarding the design-build contract."
Support Arguments: The County of Sacramento, in its letter of
support, reports that the Sacramento County Airport System has
been using design-build construction method for several years to
design and construct the New Central Terminal B at Sacramento
International Airport (a county run airport). Without the use of
design-build for this project, there would have been an additional
$100 to $150 million dollars in project costs.
According to the California State Association of Counties (CSAC)
and the Regional Council for Rural Counties (RCRC), approximately
nine counties have used or plan to use the design-build method for
project delivery for a variety of projects ranging from parking
facilities to parks and recreation projects to fire stations to
name a few. CSAC and RCRC argue that "counties and taxpayers in
general benefit from the use of design-build authority resulting
from cost savings produced by this method of project delivery."
Opposition Arguments: The American Federation of State, County
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and Municipal Employees (AFCSME), AFL-CIO, in its letter of
opposition states that "in the last year, design-build has been
extended to redevelopment agencies, state buildings, wastewater
systems, and correctional facilities. The Legislature should let
these projects proceed, finish, and play out, to get a broader
sense of cost-effectiveness and efficiency of the system before
contemplating new authorization for a comprehensive design-build
program."
AFCSME goes on to say that it "does not believe the design-build
program to be faster, cheaper, or any more innovative for the
taxpayer than traditional contract bidding. AFCSME believes this
contracting system to be much less cost-effective because we end
up having a small group of individuals having authority to grant
large public contracts to [a] small group of hand-picked firms
from the private sector essentially eliminating competitive
bidding."
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916) 319-3958
FN: 0006128