BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Dave Cox, Chair
BILL NO: SB 1005 HEARING: 4/19/10
AUTHOR: Cox FISCAL: Yes
VERSION: 2/10/10 CONSULTANT:
Weinberger
DESIGN-BUILD POWERS FOR HEALTHCARE DISTRICTS
Background
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. State
law allows all counties to use the design-build method to
construct projects worth more than $2.5 million (SB 416,
Ashburn, 2007).
State law allows three special districts to construct
projects using counties' design-build procedures. The
Santa Clara Water District can use the counties'
design-build statute specifically for building and
upgrading its water treatment plant facilities (AB 674,
Dutra, 2001). Similarly, the Orange County Sanitation
District can use counties' design-build procedures for the
construction of projects in excess of $6 million, including
wastewater facilities (SB 645, Correa, 2007). The Sonoma
Valley Health Care District can use counties' design-build
procedures to construct a hospital or health facility
building (SB 1699, Wiggins, 2008).
Existing Law
Method . Local officials must follow a four-step
design-build method:
Prepare documents describing the project and its
specifications.
Prepare a detailed request for proposals, inviting
competitive bids.
Establish a detailed procedure to pre-qualify
SB 1005 -- 2/10/10 -- Page 2
design-build entities.
Establish the procedures to select the design-build
entity.
Counties must establish and enforce labor compliance
programs. The requirement for a labor compliance program
doesn't apply if the county or the design-build entity has
a collective bargaining agreement.
When pre-qualifying design-build entities, local officials
must collect at least 11 types of information. The entity
must list its proposed mechanical subcontractors and
licenses. The entity must also report past worker safety
violations, contracting problems, contract defaults,
license violations, payroll violations, and bankruptcies.
The entity must verify this information under oath. State
law prohibits public inspection of information that is not
public under the Public Records Act.
Awarding contracts . Local officials must 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 the local
officials set the criteria. At least 50% of the weight of
these best value factors must include price, expertise,
life cycle costs, labor availability, and safety records.
The county must rank the top three responsive bidders and
the award goes to the responsible bidder whose proposal
local officials rank as "the most advantageous." After the
county publicly announces the award, the local officials
must also identify the second and third ranked bidders.
Performance . The winning design-build entity must be
bonded and carry errors-and-omissions insurance that covers
its design and architectural services. The entity must
adhere to local performance criteria and design standards.
Deviations require local officials' written consent. The
county may hire a design professional to ensure compliance.
The winning design-build entity can use subcontractors who
were not listed in its original bid. The entity must award
subcontracts by following a process set by the county,
including publishing notices and setting deadlines.
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If the county's bid request required the design-build
entity to carry a performance and payment bond, the county
can retain only 5% of the contract.
Automatic repeal . The design-build statute for counties
sunsets on January 1, 2011.
Proposed Law
Senate Bill 1005 authorizes a health care district to use
the design-build contracting method for the construction of
a hospital or health facility building.
SB 1005 requires a hospital building project utilizing the
design-build process to be reviewed and inspected in
accordance with the standards and requirements of the
Alfred E. Alquist Hospital Facilities Seismic Safety Act of
1983.
Comments
1. Imitation is flattery . When it comes to public works
projects, taxpayers want local officials to hold down
costs, but they also want to be sure that their tax dollars
are spent wisely. However, the traditional process can be
more time consuming and more expensive than the
design-build contracting method. Faced with looming
seismic retrofit deadlines and soaring construction costs,
health care districts want to use design-build contracts to
gain more control over the bidding process and the final
outcomes of hospital construction projects. SB 1005
imitates the 2008 Wiggins bill for the Sonoma Valley Health
Care District by giving all health care districts the
option of using counties' design-build contracting
procedures.
2. Not so simple . A 2005 Legislative Analyst's Office
(LAO) report questioned whether design-build is the best
construction delivery process for specialized buildings
like hospitals. The LAO suggested that design-build is
best suited for "straightforward" design and construction
projects, but not for complex projects that require
builders to accommodate more unique design preferences.
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State engineers are concerned that state law fails to
ensure adequate plan checks and inspections of projects
build using the design-build method. Because hospitals are
highly specialized structures that must meet complex
construction and seismic standards, the Committee may wish
to consider whether the design-build method is appropriate
for constructing hospital buildings.
3. One at a time . Legislators have been cautious about
allowing local governments, and special districts in
particular, to use the design-build contracting method.
The last decade has seen incremental bills for counties and
cities. The Senate Local Government Committee passed SB
1431 (Cox, 2006) to allow all special districts to use the
design-build method of contracting. That bill died on the
Senate Appropriations Committee's suspense file. The 2008
Wiggins bill provided the Sonoma Valley Health Care
District with the only authorization for a health care
district to use the design-build contracting method.
Without much evidence on the success of special districts'
use of the design-build method, it may be too soon to grant
all health care districts this authority.
4. Related legislation . At its April 21 hearing, the
Committee will also consider SB 879 (Cox), which deletes
the 2011 sunset date on the statute authorizing counties to
use design-build.
Support and Opposition (4/15/10)
Support : Association of California Healthcare Districts,
Antelope Valley Health Care District, Eastern Plumas Health
Care District, San Bernardino Mountains Community Hospital
District, American Institute of Architects California
Council, California Chamber of Commerce, California
Hospital Association, California Special Districts
Association, CH2M Hill, Regional Council of Rural Counties.
Opposition : American Federation of State, County, and
Municipal Employees, AFL-CIO, Professional Engineers in
California Government.