BILL ANALYSIS
SB 1005
Page 1
Date of Hearing: June 16, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 1005 (Cox) - As Amended: May 10, 2010
SENATE VOTE : 23-6
SUBJECT : Public contracts: health care districts: design-build.
SUMMARY : Authorizes the Tahoe Forest Health Care District and
one other health care district authorized by the Office of
Statewide Health Planning and Development, upon approval of the
board of directors of the district, to use a design-build
procedure when assigning contracts for the construction of a
hospital or health facility building. Specifically, this bill :
1)Authorizes the Tahoe Forest Health Care District upon approval
of the board of directors
of the district, to use a design-build procedure when assigning
contracts for the construction of a hospital or health
facility building.
2)Allows one health care district authorized by the Office of
Statewide Health Planning and Development, upon approval of
the board of directors of the district, to use a design-build
procedure when assigning contracts for the construction of a
hospital or health facility building.
3)Contains a sunset date of January 1, 2016.
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
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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.
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.
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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 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
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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 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."
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 : Unknown
COMMENTS :
1)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.
2)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.
3)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
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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.
4)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.
5)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
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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."
6)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 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.
7)SB 1005 extends the design-build authorization currently
granted to the Sonoma Valley Health Care District to the Tahoe
Forest Health Care District and one additional health care
district authorized by the Office of Statewide Health Planning
and Development. Because this authorization only extends to
the construction of buildings, it does not exceed the scope
recommended by the LAO report.
8)Support Arguments : According to the sponsor, the Association
of California Healthcare Districts, 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 : In opposition, the American Federation of
State, County, and Municipal Employees states 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
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take into account the very specific needs of emergency medical
personnel, doctors, and support staff."
9)Technical Amendment : On Page 3, line 38, after "Statewide",
insert "Health".
REGISTERED SUPPORT / OPPOSITION :
Support
Association of CA Healthcare Districts [SPONSOR]
American Institute of Architects, CA Council
Antelope Valley Healthcare District
CA Chamber of Commerce
CA Hospital Association
CA Special Districts Association
CH2M Hill
Design-Build Institute of America, Western Pacific Region
Eastern Plumas Health Care District
Kaweah Delta Health Care District
Oak Valley Hospital
Regional Council of Rural Counties
San Bernardino Mountains Community Hospital District
Southern Mono Healthcare District dba Mammoth Hospital
Tahoe Forest Health System
Opposition
American Federation of State, County and Municipal Employees,
AFL-CIO
Professional Engineers in CA Government
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958