BILL ANALYSIS �
AB 1901
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Date of Hearing: April 25, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 1901 (Jones) - As Amended: April 17, 2012
SUBJECT : Counties: construction projects: design-build.
SUMMARY : Lowers the existing cost threshold to $1,000,000 for
county-based design-build construction projects. Specifically,
this bill :
1)Lowers the cost threshold on this authorization to projects
costing in excess of $1,000,000.
2)Declares that no reimbursement to local agencies is required
because this bill creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for,
or definition of, a crime or infraction.
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-bid-build project delivery system.
2)Until July 1, 2014, authorizes counties to use alternative
procedures, known as design-build, for bidding on construction
projects in the county in excess of $2,500,000, in accordance
with specified procedures.
3)Defines "design-build" as a procurement process in which both
the design and construction of a project are procured from a
single entity.
4)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.
FISCAL EFFECT : Unknown. This bill is keyed fiscal and is a
state-mandated local program.
COMMENTS :
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1)This bill is intended to expand the use of design-build
contracting for county projects costing less than $2.5 million
by revising that $2.5 million cost threshold down to $1
million for projects to make design-build available for
smaller-sized projects. This bill is sponsored by the County
of San Diego.
2)The Local Agency Public Construction Act (the "Act") requires
local agencies to comply with certain procedures in soliciting
and evaluating bids and awarding contracts for the
construction of public works. The traditional approach to
public contracting is referred to as the "design-bid-build"
method, which requires local officials to invite bids for
construction projects, based on a completed set of engineering
plans, then to award the construction bid to the lowest
responsible bidder. An alternative approach is the
"design-build" method, where both the design and construction
are procured from the same entity.
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 is touted as being faster than the
design-bid-build method, but may also require a higher level
of management sophistication since design and construction may
occur simultaneously.
The sponsor cites one potential project in San Diego County
that could be built using the lower design-build authority
threshold created by this bill: a $1.8 million, 3,500 square
foot sheriff's substation in Pine Valley.
3)The history of design-build legislation reflects several years
of discussion, compromise and conflict between local
governments, labor advocates and contractors. Generally,
local officials want the flexibility and potential cost
savings offered by design-build contracts, labor unions want
to ensure that local agencies and the contractors they hire
protect workers' interests and rights, and contractors want to
be sure they have a fair opportunity to compete for public
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contracts.
Advocates for the design-build method of contracting for
public works contend that having a single request for proposal
for selecting the project's designer and builder leads to
project schedule savings. 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. By merging design and construction
activities, and 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 with greater speed and at reduced cost.
Conversely, opponents like the Professional Engineers in
California Government (PECG) have previously argued that
"design-build has been a failure. Design-build contracting
eliminates competitive building, allows the private contractor
or consortium to inspect and sign off on their own work, and
in every instance in California has greatly increased project
delivery costs. To date, for example, four design-build
highway projects in California have wasted a combined $2.2
billion in transportation funds without expediting delivery."
PECG has also condemned the use of private inspectors of
construction and seismic standards, because this "crucial
function should not be performed by a private inspector whose
primary obligation is to the success and profitability of his
company or business partners - not public safety and project
quality." Furthermore, PECG contends that the cost limits in
the current statute were the result of a compromise, so it
would be inappropriate or at least premature to adjust the
threshold.
4)In order to help the Legislature evaluate the effectiveness of
the design-build process, Section 20133 of the Public Contract
Code required counties that completed design-build projects by
November 1, 2009, to submit a report to the Legislative
Analyst's Office (LAO). In response to this requirement, LAO
received reports on 15 design-build projects from nine
counties.
In January 2010, the LAO issued a report updating the
Legislature on the use of design-build by counties in
California. While its findings were varied, the LAO report
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summary found 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."
Moreover, the LAO specifically recommended eliminating the
cost limitation threshold: "�w]e recommend there be no maximum
or minimum project cost threshold imposed on design-build
authority. Design-build could provide additional flexibility
for smaller projects in some cases."
5)The state has debated and enacted numerous bills over the past
decade expanding authority for local governments to use
design-build processes. For example, SB 416 (Ashburn), Chapter
585, Statutes 2007, extended design-build authority to the
construction of buildings and directly related improvements to
all 58 counties in the state through 2010. AB 642 (Wolk),
Chapter 314, Statutes 2008, extended design-build authority to
the construction of buildings and directly related
improvements to all cities in the state. SB 879 (Cox),
Chapter 629, Statutes of 2010, extended the sunset date for
the county authorization to 2014, among other things.
As a result of these and related changes, design-build
contracting for building and related construction is currently
authorized for all cities and counties in the state, and more
targeted authorizations exist for other agencies of state and
local government. The county authorization is scheduled to
expire by July 1, 2014.
6)Support arguments : According to the Regional Council of Rural
Counties, "�t]he design-build procedure has provided counties
the needed flexibility to utilize the method of construction,
whether it is design-build or design-bid-build, that is most
appropriate for the specific project. Additionally, the
removal of the $2.5 million threshold �now $1 million] on this
narrowly defined scope of projects will allow counties to
continue to utilize this process as costs continue to rise on
these types of projects."
Opposition arguments : According to the American Federation of
State, County and Municipal Employees, the design-build mode
of contracting "diminishes the quality of work performed on
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construction projects. Design-build procedures are bad for
the state of California as they encourage corrupt contracting
practices and allow the use of highly subjective selection
criteria that would let public agencies select their preferred
contractors. Additionally, design-build projects can be
excessively cost inefficient, thus adversely affecting tax
payers."
REGISTERED SUPPORT / OPPOSITION :
Support
County of San Diego �SPONSOR]
American Council of Engineering Companies
Associated General Contractors (AGC)
California State Association of Counties
CH2M HILL
County of San Bernardino
County of Santa Clara
Design-Build Institute of America, Western Pacific Region
Regional Council of Rural Counties
Urban Counties Caucus
Opposition
American Federation of State, County and Municipal Employees
(AFSCME)
California State Pipe Trades Council
California State Association of Electrical Workers
Laborers' Locals 777 & 792
Professional Engineers in California Government (PECG)
State Building and Construction Trades Council
Western States Council of Sheet Metal Workers
Analysis Prepared by : Hank Dempsey / L. GOV. / (916) 319-3958
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