BILL ANALYSIS �
SB 1509
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Date of Hearing: June 13, 2012
ASSEMBLY COMMITTEE ON EDUCATION
Julia Brownley, Chair
SB 1509 (Simitian) - As Amended: April 18, 2012
SENATE VOTE : 32-4
SUBJECT : School facilities: design-build contracts
SUMMARY : Repeals the sunsets authorizing kindergarten through
grade 12 (K-12) and California Community Colleges (CCC)
districts to utilize design-build contracts for the design and
construction of school facilities.
EXISTING LAW :
1)Establishes a process, until January 1, 2014, for local
governing boards to enter into a design-build contract for
both the design and construction of a school facility project
over $2.5 million. (Education Code (EC Section 17250.20)
2)Specifies the elements required to be included in a
design-build request for proposal (including significant
factors, subfactors, methodology, rating and weighting schemes
for evaluating proposals) and establishes, among others,
prequalification, bonding and labor compliance program
requirements (EC Sections 17250.10 - 17250.50)
3)Requires the governing board of a school district to
competitively bid and award to the lowest bidder contracts
involving the following:
a) An expenditure of $50,000 or more for the purchase of
equipment, materials, or supplies, services (except for
construction services), and repairs.
b) An expenditure of $15,000 or more for a public contract
project defined as construction, reconstruction, erection,
alteration, renovation, improvement, demolition, repair,
painting or repainting of any publicly owned, leased, or
operated facility. (Public Contract Code (PCC) Sections
20111 and 22002)
4)Authorizes the governing board of a school district to require
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each prospective bidder for a contract to participate in a
prequalification process that includes the submission of a
standardized questionnaire and financial statement in a form
established by the district, including a complete statement of
the prospective bidder's financial ability and experience in
performing public works. (PCC 20111)
FISCAL EFFECT : According to the Senate Appropriations
Committee, there is no direct state cost.
COMMENTS : Background . Under current law, K-12 school districts
are required to competitively bid any public works contract over
$15,000 and award the contract to the lowest responsible bidder.
Current law also allows contracts for architectural services to
be awarded on the basis of demonstrated competence and
professional qualifications to be performed at a fair and
reasonable price (not necessarily the lowest bidder). Under
this process, a school district would first hire an architect to
design a school facility and then issue a bid for the
construction phase, awarding the contract to the lowest bidder.
This process is commonly called "design-bid-build". AB 1402
(Simitian), Chapter 421, Statutes of 2001 established a process
called "design-build" that enables a school district to issue a
bid for both the design and construction of projects over $10
million and authorizes school districts to consider factors
other than cost. AB 1402 had an initial sunset of January 1,
2007 and required the Legislative Analyst's Office (LAO) to
submit a report with information on the experiences of districts
that used the design-build process and make recommendations to
the Legislature. The sunset was extended to January 1, 2010 in
2006 (AB 127 (Nunez), Chapter 35, Statutes of 2006.
The author introduced another bill in 2002, AB 1000 (Simitian),
Chapter 637, Statutes of 2002, authorizing three CCC districts
to utilize design-build contracts for projects over $10 million
with a sunset of January 1, 2008. SB 614 (Simitian), Chapter
471, Statutes of 2007, reduced the threshold for eligible K-12
and CCC projects from $10 million to $2.5 million, extended the
authority to all CCC districts, and extended the sunset dates
for both K-12 and CCCs to January 1, 2014. SB 1509 repeals both
sunsets and makes the authority to use design-build contracts
permanent for both K-12 and CCCs.
Design-build . Under a design-build process, a K-12, CCC
district, or other public or private agency issues a bid for
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both design and construction of a facility. A general
contractor may collaborate with an architect/engineer to submit
a proposal, or a general contractor may submit the proposal and
subcontract with an architect/engineer. Prior to using a
design-build process for a project, a school district must make
written findings that using the design-build method for the
project will meet at least one of the following objectives:
reduce comparable project costs, expedite the project's
completions, or provide features not achievable through the
traditional design-bid-build process. The school district must
also establish a process to prequalify design-build entities
using a standard questionnaire developed by the Department of
Industrial Relations. The questionnaire requires contractors to
provide detailed information regarding the company and its
financial status, including whether the company has been in
bankruptcy or involved in a civil lawsuit, licensing
information, prior contracting experience (whether the
contractor has completed other public works projects), whether
the contractor has been involved or been found to have violated
any federal, state or local laws, and whether the contractor has
violated any labor and health and safety laws, including
prevailing wage.
Rather than selecting the contractor based solely on the lowest
offer, the K-12 or CCC district may use criteria in addition to
cost, which may include qualification, experience, proposed
design approach, life cycle costs, project features and project
functions. Based on the criteria selected by a governing board,
the proposals are scored and awarded to the bidder whose
proposal is considered to be the best value to the school
district. Design build contracting can expedite the
construction of a project, avoid conflicts between
architects/engineers and contractors, and according to
experiences from school and CCC districts, reduce costs by
reducing change orders once construction begins. Under a
design-bid-build process, the architect works independently on
the design of the facility. Once construction begins, any
problems identified by the contractor must be resolved,
frequently with the school district acting as the mediator.
Under design-build, the architect and contractor are working
together from the beginning of the project, thereby reducing
conflicts, delays, and additional costs during the construction
phase.
The design-build method does not exempt a school district from
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complying with all requirements for receipt of state bond funds,
including compliance with the labor compliance program.
According to data provided by the Office of Public School
Construction, which administers K-12 state education bond funds,
17 school districts have employed the design-build method,
submitting applications for 29 projects. Of these projects, two
were completed in 2008, two completed in 2009, and four
completed in 2011. Nineteen projects are either going through
the funding process or have already started construction but are
not finished. Two applications were returned to the districts;
one application was for a duplicate project and the other
contained insufficient documentation.
Other design-build authorizations . In addition to K-12 school
and CCC districts, a number of design-build authorizations have
been given to various cities and counties, state building
projects, and transit districts. It is unclear whether all
design-build authorizations contain the same requirements.
LAO Report . In February 2005, the LAO issued a report titled
Design-Build: An Alternative Construction System in which it
reported its consolidated findings on design-build across
several public works sectors. The LAO report was based on
reports provided by entities authorized to use design-build
contracting and had difficulty finding conclusive evidence as to
the benefits of the design-build method. However, the LAO
reported that the entities that experimented with design-build
were generally pleased with the process and outcomes. The LAO
concluded that design-build is a useful alternative delivery
method, but made the following recommendations:
1)The state should adopt a single statute applying to all public
entities (state and local governments and education
institutions);
2)Design-build should be available as an option and not a
replacement for design-bid-build;
3)Contracts for most of the project costs should be objectively
awarded based on competitive bidding;
4)No cost threshold should be imposed on the authority to use
design-build;
5)Access for small and newly established contractors should be
assured by requiring that design build contracts be awarded to
contractors with experience and qualifications that are
consistent with the needs of the project, rather than limited
to the biggest and longest-established firms. (The LAO made
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this recommendation due to considerations of qualification and
experience in awarding design-build contracts, which may
disadvantage small, newly established contractors, who do not
have the range of experience of more established firms); and,
6)The authority should only be granted to construct buildings
and directly related infrastructure given the more complex
issues associated with transportation, public transit, and
water resources facilities.
The author and the Committee may wish to consider the LAO's
recommendations.
Arguments in support . The Los Angeles Unified School District
states, "In our experience we have found there are a number of
inherent flaws with the design-bid-build process. The biggest
flaw is the lack of communication, coordination and planning
between the design professional and contractor at the onset of
the project. This creates contract disputes, increased change
order requests, and exposes the owner to unnecessary liability
and litigation. The design-build method addresses this flaw by
partnering with contractor and design professional at the
beginning of the project. Each provides input and perspective
which ensures the project is built in the most efficient manner.
The design-build method has proven to the District to save time
and money as a result of fewer change orders, fewer contract
disputes, provides the owner with a single point of
accountability, and ultimately provides a better quality
product."
Arguments in opposition . The American Federation of State,
County and Municipal Employees (AFSCME) states, "AFSCME believes
there is ample evidence that design-build has been a failure for
California taxpayers. Design-build contracting eliminates
competitive bidding, 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.
"While design-build is a useful method of construction delivery
in cases of emergency or where urgent development is necessary,
this bill lacks any sense of urgency in requiring the usage of
design-build. Without any external circumstances such as an
emergency, it should be necessary to utilize the competitive
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bidding process for construction delivery. Design-build can
circumvent local contractors from being involved in the
construction delivery process, as outside contractors may be
able to secure construction contracts, which would prevent local
businesses from obtaining these jobs."
Other opponents express similar concerns and have an "oppose
unless amended" position. The requested amendment would extend
the sunsets by two years, rather than eliminating the sunsets.
REGISTERED SUPPORT / OPPOSITION :
Support
American Council of Engineering Companies of California
Associated General Contractors
California Community Colleges Chancellor's Office
Coalition for Adequate School Housing
Community College Facility Coalition
Community College League
County of Los Angeles Board of Supervisors
County School Facilities Consortium
Design-Build Institute of America, Western Pacific Region
Kern Community College District
Los Angeles Community College District
Los Rios Community College District
Los Angeles Unified School District
Peralta Community College District
Rio Hondo Community College District
San Francisco Unified School District
South Orange County Community College District
San Diego Community College District
San Mateo County Community College District Chancellor
State Building and Construction Trades Council
West Kern Community College District
Opposition
American Federation of State, County and Municipal Employees
Glendale City Employees Association (unless amended)
Laborers' Locals 777 & 792 (unless amended)
Organization of SMUD Employees (unless amended)
Professional Engineers in California Government (unless amended)
San Bernardino Public Employees Association (unless amended)
San Luis Obispo County Employees Association (unless amended)
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Santa Rosa City Employees Association (unless amended)
Analysis Prepared by : Sophia Kwong Kim / ED. / (916) 319-2087