BILL ANALYSIS �
AB 195
Page 1
Date of Hearing: May 1, 2013
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
AB 195 (Hall) - As Introduced: January 28, 2013
SUBJECT : Counties: construction projects: design-build.
SUMMARY : Extends the sunset for the use of design-build by
counties from July 1, 2014, to July 1, 2020.
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-bid-build project delivery
system.
2)Authorizes counties, until July 1, 2014, to use the
design-build method for projects costing more than $2.5
million and to award the project using either the lowest
responsible bidder or by best value.
3)Allows a county, in lieu of reimbursing the Department of
Industrial Relations (DIR) for its reasonable and directly
related costs of performing monitoring and enforcement on
public works projects, to continue operating an existing
previously approved labor compliance program to monitor and
enforce prevailing wage requirements on the project if: it has
not contracted with a third party to conduct its labor
compliance program and requests and receives approval from DIR
to continue its existing program; or, it enters into a
collective bargaining agreement that binds all of the
contractors performing work on the project and that includes a
mechanism for resolving disputes about the payment of wages.
4)Defines "design-build" as a procurement process in which both
the design and construction of a project are procured from a
single entity.
5)Defines "best-value" as a value determined by objective
criteria related to price, features, functions, and life cycle
costs.
AB 195
Page 2
6)Defines "project" as the construction of a building and
improvements directly related to the construction of a
building, and county sanitation wastewater treatment
facilities, but does not include the construction of other
infrastructure, including, but not limited to, streets and
highways, public rail transit, or water resources facilities
and infrastructure.
7)Requires counties to prepare documents describing the project
and its specifications; prepare a detailed request for
proposals that invites competitive bids; establish a detailed
procedure to pre-qualify design-build entities; and, establish
the procedures to select the design-build entity.
8)Requires counties to establish and enforce labor compliance
programs, as specified.
9)Requires counties that use design-build contracting to submit
a report to the Legislative Analyst's Office (LAO) by
September 1, 2013, containing specified information and
requires the LAO to report to the Legislature by January 1,
2014, on counties' use of design-build, as specified.
FISCAL EFFECT : Unknown
COMMENTS :
1)This bill extends the sunset date on the authority of counties
to use the design-build method of contracting for projects
costing more than $2.5 million. This authority is limited to
the construction of a building and improvements directly
related to the construction of a building, and to county
sanitation wastewater treatment facilities. This bill is
jointly sponsored by the California State Association of
Counties, the Counties of Los Angeles, San Bernardino, San
Diego, and Solano, and the Urban Counties Caucus.
2)According to the author's office, "In 2010, the (LAO)
investigated five design-build projects and found that four of
those projects were completed under budget. Further, their
findings cited that the counties that have used design-build
generally expressed favorable opinions of the process. Almost
all reported that compared to the traditional design-bid-build
process, it took less staff time to construct a project and
resulted in fewer claims and less litigation. Unless this
AB 195
Page 3
authorization is extended, counties will no longer be able to
use this successful, cost effective project delivery system in
the state."
3)The LAPC Act generally 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.
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.
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 design-build can deliver
public works faster and cheaper.
Detractors of design-build contend that it eliminates
competitive bidding, allows the private contractor or
consortium to inspect and sign off on their own work, and
increases project delivery costs.
4)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
AB 195
Page 4
opponents and reviewing the experience of counties that were
authorized to use design-build at the time, the 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 2010 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
that 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 a uniform design-build statute, eliminating cost
limitations, and requiring project cost to be a larger factor
in awarding the design-build contract."
5)Current law requires counties that use design-build
contracting to submit a report to the LAO by September 1,
2013, containing specified information such as project costs,
completion times, change orders, any written protests, an
assessment of the pre-qualification process and the labor
force compliance program, and other elements. The law also
requires the LAO to report to the Legislature by January 1,
2014, on counties' use of design-build. The LAO must also
complete a fact-based analysis of the use of design-build by
counties and compile the analyzed information into a report
for the Legislature. This analysis must include conclusions
describing the actual cost of design-build projects, whether
project schedules were met, and whether projects needed or
used change orders. These reports have yet to be completed.
The Committee may wish to consider whether an extension on
counties' use of design-build should be granted before these
reports are reviewed, and whether similar reporting should be
required in the future.
6)According to the California State Association of Counties,
AB 195
Page 5
"The design-build method is an approach to delivering public
works projects which counties find beneficial?There are a
number of advantages to design-build, when compared to the
traditional design-bid-build method:
a) Projects can be completed faster, as construction can
commence during the design phase;
b) Contractors are provided with more flexibility over
project design, materials and construction methods. This
promotes project design and construction innovation, which
can ultimately result in higher quality, as well as cost
savings; and,
c) Time-consuming and costly disputes between designer and
contractor are reduced, because both parties are affiliated
with the same entity."
7)The Professional Engineers in State Government argue that
"there is ample evidence that design-build has been a failure
for California taxpayers?Historically, on state highways and
other public works projects, public inspectors have ensured
that construction and seismic standards are met, that projects
meet safety requirements and that the materials used will
stand the test of time?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?
"Additionally, in 2009, legislative leaders negotiated an
agreement (SB X2 4 - Cogdill)?to provide broad design-build
authority for transportation projects," which include a
requirement that the Department of Transportation perform
inspection services on state highway projects. The courts
have determined that this provision is no longer required.
"PECG does not believe it is appropriate to clarify existing
design-build authority for other government entities unless
and until we restore the original intent of SB X2 4."
8)The Air Conditioning Trade Association, the
Plumbing-Heating-Cooling Contractors Association of
California, and the Western Electrical Contractors Association
take issue with current law that exempts counties from
reimbursing DIR "for its reasonable and directly related costs
of performing monitoring and enforcement" if "it enters into a
collective bargaining agreement that binds all of the
AB 195
Page 6
contractors performing work on the project and that includes a
mechanism for resolving disputes about the payment of wages."
They argue that this exemption "denies DIR of vitally needed
funds to enforce State law and puts at risk the workers on
these construction jobs who will be potentially denied the
protection of the State Labor Commissioner."
9)Support arguments : Supporters argue that design-build
authority for counties is an effective method of completing
construction projects on time and within or under budget, and
that it has been a useful tool that counties should be able to
continue using in the future.
Opposition arguments : Opponents contend that design-build
does not guarantee cost savings, reduces competitive bidding,
and lacks impartial inspection procedures, which can put the
public at risk for failed construction projects.
REGISTERED SUPPORT / OPPOSITION :
Support
California State Association of Counties [CO-SPONSOR]
County of Los Angeles [CO-SPONSOR]
County of San Bernardino [CO-SPONSOR]
County of San Diego [CO-SPONSOR]
County of Solano [CO-SPONSOR]
Urban Counties Caucus [CO-SPONSOR]
Associated General Contractors
AB 195
Page 7
California State Sheriffs' Association
Counties of Kern, Merced, Napa, Orange, Sacramento, Santa Clara,
Sonoma, and Stanislaus
Design-Build Institute of America
Rural County Representatives of California
San Francisco Unified School District
Opposition
Air Conditioning Trade Association
Plumbing-Heating-Cooling Contractors Association of California
Professional Engineers in California Government
Western Electrical Contractors Association
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958