BILL ANALYSIS �
AB 195
Page 1
ASSEMBLY THIRD READING
AB 195 (Hall)
As Amended May 20, 2013
Majority vote
LOCAL GOVERNMENT 7-1 APPROPRIATIONS 16-1
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|Ayes:|Achadjian, Levine, |Ayes:|Gatto, Harkey, Bigelow, |
| |Bradford, Gordon, Mullin, | |Bocanegra, Bradford, Ian |
| |Waldron, Frazier | |Calderon, Campos, Eggman, |
| | | |Gomez, Hall, Rendon, |
| | | |Linder, Pan, Quirk, |
| | | |Wagner, Weber |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Melendez |Nays:|Donnelly |
| | | | |
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SUMMARY : Extends the sunset for the use of design-build by
counties from July 1, 2014, to July 1, 2016.
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
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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.
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 : According to the Assembly Appropriations
Committee, there are no direct state costs. Presumably counties
will continue to use design-build on those projects where this
alternative contracting method provides opportunities for cost
and time savings.
COMMENTS : This bill extends for two years the sunset date on
the authority of counties to use the design-build method of
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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.
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
authorization is extended, counties will no longer be able to
use this successful, cost effective project delivery system in
the state."
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
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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.
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, 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."
Current law requires counties that use design-build contracting
to submit a report to the LAO by September 1, 2013, containing
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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.
According to the California State Association of Counties, in
support, "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."
The Professional Engineers in California Government (PECG), in
opposition, 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
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design-build authority for other government entities unless and
until we restore the original intent of SB X2 4."
The Air Conditioning Trade Association, the
Plumbing-Heating-Cooling Contractors Association of California,
and the Western Electrical Contractors Association, in
opposition, 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
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."
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.
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958
FN: 0000651