BILL ANALYSIS �
SB 268
Page 1
Date of Hearing: May 7, 2014
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
K.H. "Katcho" Achadjian, Chair
SB 268 (Gaines) - As Amended: January 27, 2014
SENATE VOTE : 35-0
SUBJECT : Health care districts: public contracts:
design-build.
SUMMARY : Allows the Last Frontier Health Care District to use
the design-build process when contracting for the construction
of a building and improvements directly related to a hospital or
health facility building at the Modoc Medical Center.
Specifically, this bill :
1)Allows, upon approval by the board of directors of the Last
Frontier Health Care District (District), the design-build
procedure authorized for counties in existing law to be used
to assign contracts for the construction of a building or
improvements directly related to construction of a hospital or
health facility building at the Modoc Medical Center.
2)Provides that statutory references to a "county" and a "board
of supervisors" in existing law authorizing counties to use
design-build also mean the Last Frontier Health Care District
and its board of directors.
3)Requires that a hospital building project using the
design-build process authorized by the bill must be reviewed
and inspected in accordance with the standards and
requirements of the Alfred E. Alquist Hospital Facilities
Seismic Safety Act of 1983 (Act).
4)Finds and declares the Legislature's intent that health care
districts use the design-build process solely for buildings
associated with hospitals and health care and not for other
infrastructure, including, but not limited to, streets,
highways, public rail transit, roads, bridges, water
resources, and related infrastructure.
5)Contains an urgency clause and provides that the facts
constituting the necessity are: in order to comply with health
regulations and meet increasing demand for health care
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services, it is necessary that this act take effect
immediately
6)Contains chaptering language to resolve conflicts with SB 785
(Wolk) of 2013.
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, 2016, 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)Authorizes cities to use the design-build method for projects
costing more than $1 million.
4)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 at the Sonoma Valley
Hospital, which is required to be reviewed and inspected
according to the standards of the Act.
5)Provides for local health care districts, which govern certain
health care facilities. Each health care district has
specific duties and powers respecting the creation,
administration, and maintenance of the districts, including
the authority to purchase, receive, take, hold, lease, use,
and enjoy property of every kind and description of property
within and without the limits of the district.
6)Establishes, pursuant to the Act, timelines for hospital
compliance with seismic safety standards.
FISCAL EFFECT : None
COMMENTS :
1)Purpose of this bill . This bill allows the Last Frontier
Health Care District to use the design-build process when
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contracting for the construction of a building and
improvements directly related to a hospital or health facility
building at the Modoc Medical Center. This bill is
author-sponsored.
2)Author's statement . According to the author, "Modoc Medical
Center is currently working on a USDA loan package and is
contemplating the Preliminary Architectural Report (PAR). The
new facility will be a single-story, 8- or 10-bed, +/- 35,000
sq. ft. (pending feasibility analysis) facility.
"The Health Resources and Services Administration (HRSA)
identifies Modoc County as a Medically Underserved and Health
Professional Shortage Area with 20 percent of persons below
poverty and 18 percent of residents enrolled in Medi-Care.
With the increase in new patients under the Affordable Care
Act and healthcare costs going up while reimbursement rates
continue to decline, savings on construction are critical.
The Design-Build method of project delivery can provide
significant cost savings that will benefit the entire
community."
3)Background . 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
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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 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.
All counties can use the design-build method to construct
buildings and related improvements and wastewater treatment
facilities that cost more than $2.5 million. Similarly, all
cities can use the design-build method to construct buildings
and related improvements worth more than $1 million. A pilot
program also permits cities, counties, and special districts
to use the design-build method to construct 20 local
wastewater treatment facilities, local solid waste facilities,
or local water recycling facilities. The Legislature also has
passed a number of bills authorizing some special districts to
construct projects using the design-build method.
4)Design-Build and Healthcare Districts . 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 Act. 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.
SB 1699 (Wiggins), Chapter 415, Statutes of 2008, authorized
the use of design-build for the Sonoma Valley Health Care
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District (SVHCD). Following SB 1699's enactment, the SVHCD's
voters approved a $35 million bond to finance earthquake
safety improvements to bring the hospital's emergency room
into compliance with the state's seismic safety standards for
hospitals. The SVHCD's upgraded facility, which was
constructed using design-build contracts, opened last year.
The District operates the Modoc Medical Center in Alturas, in
Modoc County. The medical center is comprised of a critical
access hospital, a skilled nursing facility, and a rural
health clinic providing health services to a sparsely
populated rural community. State law requires the District to
move its hospital into a building that meets the state's
seismic safety standards. District officials are in the early
stages of planning the construction of a new building that is
expected to be a single-story, 10 bed, 40,000 square foot
facility.
5)Related legislation . SB 785 (Wolk) of 2013 repeals existing
law authorizing the Department of General Services (DGS), the
Department of Corrections and Rehabilitation (CDCR), and local
agencies to use the design-build procurement process, and
enacts uniform provisions authorizing DGS, CDCR, and local
agencies to utilize the design-build procurement process for
specified public works projects. This bill contains language
to avoid chaptering out problems with SB 785.
6)Previous legislation . SB 1005 (Cox) of 2010 would have
authorized the Tahoe Forest Health Care District and a health
care district authorized by the Office of Statewide Health
Planning and Development to use a design-build procedure when
assigning contracts for the construction of a hospital or
health facility building. SB 1005 was held in the Assembly
Appropriations Committee.
SB 1699 (Wiggins), Chapter 415, Statutes of 2008, authorized
the use of design-build for the SVHCD.
7)Arguments in support . The Modoc Medical Center, in support,
writes, "SB 268 would allow the Last Frontier Healthcare
District to use the design-build process to construct a
replacement facility for Modoc Medical Center, a Critical
Access Hospital (CAH). The new facility is crucial to
complying with the State's Seismic Mandate deadline. This
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mandate was enacted to make sure that California hospitals are
safe in the likely event of an earthquake?This (bill) would
create cost saving benefits by shifting the liability and risk
for cost containment and project completion to the
design-build entity."
8)Arguments in opposition . None on file.
9)Urgency clause . This bill contains an urgency clause and
requires a two-thirds vote on the Assembly Floor.
REGISTERED SUPPORT / OPPOSITION :
Support
Association of California Healthcare Districts
California Association of Rural Health Clinics
California Special Districts Association
Design-Build Institute of America, Western Pacific Region
Modoc County Board of Supervisors
Modoc Medical Center
Opposition
None on file
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958