BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 785|
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UNFINISHED BUSINESS
Bill No: SB 785
Author: Wolk (D) and Hill (D), et al.
Amended: 8/22/14
Vote: 21
SENATE GOVERNMENTAL ORGANIZATION COMMITTEE : 10-0, 4/9/13
AYES: Wright, Nielsen, Berryhill, Calderon, Cannella, Correa,
De Le�n, Galgiani, Hernandez, Lieu
NO VOTE RECORDED: Padilla
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 5/1/13
AYES: Wolk, Knight, Beall, DeSaulnier, Emmerson, Hernandez, Liu
SENATE APPROPRIATIONS COMMITTEE : 5-0, 5/20/13
AYES: De Le�n, Walters, Gaines, Hill, Steinberg
NO VOTE RECORDED: Lara, Padilla
SENATE FLOOR : 35-0, 1/27/14
AYES: Beall, Block, Calderon, Cannella, Corbett, Correa, De
Le�n, DeSaulnier, Evans, Fuller, Gaines, Galgiani, Hancock,
Hernandez, Hill, Hueso, Huff, Jackson, Knight, Lara, Leno,
Lieu, Liu, Mitchell, Monning, Padilla, Pavley, Roth,
Steinberg, Torres, Vidak, Walters, Wolk, Wyland, Yee
NO VOTE RECORDED: Anderson, Berryhill, Nielsen, Wright, Vacancy
ASSEMBLY FLOOR : Not available
SUBJECT : Design-build
SOURCE : Associated General Contractors of California
Design Build Institute of America
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DIGEST : This bill repeals existing law authorizing the
Department of General Services (DGS), the Department of
Corrections and Rehabilitation (CDCR), and specified local
agencies to use the design-build (DB) procurement process; and
enacts more uniform provisions authorizing DGS, CDCR, and most
local agencies to utilize the DB procurement process for
specified public works projects.
Assembly Amendments add a sunset date of January 1, 2025, on DB
authorizations; authorize the San Diego Unified Port District
(SDUPD) to use DB; provide a two-year extension for transit
operators, as specified; delete the requirement that monies be
deposited into the State Public Works Enforcement Fund; add
Senator Hill as an author; and make clarifying and technical
changes.
ANALYSIS :
Existing law:
1. Authorizes DGS, the CDCR, and various local agencies to use
the DB procurement process for specified public works under
different laws.
2. Authorizes the formation of special districts, including the
Marin Healthcare District and SDUPD.
This bill:
1. Repeals statutes governing the use of DB by DGS, CDCR, and a
number of local agencies, and instead, revises and recasts
those statutes to allow DGS, CDCR, cities, counties, and
specified special districts and transit agencies (awarding
authorities) to use DB for their public works contracts in
excess of $1 million using either a low bid or best value
process.
2. Maintains an existing exception to the cost threshold in #1
above, that allows transit agencies to use DB for the
acquisition and installation of technology applications or
surveillance equipment designed to enhance safety, disaster
preparedness, and homeland security efforts, regardless of
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cost.
3. Requires specified notification to the State Public Works
Board before DB can be used for DGS or CDCR projects.
4. Prohibits DGS and CDCR from using DB for projects on the
state highway system.
5. Requires the awarding authority to develop guidelines for a
standard organizational conflict-of-interest policy in
connection with DB projects.
6. Specifies the procurement process that DB projects must
follow, including:
A. Preparation of documents setting forth scope and
estimated price, as specified;
B. A prohibition against DB-operate contracts;
C. Preparation and issuance of a request for
qualifications (RFQ) in order to pre-qualify bidders. The
RFQ must contain specified elements, including a standard
template request for statements of qualifications that
requires an acceptable safety record that shall be deemed
acceptable if: (1) the proposer's experience modification
rate for the most recent three-year period is an average
of 1.00 or less, and its average total recordable injury
or illness rate and average lost work rate for the most
recent three-year period does not exceed the applicable
statistical standards for its business category; or (2)
the proposer is a party to an alternative dispute
resolution system as provided for in a specified section
of the Labor Code, which governs workers' compensation and
insurance.
7. Provides that a DB entity shall not be prequalified or
shortlisted unless the entity provides an enforceable
commitment to the director that the entity and its
subcontractors at every tier will use a skilled and trained
workforce to perform all work on the project or contract that
falls within an apprenticeable occupation in the building and
construction trades, as specified.
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8. Requires the awarding authority to prepare a request for
proposals (RFP) that invites prequalified or short-listed
entities to submit competitive sealed proposals in the manner
prescribed by the awarding authority.
9. Requires the RFP to include certain elements, as specified,
including project scope, cost, evaluation and awarding
methods, relative weight of selection factors, and procedures
for negotiations on best value selections.
10.Requires, for projects utilizing low bid as the selection
method, the competitive bidding process to result in lump-sum
bids by the prequalified or short-listed DB entities, and
awards to be made to the DB entity that is the lowest
responsible bidder.
11.Requires projects utilizing best value as a selection method
to follow a specified process that requires proposals to be
evaluated by using only the criteria and selection procedures
specifically identified in the RFP, with the following
minimum factors that must be weighted as deemed appropriate
by the awarding entity: price, unless a stipulated sum is
specified; technical design and construction experience; and
life-cycle costs over 15 or more years.
12.Allows the awarding authority to hold discussions or
negotiations with responsive proposers, and requires
proposers to be ranked based on a determination of value
provided, with a limit of three proposers required to be
ranked, as specified.
13.Requires the award of the contract to be made to the
responsible DB entity whose proposal is determined to have
offered the best value to the public, and requires the
awarding authority to publicly announce its award, as
specified.
14.Requires the DB entity to provide payment and performance
bonds for the project in the form and in the amount required
by the awarding authority, and issued by a California
admitted surety. The amount of the payment bond shall not be
less than the amount of the performance bond.
15.Requires the DB contract to provide errors and omissions
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insurance coverage for the design elements of the project.
16.Requires the awarding authority to develop a standard form
of payment and performance bond for its DB projects.
17.Specifies that awarding authorities may identify specific
types of subcontractors that must be included in the DB
entity statement of qualifications and proposal, as
specified, and outlines procedures for awarding subcontracts
with a value exceeding 0.5% of the contract price allocable
to construction work.
18.Prohibits retention proceeds withheld by an agency from a DB
entity from exceeding 5% if a performance and payment bond,
issued by an admitted surety insurer, is required in the
solicitation of bids, and specifies the retention proceeds
for subcontracts.
19.Deletes language in existing statutes governing the use of
DB that requires awarding authorities to reimburse the
Department of Industrial Relations for its costs of
performing prevailing wage monitoring and enforcement on
public works projects, and that alternatively allows the
agency to continue operating an existing previously approved
labor compliance program to monitor and enforce prevailing
wage requirements on the project under specified
circumstances.
20.Deletes existing laws requiring specified DB reporting to
the Legislative Analyst's Office (LAO).
21.Allows the Marin Healthcare District to use the DB method
established for local agencies under this bill to assign
contracts for the construction of a building or improvements
directly related to construction of a hospital or health
facility building at the Marin General Hospital, until
January 1, 2025.
22.Continues to allow the Sonoma Valley Health Care District to
use DB to assign contracts for the construction of a building
or improvements directly related to construction of a
hospital or health facility building at the Sonoma Valley
Hospital, but requires the Sonoma Valley Health Care District
to use the DB procedure this bill establishes for local
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agencies rather than the DB procedure that existing law
allows for counties, as specified.
23.Extends the sunset date on provisions of law governing the
use of DB by transit operators, from January 1, 2015, to
January 1, 2017, and provides that those provisions apply
only to transit operators that begin a project solicitation
before January 1, 2015. Transit operators that begin a
project solicitation on or after January 1, 2015, are subject
to this bill's provisions governing the use of DB by local
agencies.
24.Allows SDUPD to procure DB contracts in excess of $1 million
for the construction of buildings and improvements directly
related to the construction of buildings, as specified.
25.Finds and declares that, due to the unique circumstances of,
and the potential costs faced by, SDUPD, a general statute
cannot be made applicable within the meaning of California
Constitution Article IV, Section 16 and that the special
legislation contained in #23 above, is applicable only to
SDUPD.
26.Repeals an uncodified section of law that does the
following:
A. Requires a specified peer review committee (committee)
established by the California Transportation Commission
(Commission) to operate until it has fulfilled its
reporting requirements, as outlined below;
B. Requires the committee to evaluate all transportation
projects using DB as authorized pursuant to SB 4X2
(Cogdill, Chapter 2, Statutes of 2009-10 Second
Extraordinary Session) which allowed local transportation
entities to use DB on up to five projects and the
Department of Transportation to use DB on up to 10
projects, as specified;
C. Requires the committee's evaluation to examine the
procurement method, comparing low bid and best value, and
to consider whether the projects were on time and on
budget. The evaluation must also compare the DB projects
to similar transportation projects that used
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design-bid-build procurement; and
D. Requires the Commission to submit to the Legislature a
mid-term report of its findings by June 30, 2012, and a
final report by June 30, 2015.
1. Defines "best value" to mean the value determined by
evaluation of objective criteria that may include, but not be
limited to, price, features, functions, life cycle costs,
experience, and past performance. A best value determination
may involve the selection of the lowest cost proposal meeting
the interests of DGS, CDCR, or the local agency and meeting
the objectives of the project, selection of the best proposal
for a stipulated sum established by the procuring agency, or
a tradeoff between price and other specified factors.
2. Defines "construction subcontract" to mean each subcontract
awarded by the DB entity to a subcontractor that will perform
work or labor or render service to the DB entity in or about
the construction of the work or improvement, or a
subcontractor licensed by the State of California that, under
subcontract to the DB entity, specially fabricates and
installs a portion of the work or improvement according to
detailed drawings contained in the plans and specifications
produced by the DB team.
3. Defines "design-build" to mean a project delivery process in
which both the design and construction of a project are
procured from a single entity.
4. Defines "design-build entity" to mean a corporation, limited
liability company, partnership, joint venture, or other legal
entity that is able to provide appropriately licensed
contracting, architectural, and engineering services as
needed pursuant to a DB contract.
5. Defines "design-build team" to mean the DB entity itself and
the individuals and other entities identified by the DB
entity as members of its team. Members shall include the
general contractor and, if utilized in the design of the
project, all electrical, mechanical, and plumbing
contractors.
6. Defines "local agency" to mean the following:
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A. A city, county, or city and county;
B. A special district that operates wastewater
facilities, solid waste management facilities, water
recycling facilities, or fire protection facilities; and
C. Any transit district, included transit district,
municipal operator, included municipal operator, any
consolidated agency, as specified, any joint powers
authority formed to provide transit service, any county
transportation commission, as specified, or any other
local or regional agency, responsible for the construction
of transit projects.
7. Defines, for cities or counties, "project" to mean the
construction of a building or buildings and improvements
directly related to the construction of a building or
buildings, county sanitation wastewater treatment facilities,
and park recreational 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. For cities or
counties that operate wastewater facilities, solid waste
management facilities, or water recycling facilities,
"project" also means the construction of regional and local
wastewater treatment facilities, regional and local solid
waste facilities, or regional and local water recycling
facilities.
8. Defines, for special districts, "project" to mean the
construction of regional and local wastewater treatment
facilities, regional and local solid waste facilities,
regional and local water recycling facilities, or fire
protection facilities.
9. Defines, for transit agencies, "project" to mean a transit
capital project that begins project solicitation on or after
January 1, 2015. A project that begins the solicitation
process before January 1, 2015, is subject to existing law
governing the use of DB by transit operators. "Project" does
not include state highway construction or local street and
road projects.
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10.Makes findings and declarations regarding the DB method of
project delivery.
11.Makes additional technical and conforming changes.
Comments
According to the author's office, this bill is intended to
consolidate existing local and state DB statutes and eliminate
inconsistencies in statutory language by adopting authority of
general application to identified agencies and repeal superseded
sections. The author's office notes that the Legislative
Analyst has recommended enactment of a uniform DB contracting
statute.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Assembly Appropriations Committee:
1. Updated information from CDCR indicates increased project
costs to CDCR of approximately 10% to 25% due to the limits
on subcontractor competition. This equates to a $75 million
to $187.5 million increase on two current projects of $750
million had this bill been in effect.
2. Unknown impact on DGS and CDCR contracting costs as a result
of revised thresholds for which a DB contract may be used,
and awarding of contracts on a "best value" rather than
"lowest responsible bidder" basis for more projects (General
Fund (GF) and various special funds). To the extent that
more contracts are awarded on a "best value" basis and
contracts are awarded to bidders who may not have the lowest
bid price, overall contracting costs may increase. On the
other hand, overall contracting costs may be lower to the
extent that efficiencies are gained by using the DB method on
more projects.
3. Unknown, but likely minor costs to DGS to ensure compliance
with labor requirements.
4. Minor savings (GF) to the LAO by deleting reporting
requirements.
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SUPPORT : (Verified 8/26/14)
Associated General Contractors of California (co-source)
Design Build Institute of America (co-source)
Air Conditioning & Refrigeration Contractors Association
Air Conditioning Sheet Metal Association
Building & Construction Trades Council of Marin
California Legislative Conference of the Plumbing, Heating &
Piping Industry
California State Association of Counties
California State Council of Laborers
California Transit Association
CH2M Hill
Counties of Lassen, Los Angeles, Orange, San Bernardino, San
Diego, and Santa Clara
East Valley Water District
Finishing Contractors Association of Southern California
Infrastructure Delivery Council
Marin Healthcare District
National Electrical Contractors Association
Northern California Carpenters Regional Council
Santa Clara Valley Transportation Authority
Sonoma-Marin Area Rail Transit District
State Building and Construction Trades Council of California
Unified Port of San Diego
Urban Counties Caucus
OPPOSITION : (Verified 8/26/14)
Associated Builders and Contractors of California
ARGUMENTS IN SUPPORT : Supporters note that this bill rewrites
DB statutes to eliminate inconsistencies in existing law and
provide agencies with a general authorization to develop
projects using DB. They support this bill because it
consolidates the various statutes into a single "boilerplate"
for use by state agencies, counties, cities, water
municipalities, transit operators and others.
ARGUMENTS IN OPPOSITION : The Associated Builders and
Contractors of California write:
SB 785, as currently written, seeks to change Public Contract
Code �10191 (b)(3)(G) and �22164 (b)(3)(G): "A proposer's
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safety record shall be deemed acceptable if its experience
modification rate for the most recent three-year period is an
average of 1.00 or less, and its average total recordable
injury or illness rate and average lost work rate for the most
recent three-year period does not exceed the applicable
statistical standards for its business category or if the
proposer is a party to an alternative dispute resolution
system as provided for in Section 3201.5 of the Labor Code."
By statute, only union contractors are able to establish an
ADR program, under the referenced Labor Code section 3201.5.
ABC California does not believe it is appropriate public
policy to provide an exception for demonstration of safety.
Workplace safety does not depend on whether or not you have a
collective bargaining agreement. All prospective bidders
should have to place in the public record their experience
modification rate and other safety standards in the section to
meet the requirements of �10191 (b)(3)(G) and �22164
(b)(3)(G). We believe that ensuring a company's safety record
is part of their bid information is the best and only way to
demonstrate contractor commitment to workplace safety. There
shouldn't be exceptions for any bidder on safety.
MW:k 8/26/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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