BILL ANALYSIS �
SB 1433
Page 1
Date of Hearing: June 23, 2014
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
SB 1433 (Hill) - As Introduced: February 21, 2014
SENATE VOTE : 35-0
SUBJECT : Local Agency Public Construction Act: transit
design-build contracts
SUMMARY : Repeals the sunset date on transit operators'
authority to use design-build (DB) for transit projects, expands
the number of entities eligible to exercise this authority,
eliminates minimum cost thresholds, and deletes reporting
requirements. Specifically, this bill :
1)Repeals the existing sunset date of January 1, 2015, on
transit operators' authority to use DB, thereby making this
authorization permanent.
2)Changes the definition of "transit operator" to include any
other local or regional agency responsible for the
construction of transit projects, as specified.
3)Eliminates cost thresholds in current law limiting transit
operators' use of DB to:
a) Contracts for capital maintenance or capacity-enhancing
rail projects that cost more than $25 million; and,
b) Contracts for non-rail transit projects that cost more
than $2.5 million.
4)Repeals a requirement that transit operators report to the
Legislative Analyst's Office (LAO) about public works projects
financed with public funds and procured through the DB
process.
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
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system.
2)Authorizes, as an alternative to the LAPC Act, transit
operators to enter into a DB contract for both the design and
construction of a project, and prescribes the process to be
used by transit operators when developing and procuring a DB
project.
3)Requires transit operators who use DB contracting to:
a) Prepare documents describing the project and its
specifications;
b) Prepare a detailed request for proposals that invites
competitive bids;
c) Establish a detailed procedure to pre-qualify DB
entities; and,
d) Establish the procedures to select the DB entity.
4)Requires a transit operator to establish a procedure for final
selection of the DB entity, subject to the following
conditions:
a) In no case shall the transit operator award a contract
to a DB entity for a capital maintenance or
capacity-enhancing rail project unless that project exceeds
$25 million in cost;
b) For non-rail transit projects that exceed $2.5 million,
the transit operator may award the project to the lowest
responsible bidder or by using the best value method; and,
c) For the acquisition and installation of technology
applications or surveillance equipment designed to enhance
safety, disaster preparedness, and homeland security
efforts, there shall be no cost threshold and the transit
operator may award the contract to the lowest responsible
bidder or by using the best value method.
5)Requires, for DB contracts awarded prior to the effective date
of specified regulations adopted by the Department of
Industrial Relations (DIR), a transit operator to establish
and enforce a labor compliance program or contract with a
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third party to operate such a program, as specified. This
requirement does not apply to DB projects if the operator or
the DB entity has entered into a collective bargaining
agreement that binds all contractors performing work on the
contract, or to any other project of the transit operator that
is not DB.
6)Requires, for DB contracts awarded on or after the effective
date of specified regulations adopted by DIR, the transit
operator to reimburse DIR for its reasonable and directly
related costs of performing prevailing wage monitoring and
enforcement on public works projects, as specified. All moneys
collected pursuant to this requirement shall be deposited in
the State Public Works Enforcement Fund to be used only for
enforcement of prevailing wage requirements on those projects,
as specified.
7)Allows a transit operator, in lieu of reimbursing 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:
a) 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,
b) 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.
8)Requires a transit operator that uses DB contracting to submit
a report to the LAO within certain timeframes that contains
specified information about all of its public works projects
financed with public funds and procured through the DB
process.
9)Excludes construction projects on state highways or local
streets and roads from transit operators' authority to use DB.
10)Defines "transit operator" to mean any transit district,
included transit district, municipal operator, included
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municipal operator, transit development board, or consolidated
agency, as specified, or any joint powers authority formed to
provide transit service.
11)Defines "design-build" as a procurement process in which both
the design and construction of a project are procured from a
single entity.
12)Defines "best-value" as a value determined by objective
criteria related to price, features, functions, and life cycle
costs.
13)Sunsets the DB authority for transit operators on January 1,
2015.
FISCAL EFFECT : Unknown
COMMENTS : DB refers to a procurement process in which both the
design and construction of a project are procured in a single
contract from one entity. DB stands in contrast to the
traditional design-bid-build contracting method, in which work
on a project is divided into separate design and construction
phases. Under design-bid-build, the government agency is
responsible for the design of the project, either by designing
it itself or by contracting with a private entity to do so.
When designs are completed, the agency solicits bids from the
construction industry and hires the lowest responsible bidder to
build the project. DB combines these two phases into a single,
comprehensive contract.
Various sections of existing law authorize a number of different
state and local agencies, including transit operators, to
utilize the DB process for procuring capital projects. Existing
law prescribes the specific process transit operators must
follow when developing and constructing a transit project
through this procurement method. Statutory authority specific to
transit operators' use of DB expires January 1, 2015.
This bill deletes the sunset on transit operators' authority to
use DB. It additionally expands the definition of "transit
operator" to include any local or regional agency responsible
for constructing transit projects, eliminates minimum cost
thresholds for transit operators' use of DB, and eliminates a
requirement for transit operators to report to the Legislative
Analyst's Office (LAO) about project procured through DB.
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The author contends this bill is necessary in order to maintain
an innovative and valuable tool transit operators can use to
deliver critical capital projects. In 2011, the Santa Clara
Valley Transportation Authority awarded a $900 million DB
contract to extend the Bay Area Rapid Transit system toward San
Jose. According to bill proponents, this project is currently
10 months ahead of schedule and $100 million under budget.
Projects experiencing results similar to this suggest DB can be
a successful way to deliver important transportation
infrastructure within limited means. As transit operators
continue to wrestle with the challenge of revenue growth not
keeping pace with increasing costs, the author believes this
tool could help maintain transit ridership and presence in the
state.
In 2000, when the Legislature passed and the governor signed
into law AB 958 (Scott), Chapter 541, which originally
authorized transit operators to use DB procurement, DB was
relatively new in California. Because DB was untested, the bill
included a sunset and reporting requirements. Now, the state and
many local and regional agencies have had significant experience
with DB procurement. It is a widely understood method of
procuring large capital projects and results from using DB for
project delivery across the state have been largely positive.
For example, in a recent report, the LAO found that the DB
projects reviewed for the report were generally successful at
staying on budget and schedule.
Arguments in support : The California Transit Association,
sponsor of this bill, states, "Design-build is one of several
innovative alternative procurement methods to the traditional
design-bid-build approach. Design-build is the most commonly
used alternative for the delivery of public works projects?Here
in California, the Santa Clara Valley Transportation Authority
(VTA) is relying on the authority provided by this authorization
by using design-build contracting for the first phase of its
BART Silicon Valley Project. Additionally, VTA plans to use
design-build for the second phase of the BART Silicon Valley
Project through downtown San Jose, scheduled to begin in 2017.
In addition to VTA's BART Silicon Valley Project, the Peninsula
Corridor Joint Powers Board (Caltrain) is currently utilizing
design-build for its advanced signaling system (positive train
control) on the corridor and plans to use design-build for the
electrification of the Caltrain system."
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Arguments in opposition : The Air Conditioning Sheet Metal
Association, the Air-conditioning and Refrigeration Contractors
Association, the California chapters of the National Electrical
Contractors Association, and the California Legislative
Conference of the Plumbing, Heating and Piping Industry, in
opposition, state, "Unlike other design-build statutes which
contain protections for contractors, subcontractors and
construction industry journeymen and apprentices, current law
pertaining to design-build authority for transit operators lacks
many of the industry supported boiler plate design-build
provisions. Further, the conversation regarding design-build as
a whole is happening on a wider scale in SB 785 (Wolk). That
measure is aimed at providing uniformity throughout the
design-build statutes?We believe it is imprudent at this time to
completely delete the sunset provision within this section of
law while larger conversations on uniformity for design-build
procurement are ongoing.
Committee concern : SB 785 (Wolk) would create a uniform DB
contracting statute for the Department of General Services
(DGS), the Department of Corrections and Rehabilitation (CDCR),
and local agencies, including transit operators as defined in
this bill. The LAO has recommended such an approach in order to
provide contractors and public officials with a consistent
business environment within which to operate throughout the
state. Should that bill become law, this bill will be
unnecessary. The committee may wish to consider asking the
author of this bill to include language specifying that this
bill will only become law should SB 785 fail to get chaptered.
Related legislation : SB 785 (Wolk) repeals statutes authorizing
the DGS, CDCR, and local agencies to use the design-build
procurement process and enacts new statutes authorizing DGS,
CDCR and local agencies to utilize the design-build procurement
process for specified public works projects. The bill is set for
hearing in the Local Government Committee on June 25.
Previous legislation : AB 958 (Scott), Chapter 541, Statutes of
2000, authorized transit operators to use DB procurement until
January 1, 2005.
SB 1130 (Scott), Chapter 196, Statutes of 2004, extended the
sunset date on transit operators' DB authority until January 1,
2007.
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AB 372 (Nation), Chapter 262, Statutes of 2006, extended the
sunset on transit operators' DB authority again, to January 1,
2011, and made other modifications to the authority, including
requiring a transit operator to establish a labor compliance
program for a DB contract if the transit operator does not
already have such a program.
AB 729 (Evans), Chapter 466, Statutes of 2009, extended the
sunset date on transit operators' DB authority until January 1,
2015.
Double-referral : This bill was also referred to the Local
Government Committee, where it passed on June 18 by a vote of
8-0.
REGISTERED SUPPORT / OPPOSITION :
Support
California Transit Association (sponsor)
Associated General Contractors
California Concrete Contractors Association
California Special Districts Association
Monterey-Salinas Transit
Orange County Transportation Authority
Peninsula Corridor Joint Powers Board (Caltrain)
San Mateo County Transit District
San Mateo County Transportation Authority
Santa Clara Valley Transportation Authority
Ventura County Transportation Commission
Opposition
Air Conditioning Sheet Metal Association
Air Conditioning Trade Association
Air-conditioning and Refrigeration Contractors Association
Associated Builders and Contractors - San Diego Chapter
California chapters of the National Electrical Contractors
Association
California Legislative Conference of the Plumbing, Heating and
Piping Industry
Plumbing-Heating-Cooling Contractors Association of California
State Building and Construction Trades Council of California,
AFL-CIO
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Western Electrical Contractors Association
Analysis Prepared by : Anya Lawler / TRANS. / (916) 319-2093