BILL ANALYSIS �
SB 1433
Page 1
Date of Hearing: August 13, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1433 (Hill) - As Amended: August 7, 2014
Policy Committee: Local
GovernmentVote:8 - 0
Transportation 11 -
0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill extends the sunset date on transit operators'
authority to use design-build for transit projects from January
1, 2015 to January 1, 2017, for project solicitations that begin
before January 1, 2015. For project solicitations that begin on
or after January 1, 2015, this bill extends the authority to use
design-build to January 1, 2024, and conforms the requirements
for using design-build to those being extended to other local
agencies in SB 785 (Wolk). Specifically, this bill:
1) Expands the definition of "transit operator" to include
any other local or regional agency responsible for the
construction of transit projects.
2) 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 design-build process.
3) For project solicitations that begin on or after January
1, 2015, establishes a uniform threshold of $1 million for
projects to use design-build, except for projects for the
acquisition and installation of technology applications or
surveillance equipment to enhance safety, disaster
preparedness and homeland security efforts in which case
there is no minimum threshold.
FISCAL EFFECT
SB 1433
Page 2
1)Unknown overall contracting costs or savings to transit
operators. By extending design-build authority and deleting
cost thresholds for which design-build procurement may be
used, an increased number of future transit project may be
awarded on a "best value" rather than "lowest responsible
bidder" basis. Overall contracting costs may increase, to the
extent contracts are awarded to bidders who may not have the
lowest bid price. On the other hand, overall contracting costs
may be lower to the extent that efficiencies are gained by
using design-build, such as expedited project delivery.
Transit project funding could be from any combination of
local, federal, and state funds (Public Transportation Account
and potentially bond funds).
2)Likely minor costs to the Department of Industrial Relations
related to the department's monitoring and enforcement of
prevailing wage requirements, reimbursed by transit operators
(State Public Works Enforcement Fund). By extending the
deposit of funds into this continuously appropriated fund, the
bill makes an appropriation.
3)Minor cost savings to the LAO by deleting requirements that
transit operators submit reports on the use of design-build
(GF).
COMMENTS
1)Purpose . The author contends this bill is necessary 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
design-build contract to extend the Bay Area Rapid Transit
system toward San Jose. According to bill proponents, this
project is currently ten months ahead of schedule and $100
million under budget. Projects experiencing results similar to
this suggest design-build 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.
2)Background . Most public agency capital projects are
constructed using the traditional design-bid-build approach,
whereby complete plans and specifications are prepared prior
SB 1433
Page 3
to the advertising, bidding, and awarding of any construction
contracts to the lowest responsible bidder. Design-build is a
procurement process in which both the design and construction
of a project are procured from a single entity. The selected
firm arranges all architectural, engineering, and construction
services. The design-build entity is responsible for
delivering the project at a guaranteed price and schedule
based upon best value performance criteria set by the public
agency. Design-build is intended to expedite project delivery
and achieve efficiencies through collaboration between the
engineering and construction phases of project delivery.
3)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, that 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.
4)Amendment Needed . Amendments agreed to by the author in the
Assembly Local Government Committee included, among other
things, a minimum cost threshold of $1 million for a project
to use design-build. This needs to be added to the article
whose sunset is being extended to January 1, 2017.
5)Related legislation . SB 785 (Wolk) repeals various provisions
of existing law authorizing the Department of General
Services, the California Department of Corrections and
Rehabilitation, and local agencies (cities, counties and
certain special districts), including transit districts to use
the design-build procurement process, and recasts those
provisions in uniform statutes within the Public Contract
Code. This bill is pending on the Assembly Floor.
6)Previous legislation .
a) AB 958 (Scott), Chapter 541, Statutes of 2000,
authorized transit operators to use design-build
procurement until January 1, 2005. SB 1130 (Scott), Chapter
SB 1433
Page 4
196, Statutes of 2004, extended the sunset date until
January 1, 2007.
b) AB 372 (Nation), Chapter 262, Statutes of 2006, extended
the sunset 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 design-build contract if the transit operator does
not already have such a program.
c) AB 729 (Evans), Chapter 466, Statutes of 2009, extended
the sunset date once again until January 1, 2015.
Analysis Prepared by : Jennifer Swenson / APPR. / (916)
319-2081