(1)Existing law authorizes a county, until January 1, 2018, with approval of the board of supervisors, to utilize construction manager at-risk construction contracts for the erection, construction, alteration, repair, or improvement of any building owned or leased by the county, subject to certain requirements, including that the method may only be used for projects that are in excess of $1,000,000.

This bill would extend that authorization described above until January 1, 2023. The bill, with certain exceptions, would prohibit a construction manager at-risk entity from being prequalified or shortlisted or awarded a contract unless that entity provides an enforceable commitment to the county 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, in accordance with existing skilled and trained workforce requirements.

The bill would also similarly authorize the City of San Diego, until January 1, 2023, with the approval of the city council, to utilize construction manager at-risk construction contracts for the erection, construction, alteration, repair, or improvement of any building owned or leased by the city. The bill would authorize the city to use that method for a project that is in excess of $25,000,000, as specified. The bill would authorize the city to utilize the construction manger at-risk construction contracts through a single or series of contracts with the construction manager at-risk entity for services during the design and construction phases of the project, insofar as that contracting method is allowable by the city.

(2)Existing law authorizes a local agency, until January 1, 2025, to use the design-build procurement process when contracting for specified public works. Existing law requires specified information submitted by a design-build entity, as defined, in the design-build procurement process to be certified under penalty of perjury.

This bill would authorize the Santa Clara Valley Water District to use the design-build procurement process described above when contracting for the construction of a building or buildings and improvements directly related to the construction of a building or buildings. The bill would also authorize the district, upon approval by its governing body, to use the design-build procurement process for other specified projects. By expanding the design-build authorization to additional development projects, the bill would expand the scope of the crime of perjury and would impose a state-mandated local program.

This bill would make legislative findings and declarations as to the necessity of a special statute for the Santa Clara Valley Water District and the City of San Diego.

(3)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(1)Existing law authorizes a county, until January 1, 2018, with approval of the board of supervisors, to utilize construction manager at-risk construction contracts for the erection, construction, alteration, repair, or improvement of any building owned or leased by the county, subject to certain requirements, including that the method may only be used for projects that are in excess of $1,000,000.

This bill would extend that authorization described above until January 1, 2023. The bill, with certain exceptions, would prohibit a construction manager at-risk entity from being prequalified or shortlisted or awarded a contract unless that entity provides an enforceable commitment to the county 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, in accordance with existing skilled and trained workforce requirements.

The bill would also similarly authorize the City of San Diego, until January 1, 2023, with the approval of the city council, to utilize construction manager at-risk construction contracts for the erection, construction, alteration, repair, or improvement of any building owned or leased by the city. The bill would authorize the city to use that method for a project that is in excess of $25,000,000, as specified. The bill would authorize the city to utilize the construction manger at-risk construction contracts through a single or series of contracts with the construction manager at-risk entity for services during the design and construction phases of the project, insofar as that contracting method is allowable by the city.

(2)Existing law authorizes a local agency, until January 1, 2025, to use the design-build procurement process when contracting for specified public works. Existing law requires specified information submitted by a design-build entity, as defined, in the design-build procurement process to be certified under penalty of perjury.

This bill would authorize the Santa Clara Valley Water District to use the design-build procurement process described above when contracting for the construction of a building or buildings and improvements directly related to the construction of a building or buildings. The bill would also authorize the district, upon approval by its governing body, to use the design-build procurement process for other specified projects. By expanding the design-build authorization to additional development projects, the bill would expand the scope of the crime of perjury and would impose a state-mandated local program.

This bill would make legislative findings and declarations as to the necessity of a special statute for the Santa Clara Valley Water District and the City of San Diego.

(3)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(1)Existing law authorizes a county, until January 1, 2018, with approval of the board of supervisors, to utilize construction manager at-risk construction contracts for the erection, construction, alteration, repair, or improvement of any building owned or leased by the county. county, subject to certain requirements, including that the method may only be used for projects that are in excess of $1,000,000.

This bill would extend that authorization described above until January 1, 2023. The bill, with certain exceptions, would prohibit a construction manager at-risk entity from being prequalified or shortlisted or awarded a contract unless that entity provides an enforceable commitment to the county 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, in accordance with existing skilled and trained workforce requirements.

(2)Existing law authorizes a local agency, until January 1, 2025, to use the design-build procurement process when contracting for specified public works. Existing law requires specified information submitted by a design-build entity, as defined, in the design-build procurement process to be certified under penalty of perjury.

This bill would authorize the Santa Clara Valley Water District to use the design-build procurement process described above when contracting for the construction of a building or buildings and improvements directly related to the construction of a building or buildings. The bill would also authorize the district, upon approval by its governing body, to use the design-build procurement process for other specified projects. By expanding the design-build authorization to additional development projects, the bill would expand the scope of the crime of perjury and would impose a state-mandated local program.

This bill would make legislative findings and declarations as to the necessity of a special statute for the Santa Clara Valley Water District. District and the City of San Diego.

(3)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(1)Existing law authorizes a county, until January 1, 2018, with approval of the board of supervisors, to utilize construction manager at-risk construction contracts for the erection, construction, alteration, repair, or improvement of any building owned or leased by the county.

This bill would extend that authorization described above until January 1, 2023. The bill, with certain exceptions, would prohibit a construction manager at-risk entity from being prequalified or shortlisted or awarded a contract unless that entity provides an enforceable commitment to the county 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, in accordance with existing skilled and trained workforce requirements.

(2)Existing law authorizes a local agency, until January 1, 2025, to use the design-build procurement process when contracting for specified public works. Existing law requires specified information submitted by a design-build entity, as defined, in the design-build procurement process to be certified under penalty of perjury.

This bill would authorize the Santa Clara Valley Water District to use the design-build procurement process described above when contracting for the construction of a building or buildings and improvements directly related to the construction of a building or buildings. The bill would also authorize the district, upon approval by its governing body, to use the design-build procurement process for other specified projects. By expanding the design-build authorization to additional development projects, the bill would expand the scope of the crime of perjury and would impose a state-mandated local program.

(3)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(1)Existing law authorizes a county, until January 1, 2018, with approval of the board of supervisors, to utilize construction manager at-risk construction contracts for the erection, construction, alteration, repair, or improvement of any building owned or leased by the county.

This bill would extend that authorization described above until January 1, 2023. The bill, with certain exceptions, would prohibit a construction manager at-risk entity from being prequalified or shortlisted or awarded a contract unless that entity provides an enforceable commitment to the county 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, in accordance with existing skilled and trained workforce requirements.

(2)Existing law authorizes a local agency, until January 1, 2025, to use the design-build procurement process when contracting for specified public works. Existing law authorizes a city or county or a special district that falls within the definition of a local agency to use the design-build procurement process for specified types of public works projects. Existing law requires specified information submitted by a design-build entity, as defined, in the design-build procurement process to be certified under penalty of perjury.

This bill would authorize the Santa Clara Valley Water District to use the design-build procurement process described above when contracting for the construction of a building or buildings and improvements directly related to the construction of a building or buildings. The bill would also authorize the utilization of district, upon approval by its governing body, to use the design-build procurement process by the Santa Clara Valley Water District for the purposes of, among other things, flood protection improvements, habitat restorations or enhancements, and the retrofit, repair, or expansion of existing surface water facilities, upon approval by its governing body. for other specified projects. By expanding the design-build authorization to additional development projects, the bill would expand the scope of the crime of perjury and would impose a state-mandated local program.

(3)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

(2)Existing law authorizes a local agency, until January 1, 2025, to use the design-build procurement process when contracting for specified public works. Existing law authorizes a city or county or a special district that falls within the definition of a local agency to use the design-build procurement process for specified types of public works projects. Existing law requires specified information submitted by a design-build entity, as defined, in the design-build procurement process to be certified under penalty of perjury.

This bill would authorize the Santa Clara Valley Water District to use the design-build procurement process described above when contracting for the construction of a building or buildings and improvements directly related to the construction of a building or buildings. The bill would also authorize the utilization of the design-build procurement process by the Santa Clara Valley Water District for the purposes of, among other things, flood protection improvements, habitat restorations or enhancements, and the retrofit, repair, or expansion of existing surface water facilities, upon approval by its governing body. By expanding the design-build authorization to additional development projects, the bill would expand the scope of the crime of perjury and would impose a state-mandated local program.

(3)The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law authorizes a local agency, until January 1, 2025, to use the design-build procurement process when contracting for specified public works. Existing law defines the term local agency for those provisions to mean specified entities, including a city or county, or a special district that operates specified types of facilities. Existing law authorizes a city or county or a special district that falls within the definition of a local agency to use the design-build procurement process for specified types of public works projects. Existing law requires specified information submitted by a design-build entity, as defined, in the design-build procurement process to be certified under penalty of perjury.

This bill would authorize the Santa Clara Valley Water District to use the design-build procurement process described above when contracting for the construction of a building or buildings and improvements directly related to the construction of a building or buildings. The bill would also authorize the utilization of the design-build procurement process by the Santa Clara Valley Water District for the purposes of, among other things, flood protection improvements, habitat restorations or enhancements, and the retrofit, repair, or expansion of existing surface water facilities, upon approval by its governing body. By expanding the design-build authorization to additional development projects, the bill would expand the scope of the crime of perjury and would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law authorizes a local agency, until January 1, 2025, to use the design-build procurement process when contracting for specified public works. Existing law defines the term local agency for those provisions to mean specified entities, including a city or county, or a special district that operates specified types of facilities. Existing law authorizes a city or county or a special district that falls within the definition of a local agency to use the design-build procurement process for specified types of public works projects. Existing law requires specified information submitted by a design-build entity, as defined, in the design-build procurement process to be certified under penalty of perjury.

This bill would modify the definition of local agency for those purposes to include special districts that provide or operate specified types of services or facilities. This bill would expand the list of public works projects for which a local agency may utilize the design-build procurement process. By expanding the design-build authorization of these types of local agencies to additional development projects and additional types of entities, the bill would expand the scope of crime of perjury and would impose a state-mandated local program.

This bill would authorize the Santa Clara Valley Water District to use the design-build procurement process described above when contracting for the construction of a building or buildings and improvements directly related to the construction of a building or buildings.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law authorizes a local agency, until January 1, 2025, to use the design-build procurement process when contracting for specified public works. Existing law defines the term local agency for those provisions to mean specified entities, including a city or county, or a special district that operates specified types of facilities. Existing law authorizes a city or county or a special district that falls within the definition of a local agency to use the design-build procurement process for specified types of public works projects. Existing law requires specified information submitted by a design-build entity, as defined, in the design-build procurement process to be certified under penalty of perjury.

This bill would modify the definition of local agency for those purposes to include special districts that provide or operate specified types of services, or that operate specified types of services or facilities. This bill would expand the list of public works projects for which a local agency may utilize the design-build procurement process. By expanding the design-build authorization of these types of local agencies to additional development projects and additional types of entities, the bill would expand the scope of crime of perjury and would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

Existing law authorizes a local agency, until January 1, 2025, to use the design-build procurement process when contracting for specified public works. Existing law defines the term local agency for those provisions to mean specified entities, including a city or county, or a special district that operates specified types of facilities. Existing law authorizes a city or county or a special district that falls within the definition of a local agency to use the design-build procurement process for specified types of public works projects. Existing law requires specified information submitted by a design-build entity, as defined, in the design-build procurement process to be certified under penalty of perjury.

This bill would modify the definition of local agency for those purposes to include special districts that provide specified types of services, or that operate specified types of facilities. This bill would expand the list of public works projects for which a local agency may utilize the design-build procurement process. By expanding the design-build authorization of these types of local agencies to additional development projects and additional types of entities, the bill would expand the scope of crime of perjury and would impose a state-mandated local program.

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

This bill would provide that no reimbursement is required by this act for a specified reason.

CONCURRENCE IN SENATE AMENDMENTS

CSA2 Bill Id:AB 851

Author:(Caballero and Gloria)

As Amended Ver:September 7, 2017

Majority vote

(L. Gov.)

Original Committee Reference: L. GOV.

SUMMARY: Extends the sunset date on the authority of counties to use construction manager at-risk (CM at-risk) contracting, extends CM at-risk contracting authority to the City of San Diego (San Diego) for specified projects, and allows the Santa Clara Valley Water District (District) to use the design-build procurement method for specified types of projects.

The Senate amendments:

1. Extend, until January 1, 2023, the sunset date on the authority of counties to use CM at-risk contracting for projects in excess of $1 million.
2. Prohibit a CM at-risk entity from being prequalified or shortlisted or awarded a contract unless the entity provides an enforceable commitment to the county 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, in accordance specified existing law governing skilled and trained workforce requirements for public contracts.
3. Provide that 2), above, shall not apply if any of the following conditions are met:
   1. The county has entered into a project labor agreement (PLA), as defined, that will bind all contractors and subcontractors performing work on the project or contract to use a skilled and trained workforce, and the entity agrees to be bound by that PLA;
   2. The project or contract is being performed under the extension or renewal of a PLA that was entered into by the county before January 1, 2018; or,
   3. The entity has entered into a PLA that will bind the entity and all its subcontractors at every tier performing the project or contract to use a skilled and trained workforce.
4. Authorize, until January 1, 2023, San Diego to use CM at-risk contracting for specified projects in excess of $25 million, as specified.
5. Add findings and declarations regarding the necessity of a special statute allowing the District to use the design-build procurement method and allowing San Diego to use CM at-risk contracting.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS:

1. Bill Summary. This bill extends the sunset date on the authority of counties to use CM at-risk contracting. The existing sunset date of January 1, 2018, would be extended until January 1, 2023.

This bill also adds skilled and trained workforce requirements to counties' authority to use CM at-risk. It prohibits a CM at-risk entity from being prequalified, shortlisted, or awarded a contract unless the entity provides an enforceable commitment to the county 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, in accordance specified existing law governing skilled and trained workforce requirements for public contracts. However, this prohibition would not apply if:

• 1. The county has entered into a PLA that will bind all contractors and subcontractors performing work on the project or contract to use a skilled and trained workforce, and the entity agrees to be bound by that PLA;
  2. The project or contract is being performed under the extension or renewal of a PLA that was entered into by the county before January 1, 2018; or,
  3. The entity has entered into a PLA that will bind the entity and all its subcontractors at every tier performing the project or contract to use a skilled and trained workforce.

This bill also allows San Diego to use CM at-risk contracting for the erection, construction, alteration, repair, or improvement of any building owned or leased by San Diego provided the project exceeds $25 million. Contracts can be awarded on a low-bid or best value basis, and the CM at-risk entity must follow specified procedures in advertising and awarding subcontracts. San Diego must meet specified skilled and trained workforce requirements if it elects to use this authority (with specified exceptions), may award separate or combined contracts for preconstruction and construction services, and must post its CM at-risk contracts on its website and notify the Legislature of those postings, as specified. This authority sunsets January 1, 2023.

This bill also allows the District to use the design-build procurement method that is authorized for specified local agencies when contracting for improvements directly related to the construction of a building or buildings, and updates a cross-reference in the Public Contract Code that governs the District's ability to use design-build for building construction contracts. The District may use design-build for flood protection improvements; habitat restorations or enhancements; groundwater recharge or storage facilities; water treatment facilities; and, the retrofit, repair, or expansion of existing surface water storage facilities. This bill is sponsored by the District.

1. Author's Statement. According to the author, "By authorizing key water supply, habitat, and flood protection projects for design-build procurement, AB 851 will facilitate faster and more efficient project delivery by the District, while also demonstrating that design-build is an effective delivery method for innovative project types. By extending the sunset date for CM at-risk contracting and authorization to the City of San Diego, AB 851 will enable California counties and the City of San Diego to continue prudently managing public funds through efficient construction management for buildings."
2. Background. The Local Agency Public Construction 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. The design-bid-build process was developed to protect taxpayers from extravagance, corruption, and other improper practices by public officials as well as to secure a fair and reasonable price for public works construction by injecting competition amongst bidders into the process.

In the early 1990s, public works agencies grew frustrated with some of the disadvantages of design-bid-build and began experimenting with other project delivery methods, including design-build. 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 established by the public agency.

Since the Legislature began granting design-build authority in the early 1990's, it has typically done so with specified parameters, such as the duration of the authority, the types of agencies allowed to use it, the types of projects for which it can be used, cost thresholds, and specified procedures that must be followed in preparing and awarding contracts. Over the years, this resulted in numerous statutes in various code sections, which created confusion for public agencies and contractors alike.

In an effort to consolidate these statutes, SB 785 (Wolk), Chapter 931, Statutes of 2014, repealed 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 enacted uniform provisions authorizing DGS, CDCR, and specified local agencies to utilize the design-build procurement process for specified public works projects (with some exceptions, notably design-build authority for CalTrans). SB 785 created one set of codes for DGS and CDCR, and a separate set for specified local agencies, but with similar parameters.

1. Limits on Design-Build for Cities and Counties. Existing law limits the use of design-build by cities and counties to the following types of projects:
   1. 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 and recreational facilities; and,
   2. Local and regional wastewater facilities, solid waste management facilities, or water recycling facilities (for cities and counties that operate such facilities).

Existing law expressly prohibits cities and counties from using design-build for the construction of other infrastructure, including, but not limited to, streets and highways, public rail transit, or water resources facilities and infrastructure [with the exception of b), above].

1. Limits on Design-Build for Special Districts. Existing law also limits the use of design-build for special districts by both type of district and type of project. The types of special districts that may use design-build include: transit districts; and, special districts that operate wastewater facilities, solid waste management facilities, water recycling facilities, or fire protection facilities.

For special districts that operate wastewater facilities, solid waste management facilities, water recycling facilities, or fire protection facilities, their use of design-build is limited to regional and local wastewater treatment facilities; regional and local solid waste facilities; regional and local water recycling facilities; and, fire protection facilities.

1. District Services and the Need for Design-Build. The District provides wholesale water and groundwater management services to local municipalities and private water retailers who deliver drinking water directly to homes and businesses in Santa Clara County. The District manages an integrated water resources system that includes the supply of clean, safe water, flood protection and stewardship of streams on behalf of Santa Clara County's nearly 1.9 million residents. The District manages 10 dams and surface water reservoirs, three water treatment plants, an advanced recycled water purification center, a water quality laboratory, nearly 400 acres of groundwater recharge ponds and more than 275 miles of streams.

According to the author, "The increasing climate volatility is challenging the District to be more drought and flood resilient, and requires the delivery of public works projects that go beyond those authorized under current design-build law. After years of drought that have threatened regional and local water supplies, the District is seeking to expand ground water recharge, clean up contaminated water, improve water treatment, and to retrofit, repair, or expand existing water storage facilities.

"Warmer temperatures over time mean less precipitation is naturally stored in the Sierra snowpack and more falls as rainstorm events that stress the District's flood protection infrastructure. Sea level rise, already felt in Bay Area coastal communities during the confluence of high tides and intense storm events, requires a multi-faceted response involving significant public works projects to retreat from some locations, fortify levees and increase flood protection in others, and to create natural barriers such as wetlands and other habitat enhancing projects. These projects need the same design-build benefits of timely delivery and reduced costs afforded to other public works projects authorized in the California Public Contract Code."

1. CM At-Risk. According to the American Institute of Architects, "Construction management at-risk is a process that allows the client of a project to choose the CM before the design stage is complete. The CM is chosen based on qualifications, and then the entire operation is centralized under a single contract. The architect and CM work together in order to cultivate and assay the design. Then, the CM gives the client a guaranteed maximum price, and coordinates all subcontract work. The architect/engineer (A/E) is hired separately from the CM at-risk and the traditional client - A/E relationship is maintained. However, A/Es can generally perform the CM role, with various restrictions imposed based on state.

"Proponents have cited many advantages to construction management at-risk over traditional methods of procurement. These advantages are:

• 1. Increases the speed of the project and can also strengthen coordination between the A/E and the CM;
  2. The client hires the CM based on qualifications, thus better ensuring a CM with a strong allegiance to the client, because their business relies on references and repeat work;
  3. CMs, A/Es, and the client all collaborate. This creates enhanced synergies throughout the process; and,
  4. Transparency is enhanced, because all costs and fees are in the open, which diminishes adversarial relationships between components working on the project, while at the same time eliminating bid shopping."

SB 328 (Knight), Chapter 517, Statutes of 2013, authorized counties to use CM at-risk contracts for projects exceeding $1million, using low bid or best value to award these contracts. SB 328 contained a sunset date of January 1, 2018.

1. San Diego and CM At-Risk Contracting. The City of San Diego writes, "AB 851 recognizes the value of (CM at-risk contracting) for particularly large public works projects by establishing a $25 million minimum which must be met in order for the city to use (CM at-risk contracting). In the coming years, San Diego looks forward to a number of these large public works projects which can benefit from this bill."

The California Constitution allows cities that adopt charters to control their own "municipal affairs." In all other matters, charter cities must follow the general, statewide laws. Because the Constitution doesn’t define "municipal affairs," the courts determine whether a topic is a municipal affair or whether it is an issue of statewide concern. Courts have generally ruled that the method of contracting work in a city is a municipal affair. Accordingly, charter cities are not bound to follow the contracting procedures set forth in statute. (Smith v. City of Riverside (1973) 34 Cal.App.3d 529, 534; Piledrivers' Local Union v. City of Santa Monica (1984) 151 Cal.App.3d 509, 511-512; Mountain View Sch. Dist of Santa Clara v. City Council (1959) 168 Cal.App.2d 89, 92.).

In addition, San Diego voters approved a ballot measure in June of 2004 that amended San Diego's charter to allow San Diego to contract for public works through competitive negotiation with a construction manager, and to give the city council the power to adopt guidelines governing operation of such construction management contracts. The city council in March of 2010 used this authority to adopt an ordinance that expressly permits a construction manager to select contractors on a best value, rather than lowest responsible bid, basis. Despite these factors, San Diego indicates it is seeking this legislation to clarify that it has the authority to use CM at-risk contracting for projects in excess of $25 million.

1. Arguments in Support. The Santa Clara Valley Water District, sponsor of this measure, writes, "The use of design-build project delivery has been growing in recent years, particularly for large projects. A 2014 study sponsored by the Design Build Institute of America found that over half of non-residential projects in the United States with a cost exceeding $10 million are delivered using design-build. That study found that 59 percent of construction dollars spent in California in that same category are on design-build projects. The benefits of design-build for local agencies are realized by contracting with a single, unified team that is responsible for the successful completion of the project. Mistakes or miscommunications between the designer and the builder are avoided, and with only one contract to award and manage, the local agency may yield a faster project completion while reducing their liability for project failures."
2. Arguments in Opposition. The Western Electrical Contractors Association, Plumbing-Heating-Cooling Contractors Association of California, the San Diego, Southern California, and Central California chapters of the Associated Builders and Contractors, the California Chapters of American Fire Sprinkler Association, and Independent Roofing Contractors of California, Inc., in opposition, write, "(We) believe AB 851 creates a loophole for evading the Skilled and Trained Workforce (STWF) mandates of existing law. Under current law, a public entity could satisfy the STWF mandate by adopting a PLA that included a requirement to actually use a skilled and trained workforce. While my clients detest the discriminatory nature of PLAs, they recognized that with regard to STWF, all contractors would be on a level playing field.

"The language in Public Utilities Code 20146(c)(2)(B) allows PLA projects to ignore STWF. If a PLA was entered into within the last year or two, it should have included the STWF requirements. Furthermore, if older PLAs are in place (prior to say 2014) – any extension or renewal of these PLAs should include the requirement to use STWF because, as the sponsors of STWF point out, 'The skilled and trained workforce requirements ensure the use of the most highly trained workforce available in order to deliver a project on time, on or under budget and to hire local workers that have graduated from regional apprenticeship programs on these projects.' In our opinion, the State should not exempt older agreements from a requirement to use 'the most highly trained workforce available.' My clients believe that if the use of a STWF (as defined in existing law) is truly a value to contracting then it should apply to all construction of a particular type – not a scenario where it applies to some projects – but not others, simply because of the existence of a project labor agreement."

Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958 FN: 0002374

Date of Hearing: September 14, 2017

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Cecilia Aguiar-Curry, Chair

ABPCA Bill Id:AB 851 (

Author:Caballero and Gloria) – As Amended Ver:September 7, 2017

SUBJECT: Local agency contracts.

SUMMARY: Extends the sunset date on the authority of counties to use construction manager at-risk (CM at-risk) contracting, extends CM at-risk contracting authority to the City of San Diego (San Diego) for specified projects, and allows the Santa Clara Valley Water District (District) to use the design-build procurement method for specified types of projects.

The Senate amendments:

1. Extend, until January 1, 2023, the sunset date on the authority of counties to use CM at-risk contracting for projects in excess of $1 million.
2. Prohibit a CM at-risk entity from being prequalified or shortlisted or awarded a contract unless the entity provides an enforceable commitment to the county 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, in accordance specified existing law governing skilled and trained workforce requirements for public contracts.
3. Provide that 2), above, shall not apply if any of the following conditions are met:
   1. The county has entered into a project labor agreement (PLA), as defined, that will bind all contractors and subcontractors performing work on the project or contract to use a skilled and trained workforce, and the entity agrees to be bound by that PLA;
   2. The project or contract is being performed under the extension or renewal of a PLA that was entered into by the county before January 1, 2018; or,
   3. The entity has entered into a PLA that will bind the entity and all its subcontractors at every tier performing the project or contract to use a skilled and trained workforce.
4. Authorize, until January 1, 2023, San Diego to use CM at-risk contracting for specified projects in excess of $25 million, as specified.
5. Add findings and declarations regarding the necessity of a special statute allowing the District to use the design-build procurement method and allowing San Diego to use CM at-risk contracting.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS:

1. Bill Summary. This bill extends the sunset date on the authority of counties to use CM at-risk contracting. The existing sunset date of January 1, 2018, would be extended until January 1, 2023.

This bill also adds skilled and trained workforce requirements to counties' authority to use CM at-risk. It prohibits a CM at-risk entity from being prequalified, shortlisted, or awarded a contract unless the entity provides an enforceable commitment to the county 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, in accordance specified existing law governing skilled and trained workforce requirements for public contracts. However, this prohibition would not apply if:

• 1. The county has entered into a PLA that will bind all contractors and subcontractors performing work on the project or contract to use a skilled and trained workforce, and the entity agrees to be bound by that PLA;
  2. The project or contract is being performed under the extension or renewal of a PLA that was entered into by the county before January 1, 2018; or,
  3. The entity has entered into a PLA that will bind the entity and all its subcontractors at every tier performing the project or contract to use a skilled and trained workforce.

This bill also allows San Diego to use CM at-risk contracting for the erection, construction, alteration, repair, or improvement of any building owned or leased by San Diego provided the project exceeds $25 million. Contracts can be awarded on a low-bid or best value basis, and the CM at-risk entity must follow specified procedures in advertising and awarding subcontracts. San Diego must meet specified skilled and trained workforce requirements if it elects to use this authority (with specified exceptions), may award separate or combined contracts for preconstruction and construction services, and must post its CM at-risk contracts on its website and notify the Legislature of those postings, as specified. This authority sunsets January 1, 2023.

This bill also allows the District to use the design-build procurement method that is authorized for specified local agencies when contracting for improvements directly related to the construction of a building or buildings, and updates a cross-reference in the Public Contract Code that governs the District's ability to use design-build for building construction contracts. The District may use design-build for flood protection improvements; habitat restorations or enhancements; groundwater recharge or storage facilities; water treatment facilities; and, the retrofit, repair, or expansion of existing surface water storage facilities. This bill is sponsored by the District.

1. Author's Statement. According to the author, "By authorizing key water supply, habitat, and flood protection projects for design-build procurement, AB 851 will facilitate faster and more efficient project delivery by the District, while also demonstrating that design-build is an effective delivery method for innovative project types. By extending the sunset date for CM at-risk contracting and authorization to the City of San Diego, AB 851 will enable California counties and the City of San Diego to continue prudently managing public funds through efficient construction management for buildings."
2. Background. The Local Agency Public Construction 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. The design-bid-build process was developed to protect taxpayers from extravagance, corruption, and other improper practices by public officials as well as to secure a fair and reasonable price for public works construction by injecting competition amongst bidders into the process.

In the early 1990s, public works agencies grew frustrated with some of the disadvantages of design-bid-build and began experimenting with other project delivery methods, including design-build. 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 established by the public agency.

Since the Legislature began granting design-build authority in the early 1990's, it has typically done so with specified parameters, such as the duration of the authority, the types of agencies allowed to use it, the types of projects for which it can be used, cost thresholds, and specified procedures that must be followed in preparing and awarding contracts. Over the years, this resulted in numerous statutes in various code sections, which created confusion for public agencies and contractors alike.

In an effort to consolidate these statutes, SB 785 (Wolk), Chapter 931, Statutes of 2014, repealed 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 enacted uniform provisions authorizing DGS, CDCR, and specified local agencies to utilize the design-build procurement process for specified public works projects (with some exceptions, notably design-build authority for CalTrans). SB 785 created one set of codes for DGS and CDCR, and a separate set for specified local agencies, but with similar parameters.

1. Limits on Design-Build for Cities and Counties. Existing law limits the use of design-build by cities and counties to the following types of projects:
   1. 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 and recreational facilities; and,
   2. Local and regional wastewater facilities, solid waste management facilities, or water recycling facilities (for cities and counties that operate such facilities).

Existing law expressly prohibits cities and counties from using design-build for the construction of other infrastructure, including, but not limited to, streets and highways, public rail transit, or water resources facilities and infrastructure [with the exception of b), above].

1. Limits on Design-Build for Special Districts. Existing law also limits the use of design-build for special districts by both type of district and type of project. The types of special districts that may use design-build include: transit districts; and, special districts that operate wastewater facilities, solid waste management facilities, water recycling facilities, or fire protection facilities.

For special districts that operate wastewater facilities, solid waste management facilities, water recycling facilities, or fire protection facilities, their use of design-build is limited to regional and local wastewater treatment facilities; regional and local solid waste facilities; regional and local water recycling facilities; and, fire protection facilities.

1. District Services and the Need for Design-Build. The District provides wholesale water and groundwater management services to local municipalities and private water retailers who deliver drinking water directly to homes and businesses in Santa Clara County. The District manages an integrated water resources system that includes the supply of clean, safe water, flood protection and stewardship of streams on behalf of Santa Clara County's nearly 1.9 million residents. The District manages 10 dams and surface water reservoirs, three water treatment plants, an advanced recycled water purification center, a water quality laboratory, nearly 400 acres of groundwater recharge ponds and more than 275 miles of streams.

According to the author, "The increasing climate volatility is challenging the District to be more drought and flood resilient, and requires the delivery of public works projects that go beyond those authorized under current design-build law. After years of drought that have threatened regional and local water supplies, the District is seeking to expand ground water recharge, clean up contaminated water, improve water treatment, and to retrofit, repair, or expand existing water storage facilities.

"Warmer temperatures over time mean less precipitation is naturally stored in the Sierra snowpack and more falls as rainstorm events that stress the District's flood protection infrastructure. Sea level rise, already felt in Bay Area coastal communities during the confluence of high tides and intense storm events, requires a multi-faceted response involving significant public works projects to retreat from some locations, fortify levees and increase flood protection in others, and to create natural barriers such as wetlands and other habitat enhancing projects. These projects need the same design-build benefits of timely delivery and reduced costs afforded to other public works projects authorized in the California Public Contract Code."

1. CM At-Risk. According to the American Institute of Architects, "Construction management at-risk is a process that allows the client of a project to choose the CM before the design stage is complete. The CM is chosen based on qualifications, and then the entire operation is centralized under a single contract. The architect and CM work together in order to cultivate and assay the design. Then, the CM gives the client a guaranteed maximum price, and coordinates all subcontract work. The architect/engineer (A/E) is hired separately from the CM at-risk and the traditional client - A/E relationship is maintained. However, A/Es can generally perform the CM role, with various restrictions imposed based on state.

"Proponents have cited many advantages to construction management at-risk over traditional methods of procurement. These advantages are:

• 1. Increases the speed of the project and can also strengthen coordination between the A/E and the CM;
  2. The client hires the CM based on qualifications, thus better ensuring a CM with a strong allegiance to the client, because their business relies on references and repeat work;
  3. CMs, A/Es, and the client all collaborate. This creates enhanced synergies throughout the process; and,
  4. Transparency is enhanced, because all costs and fees are in the open, which diminishes adversarial relationships between components working on the project, while at the same time eliminating bid shopping."

SB 328 (Knight), Chapter 517, Statutes of 2013, authorized counties to use CM at-risk contracts for projects exceeding $1million, using low bid or best value to award these contracts. SB 328 contained a sunset date of January 1, 2018.

1. San Diego and CM At-Risk Contracting. The City of San Diego writes, "AB 851 recognizes the value of (CM at-risk contracting) for particularly large public works projects by establishing a $25 million minimum which must be met in order for the city to use (CM at-risk contracting). In the coming years, San Diego looks forward to a number of these large public works projects which can benefit from this bill."

The California Constitution allows cities that adopt charters to control their own "municipal affairs." In all other matters, charter cities must follow the general, statewide laws. Because the Constitution doesn’t define "municipal affairs," the courts determine whether a topic is a municipal affair or whether it is an issue of statewide concern. Courts have generally ruled that the method of contracting work in a city is a municipal affair. Accordingly, charter cities are not bound to follow the contracting procedures set forth in statute. (Smith v. City of Riverside (1973) 34 Cal.App.3d 529, 534; Piledrivers' Local Union v. City of Santa Monica (1984) 151 Cal.App.3d 509, 511-512; Mountain View Sch. Dist of Santa Clara v. City Council (1959) 168 Cal.App.2d 89, 92.).

In addition, San Diego voters approved a ballot measure in June of 2004 that amended San Diego's charter to allow San Diego to contract for public works through competitive negotiation with a construction manager, and to give the city council the power to adopt guidelines governing operation of such construction management contracts. The city council in March of 2010 used this authority to adopt an ordinance that expressly permits a construction manager to select contractors on a best value, rather than lowest responsible bid, basis. Despite these factors, San Diego indicates it is seeking this legislation to clarify that it has the authority to use CM at-risk contracting for projects in excess of $25 million.

1. Arguments in Support. The Santa Clara Valley Water District, sponsor of this measure, writes, "The use of design-build project delivery has been growing in recent years, particularly for large projects. A 2014 study sponsored by the Design Build Institute of America found that over half of non-residential projects in the United States with a cost exceeding $10 million are delivered using design-build. That study found that 59 percent of construction dollars spent in California in that same category are on design-build projects. The benefits of design-build for local agencies are realized by contracting with a single, unified team that is responsible for the successful completion of the project. Mistakes or miscommunications between the designer and the builder are avoided, and with only one contract to award and manage, the local agency may yield a faster project completion while reducing their liability for project failures."
2. Arguments in Opposition. The Western Electrical Contractors Association, Plumbing-Heating-Cooling Contractors Association of California, the San Diego, Southern California, and Central California chapters of the Associated Builders and Contractors, the California Chapters of American Fire Sprinkler Association, and Independent Roofing Contractors of California, Inc., in opposition, write, "(We) believe AB 851 creates a loophole for evading the Skilled and Trained Workforce (STWF) mandates of existing law. Under current law, a public entity could satisfy the STWF mandate by adopting a PLA that included a requirement to actually use a skilled and trained workforce. While my clients detest the discriminatory nature of PLAs, they recognized that with regard to STWF, all contractors would be on a level playing field.

"The language in Public Utilities Code 20146 (c)(2)(B) allows PLA projects to ignore STWF. If a PLA was entered into within the last year or two, it should have included the STWF requirements. Furthermore, if older PLAs are in place (prior to say 2014) – any extension or renewal of these PLAs should include the requirement to use STWF because, as the sponsors of STWF point out, 'The skilled and trained workforce requirements ensure the use of the most highly trained workforce available in order to deliver a project on time, on or under budget and to hire local workers that have graduated from regional apprenticeship programs on these projects.' In our opinion, the State should not exempt older agreements from a requirement to use 'the most highly trained workforce available.' My clients believe that if the use of a STWF (as defined in existing law) is truly a value to contracting then it should apply to all construction of a particular type – not a scenario where it applies to some projects – but not others, simply because of the existence of a project labor agreement."

REGISTERED SUPPORT / OPPOSITION:

Support

Santa Clara Valley Water District [SPONSOR]

American Council of Engineering Companies (prior version)

Association of California Water Agencies (prior version)

California Municipal Utilities Association (prior version)

California State Association of Counties (prior version)

California Special Districts Association (prior version)

City of San Diego

Desert Water Agency (prior version)

Design-Build Institute of America (prior version)

El Dorado Irrigation District (prior version)

Orange County (prior version)

Otay Water District (prior version)

Rural County Representatives of California (prior version)

Santa Clara County

Santa Clara Valley Open Space Authority (prior version)

State Building and Construction Trades Council (prior version)

Valley Ag Water Coalition (prior version)

Opposition

Associated Builders and Contractors – Central California Chapter (prior version)

Associated Builders and Contractors – San Diego Chapter (prior version)

Associated Builders and Contractors – Southern California Chapter (prior version)

California Chapters of American Fire Sprinkler Association (prior version)

Independent Roofing Contractors of California, Inc. (prior version)

Plumbing-Heating-Cooling Contractors Association of California (prior version)

Western Electrical Contractors Association (prior version)

Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 851

Author:(Caballero and Gloria)

As Amended Ver:September 7, 2017

Majority vote

Original Committee Reference: L. GOV.

SUMMARY: Extends the sunset date on the authority of counties to use construction manager at-risk (CM at-risk) contracting, extends CM at-risk contracting authority to the City of San Diego (San Diego) for specified projects, and allows the Santa Clara Valley Water District (District) to use the design-build procurement method for specified types of projects.

The Senate amendments:

1. Extend, until January 1, 2023, the sunset date on the authority of counties to use CM at-risk contracting for projects in excess of $1 million.
2. Prohibit a CM at-risk entity from being prequalified or shortlisted or awarded a contract unless the entity provides an enforceable commitment to the county 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, in accordance specified existing law governing skilled and trained workforce requirements for public contracts.
3. Provide that 2), above, shall not apply if any of the following conditions are met:
   1. The county has entered into a project labor agreement (PLA), as defined, that will bind all contractors and subcontractors performing work on the project or contract to use a skilled and trained workforce, and the entity agrees to be bound by that PLA;
   2. The project or contract is being performed under the extension or renewal of a PLA that was entered into by the county before January 1, 2018; or,
   3. The entity has entered into a PLA that will bind the entity and all its subcontractors at every tier performing the project or contract to use a skilled and trained workforce.
4. Authorize, until January 1, 2023, San Diego to use CM at-risk contracting for specified projects in excess of $25 million.
5. Add findings and declarations regarding the necessity of a special statute allowing the District to use the design-build procurement method and allowing San Diego to use CM at-risk contracting.

AS PASSED BY THE ASSEMBLY, this bill:

1. Allowed the District to use the design-build procurement method that is authorized for specified local agencies when contracting for improvements directly related to the construction of a building or buildings, and updates a cross-reference in the Public Contract Code that governs the District's ability to use design-build for the construction of buildings.
2. Allowed the District to also use design-build for flood protection improvements; habitat restorations or enhancements; groundwater recharge or storage facilities; water treatment facilities; and, the retrofit, repair, or expansion of existing surface water storage facilities.
3. Provided that no reimbursement is required by this bill pursuant to the California Constitution because the only costs that may be incurred by a local agency will be incurred because this bill creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, as specified.

FISCAL EFFECT: According to the Senate Appropriations Committee, pursuant to Senate Rule 28.8, negligible state costs.

COMMENTS:

1. Bill Summary. This bill extends the sunset date on the authority of counties to use CM at-risk contracting. The existing sunset date of January 1, 2018, would be extended until January 1, 2023.

This bill also adds skilled and trained workforce requirements to counties' authority to use CM at-risk. It prohibits a CM at-risk entity from being prequalified, shortlisted, or awarded a contract unless the entity provides an enforceable commitment to the county 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, in accordance specified existing law governing skilled and trained workforce requirements for public contracts. However, this prohibition would not apply if:

• 1. The county has entered into a PLA that will bind all contractors and subcontractors performing work on the project or contract to use a skilled and trained workforce, and the entity agrees to be bound by that PLA;
  2. The project or contract is being performed under the extension or renewal of a PLA that was entered into by the county before January 1, 2018; or,
  3. The entity has entered into a PLA that will bind the entity and all its subcontractors at every tier performing the project or contract to use a skilled and trained workforce.

This bill also allows San Diego to use CM at-risk contracting for the erection, construction, alteration, repair, or improvement of any building owned or leased by San Diego provided the project exceeds $25 million. Contracts can be awarded on a low-bid or best value basis, and the CM at-risk entity must follow specified procedures in advertising and awarding subcontracts. San Diego must meet skilled and trained workforce requirements if it elects to use this authority, may award separate or combined contracts for preconstruction and construction services, and must post contracts on its website and notify the Legislature, as specified. This authority sunsets January 1, 2023.

This bill also allows the District to use the design-build procurement method that is authorized for specified local agencies when contracting for improvements directly related to the construction of a building or buildings, and updates a cross-reference in the Public Contract Code that governs the District's ability to use design-build for building construction contracts. This bill also allows the District to use design-build for flood protection improvements; habitat restorations or enhancements; groundwater recharge or storage facilities; water treatment facilities; and, the retrofit, repair, or expansion of existing surface water storage facilities. This bill is sponsored by the District.

1. Author's Statement. According to the author, "By authorizing key water supply, habitat, and flood protection projects for design-build procurement, AB 851 will facilitate faster and more efficient project delivery by the District, while also demonstrating that design-build is an effective delivery method for innovative project types. By extending the sunset date for CM at-risk contracting and authorization to the City of San Diego, AB 851 will enable California counties and the City of San Diego to continue prudently managing public funds through efficient construction management for buildings."
2. Background. The Local Agency Public Construction 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. The design-bid-build process was developed to protect taxpayers from extravagance, corruption, and other improper practices by public officials as well as to secure a fair and reasonable price for public works construction by injecting competition amongst bidders into the process.

In the early 1990s, public works agencies grew frustrated with some of the disadvantages of design-bid-build and began experimenting with other project delivery methods, including design-build. 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 established by the public agency.

Since the Legislature began granting design-build authority in the early 1990's, it has typically done so with specified parameters, such as the duration of the authority, the types of agencies allowed to use it, the types of projects for which it can be used, cost thresholds, and specified procedures that must be followed in preparing and awarding contracts. Over the years, this resulted in numerous statutes in various code sections, which created confusion for public agencies and contractors alike.

In an effort to consolidate these statutes, SB 785 (Wolk), Chapter 931, Statutes of 2014, repealed 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 enacted uniform provisions authorizing DGS, CDCR, and specified local agencies to utilize the design-build procurement process for specified public works projects (with some exceptions, notably design-build authority for CalTrans). SB 785 created one set of codes for DGS and CDCR, and a separate set for specified local agencies, but with similar parameters.

1. Limits on Design-Build for Cities and Counties. Existing law limits the use of design-build by cities and counties to the following types of projects:
   1. 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 and recreational facilities; and,
   2. Local and regional wastewater facilities, solid waste management facilities, or water recycling facilities (for cities and counties that operate such facilities).

Existing law expressly prohibits cities and counties from using design-build for the construction of other infrastructure, including, but not limited to, streets and highways, public rail transit, or water resources facilities and infrastructure [with the exception of b), above].

1. Limits on Design-Build for Special Districts. Existing law also limits the use of design-build for special districts by both type of district and type of project. The types of special districts that may use design-build include: transit districts; and, special districts that operate wastewater facilities, solid waste management facilities, water recycling facilities, or fire protection facilities.

For special districts that operate wastewater facilities, solid waste management facilities, water recycling facilities, or fire protection facilities, their use of design-build is limited to regional and local wastewater treatment facilities; regional and local solid waste facilities; regional and local water recycling facilities; and, fire protection facilities.

1. District Services and the Need for Design-Build. The District provides wholesale water and groundwater management services to local municipalities and private water retailers who deliver drinking water directly to homes and businesses in Santa Clara County. The District manages an integrated water resources system that includes the supply of clean, safe water, flood protection and stewardship of streams on behalf of Santa Clara County's nearly 1.9 million residents. The District manages 10 dams and surface water reservoirs, three water treatment plants, an advanced recycled water purification center, a water quality laboratory, nearly 400 acres of groundwater recharge ponds and more than 275 miles of streams.

According to the author, "The increasing climate volatility is challenging the District to be more drought and flood resilient, and requires the delivery of public works projects that go beyond those authorized under current design-build law. After years of drought that have threatened regional and local water supplies, the District is seeking to expand ground water recharge, clean up contaminated water, improve water treatment, and to retrofit, repair, or expand existing water storage facilities.

"Warmer temperatures over time mean less precipitation is naturally stored in the Sierra snowpack and more falls as rainstorm events that stress the District's flood protection infrastructure. Sea level rise, already felt in Bay Area coastal communities during the confluence of high tides and intense storm events, requires a multi-faceted response involving significant public works projects to retreat from some locations, fortify levees and increase flood protection in others, and to create natural barriers such as wetlands and other habitat enhancing projects. These projects need the same design-build benefits of timely delivery and reduced costs afforded to other public works projects authorized in the California Public Contract Code."

1. CM At-Risk. According to the American Institute of Architects, "Construction management at-risk is a process that allows the client of a project to choose the CM before the design stage is complete. The CM is chosen based on qualifications, and then the entire operation is centralized under a single contract. The architect and CM work together in order to cultivate and assay the design. Then, the CM gives the client a guaranteed maximum price, and coordinates all subcontract work. The architect/engineer (A/E) is hired separately from the CM at-risk and the traditional client - A/E relationship is maintained. However, A/Es can generally perform the CM role, with various restrictions imposed based on state.

"Proponents have cited many advantages to construction management at-risk over traditional methods of procurement. These advantages are:

• 1. Increases the speed of the project and can also strengthen coordination between the A/E and the CM;
  2. The client hires the CM based on qualifications, thus better ensuring a CM with a strong allegiance to the client, because their business relies on references and repeat work;
  3. CMs, A/Es, and the client all collaborate. This creates enhanced synergies throughout the process; and,
  4. Transparency is enhanced, because all costs and fees are in the open, which diminishes adversarial relationships between components working on the project, while at the same time eliminating bid shopping."

SB 328 (Knight), Chapter 517, Statutes of 2013, authorized counties to use CM at-risk contracts for projects exceeding $1million, using low bid or best value to award these contracts. SB 328 contained a sunset date of January 1, 2018.

1. Arguments in Support. The Santa Clara Valley Water District, sponsor of this measure, writes, "The use of design-build project delivery has been growing in recent years, particularly for large projects. A 2014 study sponsored by the Design Build Institute of America found that over half of non-residential projects in the United States with a cost exceeding $10 million are delivered using design-build. That same study found that 59 percent of construction dollars spent in California are on design-build projects. The benefits of design-build for local agencies are realized by contracting with a single, unified team that is responsible for the successful completion of the project. Mistakes or miscommunications between the designer and the builder are avoided, and with only one contract to award and manage, the local agency may yield a faster project completion while reducing their liability for project failures."
2. Arguments in Opposition. None on file.
3. New Provisions. The subject matter of this bill was expanded in the Senate and, therefore, provisions of this measure have not been heard in any Assembly policy committee this legislative session.

Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958 FN: 0002173

 THIRD READING  

Bill No: AB 851

Author: and Gloria (D)

Amended: 9/7/17 in Senate

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 7/5/17

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

SENATE GOVERNANCE & FIN. COMMITTEE: 5-0, 9/12/17 (Pursuant to Senate Rule 29.10)

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg

NO VOTE RECORDED: Lara, Moorlach

ASSEMBLY FLOOR: 77-0, 5/30/17 (Consent) - See last page for vote

SUBJECT:

SOURCE: Santa Clara Valley Water District

DIGEST:

This bill authorizes the Santa Clara Valley Water District (SCVWD) to use design-build for certain projects and extends the sunset date for counties to use the construction manager at-risk contracting method.

Senate Floor Amendments of 9/7/17 authorize the City of San Diego to utilize the construction manager at-risk contracting method with a sunset date of January 1, 2023.

ANALYSIS:

Existing law:

1. Requires, pursuant to the Local Agency Public Construction Act (LAPC Act), local officials 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, until January 1, 2025, cities, counties, and specified special districts and transit agencies to use design-build for specified public works contracts in excess of $1 million using either a low bid or best value process.
3. Provides the following parameters for cities and counties that use design-build:
   1. Allows design-build for 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 and recreational facilities;
   2. Allow cities and counties that operate wastewater facilities, solid waste management facilities, or water recycling facilities to use design-build for the construction of such facilities, both local and regional; and,
   3. Prohibits cities and counties from using design-build for the construction of other infrastructure, including, but not limited to, streets and highways, public rail transit, or water resources facilities and infrastructure.
4. Authorizes counties to use construction manager at-risk method for projects costing in excess of $1 million, and allows the county to award the contract to the lowest responsible bidder or by the best value method until January 1, 2018.

This bill:

1. Authorizes the SCVWD, upon approval of its board of directors, to use the design-build contract procurement method that existing law authorizes for local agencies until January 1, 2025, for the following projects:
   1. Flood protection improvements.
   2. Habitat restorations or enhancements.
   3. Groundwater recharge or storage facilities.
   4. Water treatment facilities.
   5. The retrofit, repair, or expansion of existing surface water storage facilities.
2. Extends the sunset date of the authority for counties to utilize the construction manager at-risk contracting method until January 1, 2023.
3. Requires that a construction manager at-risk entity must not be prequalified, shortlisted, or awarded a contract unless the entity provides an enforceable commitment, to the county, that the entity and its subcontractors, at every tier, will use a skilled and trained workforce to perform all work as specified. This does not apply if any of the following conditions are met:
   1. The county had entered into a project labor agreement that binds all contractors and subcontractors performing work on the project or contract to use a skilled and trained workforce, and the entity agrees to be bound by that project labor agreement.
   2. The project or contract is being performed under the extension or renewal of a project labor agreement entered into by the county before January 1, 2018.
   3. The entity has entered into a project labor agreement that will bind the entity and all its subcontractors at every tier performing the project or contract to use a skilled and trained workforce.
4. Allows the City of San Diego (City) to utilize the construction manager at-risk contracting method for the construction, erection, repair, alteration, or improvement of any building owned or leased by the City if the contract is in excess of $25,000,000. The City can award the contract to the lowest responsible bidder or based upon best value.
5. Requires the construction manager at-risk entity to do both of the following:
   • 1. Provide public notice of the availability of work to be subcontracted in accordance with the publication requirements applicable to the competitive bidding process of the City.
     2. Provide a fixed date and time on which the subcontracted work will be awarded in accordance with the procedure established pursuant to this bill.
6. Requires, when using construction manager at-risk to contract for a building project, the City to make a copy of the contract available for public inspection on its Internet Web site and notify the appropriate policy committees of the Legislature with instructions on finding and accessing the stored contract.
7. Provides that, if a City elects to award a project using construction manager at-risk, retention proceeds withheld by the City from the construction manager at-risk entity must not exceed 5% if a performance and payment bond issued by an admitted surety insurer is required in the solicitation of bids.
8. Includes a sunset date of January 1, 2023 for the City’s authority to use construction manager at-risk.
9. Contains findings and declarations to support its purposes.

Background

The LAPC Act 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, and most widely-used, approach to public works construction. This approach splits construction projects into two distinct phases: design and construction. During the design phase, the local agency prepares detailed project plans and specifications using its own employees or by hiring outside architects and engineers. Once project designs are complete, local officials invite bids from the construction community and award the contract to the lowest responsible bidder.

Design-build. State law also allows some state and local agencies to use the design-build method to procure both design and construction services from a single company before the development of complete plans and specifications. Until January 1, 2025, all counties and cities can use the design-build method to construct buildings and related improvements and other specified types of public works that cost more than $1 million (SB 785, Wolk, 2014). Under design-build, the agency contracts with a single entity—which can be a single firm, a consortium, or a joint venture—to design and construct a project. Before inviting bids, the agency prepares documents that describe the basic concept of the project, as opposed to a complete set of drawings and specifications of the final product. In the bidding phase, the agency typically evaluates bids on a low-bid or best-value basis, incorporating technical factors, such as qualifications and design quality, in addition to price. The Department of General Services, the California Department of Corrections and Rehabilitation, cities, counties, transit districts, special districts operating wastewater, water recycling, or solid waste management facilities, and certain health care districts may use design-build.

Originally the authorizations for state agencies and local governments to use design-build were dispersed throughout state law in separate code sections. In 2014, the Legislature consolidated these provisions into consistent, generally-applicable statutes (SB 785, Wolk, 2014). SB 785 outlined a standardized design-build procurement process in which the awarding authority may prepare a list of qualified or short-listed entities, based on specified criteria. Once a list of qualified or short-listed entities is complete, the awarding authority may prepare a request for proposals (RFP) that invite prequalified or short-listed entities to submit competitive sealed proposals in the manner prescribed by the awarding authority.

For projects utilizing low bid as the selection method, the competitive bidding process must involve lump-sum bids by the prequalified or short-listed design-build entities. Awards must be made to the design-build entity that is the lowest responsible bidder.

For those projects utilizing best value as a selection method, proposals must be evaluated using only the criteria and selection procedures specifically identified in the RFP. The awarding authority may reserve the right to request revisions and conduct negotiations with responsive proposers, if the authority specifies in the RFP how it will ensure that negotiations are conducted in good faith. The authority may hold discussions or negotiations with responsive proposers using the process specified in the RFP. Responsive proposers are ranked based on value provided. The contract must be awarded to the responsible design-build entity whose proposal is determined by the authority to have offered the best value to the public. Upon issuance of a contract award, the awarding authority must publicly announce its award, identifying the design-build entity to which the award is made, along with a written decision supporting its contract award and stating the basis of the award.

The state’s design-build statutes also impose requirements for the use of skilled labor, the issuance of performance bonds, insurance coverage, and identification of subcontractors that will complete at least one-half of 1% of the value of a contract.

The SCVWD is the primary water resources agency for Santa Clara County. First formed as the Santa Clara Valley Water Conservation District in 1929, it now acts not only as the County's water wholesaler, but also as its flood protection agency and is the steward for its streams and creeks, underground aquifers and district-built reservoirs. The District owns and manages 10 local surface reservoirs and associated creeks and recharge facilities, manages the County’s groundwater basins and three water treatment plants, imports water from the Central Valley Project and the State Water Project, and delivers recycled water to parts of the County. The District is also responsible for flood protection within the County. Its stewardship responsibilities include creek restoration and wildlife habitat projects, pollution prevention efforts and a commitment to natural flood protection.

SCVWD was given the authority to utilize design-build by AB 674 (Dutra, 2001). However, when SB 785 consolidated the different design-build code sections, the code section that gave it this authority was repealed.

Construction manager at-risk. A method known as construction manager at-risk is another approach to public works construction and delivery which combines elements of the design-bid-build and design-build methods, and uses construction project management services. The construction manager at-risk method allows the owner of a project to retain a “construction manager,” who provides pre-construction services during the design period and later becomes the general contractor during the construction process. The owner has separate contracts for design and construction services (the construction manager), similar to the design-bid-build method. The owner may establish the separate contracts at the same time, however, thereby allowing the design party and the construction manager to work together, similar to the design-build method. Before construction can begin on a project, the owner and construction manager must agree on either a fixed price or “guaranteed maximum price” for the project. The construction manager is responsible for delivering the project within the agreed upon price, thereby assuming the risk for cost-overruns. Besides counties, the California Administrative Office of the Courts, University of California, California State University System, school districts, and some cities have used the construction manager at-risk method for building construction projects.

Under the construction manager at-risk method, project delivery can occur in sequential or concurrent phases. Projects that have multiple components lend themselves to this method because the design and construction of different aspects of the project can occur at different times. In effect, the overall project can be broken into multiple components, which the construction manager must bid to subcontractors. SB 328 (Knight, 2013) authorized counties to use construction manager at-risk method for projects costing in excess of $1 million, and allowed the county to award the contract to the lowest responsible bidder or by the best value method until January 1, 2018.

Comments

Purpose of the bill. AB 851 will expand the types of public works projects the SCVWD may construct using the design-build project delivery method to include flood protection improvements, habitat restoration or enhancement, water treatment facilities, groundwater recharge or storage facilities, or the retrofit, repair, or expansion of existing surface water storage facilities. All the skilled and trained workforce requirements included in SB 785 will apply, as well as a prohibition on including facility operations in a design-build contract. State and local highway projects are not included, and a January 1, 2025 sunset date will apply. AB 851 is an incremental step that includes all the existing protections established by previous legislation. By authorizing these key water supply, habitat, and flood protection projects for design-build procurement, AB 851 will facilitate faster and more efficient response to climate change, drought, and sea level rise by the SCVWD. Additionally, to allow counties to continue utilizing the construction manager at-risk contracting method past this year, this bill will extend the sunset date for this authority to January 1, 2023.

Design-build. Advocates for the design-build method of contracting for public works contend that project 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 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 argue that design-build makes the procurement process for agencies’ construction projects more subjective. More subjectivity increases the chances that inappropriate factors could influence which bidders are awarded some contracts. For some local governments, this additional subjectivity may be justified by the time and cost savings associated with integrating the design and construction process for complex infrastructure, like hospitals or medical clinics.

SB 785. SB 785 was enacted to harmonize the state’s design-build authorizations that had been scattered across sections of code. The particulars of SB 785 were carefully negotiated to balance the interests of project proponents, labor unions, contractors, and subcontractors. SB 785 specifically prohibited cities and counties from using the design-build project delivery method for the construction of water resources facilities. However, AB 2551 (Gallagher, 2016) created an exception to this rule as it allowed local agencies to use design-build for specific surface storage projects that receive funding from the water storage funding allocation in Proposition 1, the water bond measure approved by the voters in November of 2014. AB 851 creates another exception for the SCVWD. Although proponents may argue that these projects are distinctive and therefore warrant unique authority, AB 851 is just the most recent departure from the standard set by SB 785.

Mandate. The design-build procedures that AB 851 authorizes the SCVWD to use require that specified information provided by bidders in response to a request for qualifications must be certified under penalty of perjury. By creating a new crime, AB 851 also creates a new state-mandated program. But this bill disclaims the state's responsibility for reimbursing local governments for enforcing these new crimes. That's consistent with the California Constitution, which says that the state does not have to reimburse local governments for the costs of new crimes (Article XIIIB, 6[a][2]).

Special legislation. The California Constitution prohibits special legislation when a general law can apply (Article IV, §16). AB 851 contains findings and declarations explaining the need for legislation that applies only to the SCVWD and the City of San Diego.

Related/Prior Legislation

AB 851 is one of a number of bills in recent years to authorize specific local agencies to utilize design-build. For example, the Mayers Memorial Hospital District (AB 1290, Dahle, 2015) and the San Diego Association of Governments (SB 974, Committee on Governance and Finance, 2016) were given design-build authority since the adoption of SB 785. Additionally, SB 793 (Hill, 2017) allows the Peninsula Health Care District and the Midpeninsula Regional Open Space District to use design-build and passed out of the Senate Governance and Finance Committee with a vote of 7-0 on April 19th, and AB 994 (Muratsuchi, 2017) allows the Beach Cities Health District to use design-build and passed out of the Senate Governance and Finance Committee with a vote of 7-0 on June 21st. Lastly, SB 373 (Cannella, 2017), approved by the Senate Governance and Finance Committee at the May 3rd hearing with a vote of 6-0, allows the Stanislaus Regional Water Authority to utilize design-build to construct a surface water supply project.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 9/7/17)

Santa Clara Valley Water District (source)

Association of California Water Agencies

California Municipal Utilities Association

City of San Diego

Rural County Representatives of California

San Mateo County

Santa Clara County

Silicon Valley Leadership Group

State Building and Construction Trades Council

Urban Counties of California

OPPOSITION: (Verified 9/7/17)

Associated Builders and Contractors – Central California Chapter

Associated Builders and Contractors – San Diego Chapter

Associated Builders and Contractors – Southern California Chapter

California Chapters of American Fire Sprinkler Association

Independent Roofing Contractors of California, Inc.

Plumbing-Heating-Cooling Contractors Association of California

Western Electrical Contractors Association

ASSEMBLY FLOOR: 77-0, 5/30/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chávez, Chen, Chiu, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Chau, Choi, Eggman

Prepared by:

9/12/17 21:15:06

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

Local agency: contracts

Authorizes the Santa Clara Valley Water District to use design-build for certain projects, extends the sunset date for counties to use the construction manager at-risk (CMAR) contracting method, and specifies that the City of San Diego can utilize CMAR for contracts over $25,000,000.

Background

The Local Agency Public Construction Act 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, and most widely-used, approach to public works construction. This approach splits construction projects into two distinct phases: design and construction. During the design phase, the local agency prepares detailed project plans and specifications using its own employees or by hiring outside architects and engineers. Once project designs are complete, local officials invite bids from the construction community and award the contract to the lowest responsible bidder.

Design-build. State law also allows some state and local agencies to use the design-build method to procure both design and construction services from a single company before the development of complete plans and specifications. Until January 1, 2025, all counties and cities can use the design-build method to construct buildings and related improvements and other specified types of public works that cost more than $1 million (SB 785, Wolk, 2014). Under design-build, the agency contracts with a single entity—which can be a single firm, a consortium, or a joint venture—to design and construct a project. Before inviting bids, the agency prepares documents that describe the basic concept of the project, as opposed to a complete set of drawings and specifications of the final product. In the bidding phase, the agency typically evaluates bids on a low-bid or best-value basis, incorporating technical factors, such as qualifications and design quality, in addition to price. The Department of General Services, the California Department of Corrections and Rehabilitation, cities, counties, transit districts, special districts operating wastewater, water recycling, or solid waste management facilities, and certain health care districts may use design-build.

Originally the authorizations for state agencies and local governments to use design-build were dispersed throughout state law in separate code sections. In 2014, the Legislature consolidated these provisions into consistent, generally-applicable statutes (SB 785, Wolk, 2014). SB 785 outlined a standardized design-build procurement process in which the awarding authority may prepare a list of qualified or short-listed entities, based on specified criteria. Once a list of qualified or short-listed entities is complete, the awarding authority may prepare a request for proposals (RFP) that invite prequalified or short-listed entities to submit competitive sealed proposals in the manner prescribed by the awarding authority.

For projects utilizing low bid as the selection method, the competitive bidding process must involve lump-sum bids by the prequalified or short-listed design-build entities. Awards must be made to the design-build entity that is the lowest responsible bidder.

For those projects utilizing best value as a selection method, proposals must be evaluated using only the criteria and selection procedures specifically identified in the RFP. The awarding authority may reserve the right to request revisions and conduct negotiations with responsive proposers, if the authority specifies in the RFP how it will ensure that negotiations are conducted in good faith. The authority may hold discussions or negotiations with responsive proposers using the process specified in the RFP. Responsive proposers are ranked based on value provided. The contract must be awarded to the responsible design-build entity whose proposal is determined by the authority to have offered the best value to the public. Upon issuance of a contract award, the awarding authority must publicly announce its award, identifying the design-build entity to which the award is made, along with a written decision supporting its contract award and stating the basis of the award.

The state’s design-build statutes also impose requirements for the use of skilled labor, the issuance of performance bonds, insurance coverage, and identification of subcontractors that will complete at least one-half of 1% of the value of a contract.

The Santa Clara Valley Water District (SCVWD) is the primary water resources agency for Santa Clara County. First formed as the Santa Clara Valley Water Conservation District in 1929, it now acts not only as the County's water wholesaler, but also as its flood protection agency and manager for its streams and creeks, underground aquifers and district-built reservoirs. The District owns and manages 10 local surface reservoirs, and associated creeks and recharge facilities, manages the County’s groundwater basins and three water treatment plants, imports water from the Central Valley Project and the State Water Project, and delivers recycled water to parts of the County. The District is also responsible for flood protection within the County. Its stewardship responsibilities include creek restoration and wildlife habitat projects, pollution prevention efforts, and a commitment to natural flood protection.

SCVWD was given the authority to utilize design-build by AB 674 (Dutra, 2001). However, when SB 785 consolidated the different design-build code sections, the code section that gave it this authority was repealed. To facilitate faster and more efficient local agency response to constantly changing environmental conditions from the SCVWD, the district wants the Legislature to reactivate its authority to utilize design-build on certain projects.

Construction manager at-risk (CMAR). A method known as CMAR is another approach to public works construction and delivery which combines elements of the design-bid-build and design-build methods, and uses construction project management services. The CMAR method allows the owner of a project to retain a “construction manager,” who provides pre-construction services during the design period and later becomes the general contractor during the construction process. The owner has separate contracts for design and construction services (with the construction manager), similar to the design-bid-build method. The owner may establish the separate contracts at the same time, however, thereby allowing the design party and the construction manager to work together, similar to the design-build method. Before construction can begin on a project, the owner and construction manager must agree on either a fixed price or “guaranteed maximum price” for the project. The construction manager is responsible for delivering the project within the agreed upon price, thereby assuming the risk for cost-overruns. Besides counties, the California Administrative Office of the Courts, University of California, California State University System, school districts, and some cities have used the CMAR method for building construction projects.

Under the CMAR method, project delivery can occur in sequential or concurrent phases. Projects that have multiple components lend themselves to this method because the design and construction of different aspects of the project can occur at different times. In effect, the overall project can be broken into multiple components, which the construction manager must bid to subcontractors. SB 328 (Knight, 2013) authorized counties to use CMAR method for projects costing in excess of $1 million, and allowed the county to award the contract to the lowest responsible bidder or by the best value method until January 1, 2018. The author wants to extend the sunset for counties to use this contracting tool until January 1, 2023, and grant the same authority to the City of San Diego.

Proposed Law

Design build. Assembly Bill 851 authorizes the SCVWD, upon approval of its board of directors, to use the design-build contract procurement method that existing law authorizes for local agencies until January 1, 2025, for the following projects:

• Flood protection improvements.
• Habitat restorations or enhancements.
• Groundwater recharge or storage facilities.
• Water treatment facilities.
• The retrofit, repair, or expansion of existing surface water storage facilities.

CMAR for counties. This bill extends the sunset date of the authority for counties to utilize the CMAR contracting method until January 1, 2023.

CMAR for San Diego. AB 851 allows the City of San Diego to utilize the CMAR contracting method for the construction, erection, repair, alteration, or improvement of any building owned or leased by the City if the contract is in excess of $25,000,000. The City can award the contract to the lowest responsible bidder or based upon best value.

This measure requires the CMAR entity to do both of the following:

• • • Provide public notice of the availability of work to be subcontracted in accordance with the publication requirements applicable to the competitive bidding process of the City.
    • Provide a fixed date and time on which the subcontracted work will be awarded in accordance with the procedure established pursuant to this bill.

When using CMAR to contract for a building project, AB 851 requires the City to make a copy of the contract available for public inspection on its Internet Web site and notify the appropriate policy committees of the Legislature with instructions on finding and accessing the stored contract.

This bill provides that, if a City elects to award a project using CMAR, retention proceeds withheld by the City from the CMAR entity must not exceed 5% if a performance and payment bond issued by an admitted surety insurer is required in the solicitation of bids.

This bill includes a sunset date of January 1, 2023, for the City of San Diego’s authority to use CMAR.

This bill includes legislative declarations and findings to support its purposes.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. AB 851 will expand the types of public works projects the Santa Clara Valley Water District may construct using the design-build project delivery method to include flood protection improvements, habitat restoration or enhancement, water treatment facilities, groundwater recharge or storage facilities, or the retrofit, repair, or expansion of existing surface water storage facilities. By authorizing these key water supply, habitat, and flood protection projects for design-build procurement, AB 851 will facilitate faster and more efficient response to climate change, drought, and sea level rise by the Santa Clara Valley Water District. Additionally, to allow counties to continue realizing the advantages utilizing the CMAR contracting method past this year, this bill will extend the sunset date for this authority to January 1, 2023. Lastly, the City of San Diego has identified a number of large scale projects that could potentially benefit from using the CMAR contracting method, and AB 851 makes clear that the City can utilize CMAR without violating existing law.

2. Design-build. Advocates for the design-build method of contracting for public works contend that project 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 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 argue that design-build makes the procurement process for agencies’ construction projects more subjective. More subjectivity increases the chances that inappropriate factors could influence which bidders are awarded some contracts. For some local governments, this additional subjectivity may be justified by the time and cost savings associated with integrating the design and construction process for complex infrastructure, like hospitals or medical clinics.

3. SB 785. SB 785 was enacted to harmonize the state’s design-build authorizations that had been scattered across sections of code. The particulars of SB 785 were carefully negotiated to balance the interests of project proponents, labor unions, contractors, and subcontractors. SB 785 specifically prohibited cities and counties from using the design-build project delivery method for the construction of water resources facilities. However, AB 2551 (Gallagher, 2016) created an exception to this rule as it allowed local agencies to use design-build for specific surface storage projects that receive funding from the water storage funding allocation in Proposition 1, the water bond measure approved by the voters in November of 2014. AB 851 creates another exception for the Santa Clara Valley Water District. Although proponents may argue that these projects are distinctive and therefore warrant unique authority, AB 851 is just the most recent departure from the standard set by SB 785. The Committee may wish to consider a discussion on broadening design-build authority for large projects to all local agencies regardless of the type of project.

4. Charter cities. The California Constitution allows cities that adopt charters to control their own “municipal affairs.” In all other matters, charter cities must follow the general, statewide laws. Because the Constitution doesn’t define “municipal affairs,” the courts determine whether a topic is a municipal affair or whether it’s an issue of statewide concern. Courts have ruled that the mode of contracting work in a city is in fact a municipal affair. Accordingly, charter cities are not bound to follow the contracting procedures laid out in state statute. (Smith v. City of Riverside (1973) 34 Cal.App.3d 529, 534; Piledrivers' Local Union v. City of Santa Monica (1984) 151 Cal.App.3d 509, 511-512; Mountain View Sch. Dist of Santa Clara v. City Council (1959) 168 Cal.App.2d 89, 92.). Further, by way of a ballot measure adopted in June 2004, City of San Diego voters approved a charter amendment that permits the City to contract for public works through competitive negotiation with a construction manager and gives the city council the power to adopt guidelines governing operation of such construction management contracts. In March 2010, the city council, using this authority, adopted an ordinance which expressly permits a construction manager to select contractors on a best value rather than lowest responsible bid basis. In light of these factors, the need for this special authorization is unclear.

5. Related legislation. AB 851 is one of a number of bills in recent years to authorize specific local agencies to utilize design-build. For example, the Mayers Memorial Hospital District (AB 1290, Dahle, 2015) and the San Diego Association of Governments (SB 974, Committee on Governance and Finance, 2016) were given design-build authority since the adoption of SB 785. Additionally, SB 793 (Hill) allows the Peninsula Health Care District, the Midpeninsula Regional Open Space District, and the Santa Clara Valley Open-Space Authority to use design-build and passed out of this Committee with a vote of 7-0 on April 19^th, and AB 994 (Muratsuchi) allows the Beach Cities Health District to use design-build and passed out of this Committee with a vote of 7-0 on June 21^st. Lastly, SB 373 (Cannella), approved by the Senate Governance and Finance Committee at the May 3^rd hearing with a vote of 6-0, allows the Stanislaus Regional Water Authority to utilize design-build to construct a surface water supply project.

6. Mandate. The design-build procedures that AB 851 authorizes the SCVWD to require that specified information provided by bidders in response to a request for qualifications must be certified under penalty of perjury. By creating a new crime, AB 851 also creates a new state-mandated program. But the bill disclaims the state's responsibility for reimbursing local governments for enforcing these new crimes. That's consistent with the California Constitution, which says that the state does not have to reimburse local governments for the costs of new crimes (Article XIIIB, 6[a][2]).

7. 29.10(b). As a result of floor amendments of 9/7/17 authorizing the City of San Diego to utilize the CMAR contracting method, the Rules Committee referred AB 851 to the Committee under Senate Rule 29.10(b). The Rule provides that the Committee has three options: (1) hold the bill, (2) return the bill to the Floor for consideration, or (3) rerefer the bill to fiscal committee pursuant to Senate Rule 10.5.

7. Special legislation. The California Constitution prohibits special legislation when a general law can apply (Article IV, §16). AB 851 contains findings and declarations explaining the need for legislation that applies only to the SCVWD and the City of San Diego.

Assembly Actions

Assembly Local Government 9-0
Assembly Appropriations 17-0
Assembly Floor 77-0

Support and Opposition

(9/7/17)

Support: Santa Clara Valley Water District (Sponsor), Association of California Water Agencies; California Municipal Utilities Association; City of San Diego; Rural County Representatives of California; Santa Clara County; Silicon Valley Leadership Group; State Building and Construction Trades Council; Urban Counties of California.

Opposition: Associated Builders and Contractors – Central California Chapter; Associated Builders and Contractors – San Diego Chapter; Associated Builders and Contractors – Southern California Chapter; California Chapters of American Fire Sprinkler Association; Independent Roofing Contractors of California, Inc.; Plumbing-Heating-Cooling Contractors Association of California; Western Electrical Contractors Association.

.

-- END --

 THIRD READING  

Bill No: AB 851

Author: and Gloria (D)

Amended: 9/7/17 in Senate

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 7/5/17

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 77-0, 5/30/17 (Consent) - See last page for vote

SUBJECT:

SOURCE: Santa Clara Valley Water District

DIGEST:

This bill authorizes the Santa Clara Valley Water District (SCVWD) to use design-build for certain projects and extends the sunset date for counties to use the construction manager at-risk contracting method.

Senate Floor Amendments of 9/7/17 authorize the City of San Diego to utilize the construction manager at-risk contracting method with a sunset date of January 1, 2023.

ANALYSIS:

Existing law:

1. Requires, pursuant to the Local Agency Public Construction Act (LAPC Act), local officials 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, until January 1, 2025, cities, counties, and specified special districts and transit agencies to use design-build for specified public works contracts in excess of $1 million using either a low bid or best value process.
3. Provides the following parameters for cities and counties that use design-build:
   1. Allows design-build for 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 and recreational facilities;
   2. Allow cities and counties that operate wastewater facilities, solid waste management facilities, or water recycling facilities to use design-build for the construction of such facilities, both local and regional; and,
   3. Prohibits cities and counties from using design-build for the construction of other infrastructure, including, but not limited to, streets and highways, public rail transit, or water resources facilities and infrastructure.
4. Authorizes counties to use construction manager at-risk method for projects costing in excess of $1 million, and allows the county to award the contract to the lowest responsible bidder or by the best value method until January 1, 2018.

This bill:

1. Authorizes the SCVWD, upon approval of its board of directors, to use the design-build contract procurement method that existing law authorizes for local agencies until January 1, 2025, for the following projects:
   1. Flood protection improvements.
   2. Habitat restorations or enhancements.
   3. Groundwater recharge or storage facilities.
   4. Water treatment facilities.
   5. The retrofit, repair, or expansion of existing surface water storage facilities.
2. Extends the sunset date of the authority for counties to utilize the construction manager at-risk contracting method until January 1, 2023.
3. Requires that a construction manager at-risk entity must not be prequalified, shortlisted, or awarded a contract unless the entity provides an enforceable commitment, to the county, that the entity and its subcontractors, at every tier, will use a skilled and trained workforce to perform all work as specified. This does not apply if any of the following conditions are met:
   1. The county had entered into a project labor agreement that binds all contractors and subcontractors performing work on the project or contract to use a skilled and trained workforce, and the entity agrees to be bound by that project labor agreement.
   2. The project or contract is being performed under the extension or renewal of a project labor agreement entered into by the county before January 1, 2018.
   3. The entity has entered into a project labor agreement that will bind the entity and all its subcontractors at every tier performing the project or contract to use a skilled and trained workforce.
4. Allows the City of San Diego (City) to utilize the construction manager at-risk contracting method for the construction, erection, repair, alteration, or improvement of any building owned or leased by the City if the contract is in excess of $25,000,000. The City can award the contract to the lowest responsible bidder or based upon best value.
5. Requires the construction manager at-risk entity to do both of the following:
   • 1. Provide public notice of the availability of work to be subcontracted in accordance with the publication requirements applicable to the competitive bidding process of the City.
     2. Provide a fixed date and time on which the subcontracted work will be awarded in accordance with the procedure established pursuant to this bill.
6. Requires, when using construction manager at-risk to contract for a building project, the City to make a copy of the contract available for public inspection on its Internet Web site and notify the appropriate policy committees of the Legislature with instructions on finding and accessing the stored contract.
7. Provides that, if a City elects to award a project using construction manager at-risk, retention proceeds withheld by the City from the construction manager at-risk entity must not exceed 5% if a performance and payment bond issued by an admitted surety insurer is required in the solicitation of bids.
8. Includes a sunset date of January 1, 2023 for the City’s authority to use construction manager at-risk.
9. Contains findings and declarations to support its purposes.

Background

The LAPC Act 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, and most widely-used, approach to public works construction. This approach splits construction projects into two distinct phases: design and construction. During the design phase, the local agency prepares detailed project plans and specifications using its own employees or by hiring outside architects and engineers. Once project designs are complete, local officials invite bids from the construction community and award the contract to the lowest responsible bidder.

Design-build. State law also allows some state and local agencies to use the design-build method to procure both design and construction services from a single company before the development of complete plans and specifications. Until January 1, 2025, all counties and cities can use the design-build method to construct buildings and related improvements and other specified types of public works that cost more than $1 million (SB 785, Wolk, 2014). Under design-build, the agency contracts with a single entity—which can be a single firm, a consortium, or a joint venture—to design and construct a project. Before inviting bids, the agency prepares documents that describe the basic concept of the project, as opposed to a complete set of drawings and specifications of the final product. In the bidding phase, the agency typically evaluates bids on a low-bid or best-value basis, incorporating technical factors, such as qualifications and design quality, in addition to price. The Department of General Services, the California Department of Corrections and Rehabilitation, cities, counties, transit districts, special districts operating wastewater, water recycling, or solid waste management facilities, and certain health care districts may use design-build.

Originally the authorizations for state agencies and local governments to use design-build were dispersed throughout state law in separate code sections. In 2014, the Legislature consolidated these provisions into consistent, generally-applicable statutes (SB 785, Wolk, 2014). SB 785 outlined a standardized design-build procurement process in which the awarding authority may prepare a list of qualified or short-listed entities, based on specified criteria. Once a list of qualified or short-listed entities is complete, the awarding authority may prepare a request for proposals (RFP) that invite prequalified or short-listed entities to submit competitive sealed proposals in the manner prescribed by the awarding authority.

For projects utilizing low bid as the selection method, the competitive bidding process must involve lump-sum bids by the prequalified or short-listed design-build entities. Awards must be made to the design-build entity that is the lowest responsible bidder.

For those projects utilizing best value as a selection method, proposals must be evaluated using only the criteria and selection procedures specifically identified in the RFP. The awarding authority may reserve the right to request revisions and conduct negotiations with responsive proposers, if the authority specifies in the RFP how it will ensure that negotiations are conducted in good faith. The authority may hold discussions or negotiations with responsive proposers using the process specified in the RFP. Responsive proposers are ranked based on value provided. The contract must be awarded to the responsible design-build entity whose proposal is determined by the authority to have offered the best value to the public. Upon issuance of a contract award, the awarding authority must publicly announce its award, identifying the design-build entity to which the award is made, along with a written decision supporting its contract award and stating the basis of the award.

The state’s design-build statutes also impose requirements for the use of skilled labor, the issuance of performance bonds, insurance coverage, and identification of subcontractors that will complete at least one-half of 1% of the value of a contract.

The SCVWD is the primary water resources agency for Santa Clara County. First formed as the Santa Clara Valley Water Conservation District in 1929, it now acts not only as the County's water wholesaler, but also as its flood protection agency and is the steward for its streams and creeks, underground aquifers and district-built reservoirs. The District owns and manages 10 local surface reservoirs and associated creeks and recharge facilities, manages the County’s groundwater basins and three water treatment plants, imports water from the Central Valley Project and the State Water Project, and delivers recycled water to parts of the County. The District is also responsible for flood protection within the County. Its stewardship responsibilities include creek restoration and wildlife habitat projects, pollution prevention efforts and a commitment to natural flood protection.

SCVWD was given the authority to utilize design-build by AB 674 (Dutra, 2001). However, when SB 785 consolidated the different design-build code sections, the code section that gave it this authority was repealed.

Construction manager at-risk. A method known as construction manager at-risk is another approach to public works construction and delivery which combines elements of the design-bid-build and design-build methods, and uses construction project management services. The construction manager at-risk method allows the owner of a project to retain a “construction manager,” who provides pre-construction services during the design period and later becomes the general contractor during the construction process. The owner has separate contracts for design and construction services (the construction manager), similar to the design-bid-build method. The owner may establish the separate contracts at the same time, however, thereby allowing the design party and the construction manager to work together, similar to the design-build method. Before construction can begin on a project, the owner and construction manager must agree on either a fixed price or “guaranteed maximum price” for the project. The construction manager is responsible for delivering the project within the agreed upon price, thereby assuming the risk for cost-overruns. Besides counties, the California Administrative Office of the Courts, University of California, California State University System, school districts, and some cities have used the construction manager at-risk method for building construction projects.

Under the construction manager at-risk method, project delivery can occur in sequential or concurrent phases. Projects that have multiple components lend themselves to this method because the design and construction of different aspects of the project can occur at different times. In effect, the overall project can be broken into multiple components, which the construction manager must bid to subcontractors. SB 328 (Knight, 2013) authorized counties to use construction manager at-risk method for projects costing in excess of $1 million, and allowed the county to award the contract to the lowest responsible bidder or by the best value method until January 1, 2018.

Comments

Purpose of the bill. AB 851 will expand the types of public works projects the SCVWD may construct using the design-build project delivery method to include flood protection improvements, habitat restoration or enhancement, water treatment facilities, groundwater recharge or storage facilities, or the retrofit, repair, or expansion of existing surface water storage facilities. All the skilled and trained workforce requirements included in SB 785 will apply, as well as a prohibition on including facility operations in a design-build contract. State and local highway projects are not included, and a January 1, 2025 sunset date will apply. AB 851 is an incremental step that includes all the existing protections established by previous legislation. By authorizing these key water supply, habitat, and flood protection projects for design-build procurement, AB 851 will facilitate faster and more efficient response to climate change, drought, and sea level rise by the SCVWD. Additionally, to allow counties to continue utilizing the construction manager at-risk contracting method past this year, this bill will extend the sunset date for this authority to January 1, 2023.

Design-build. Advocates for the design-build method of contracting for public works contend that project 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 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 argue that design-build makes the procurement process for agencies’ construction projects more subjective. More subjectivity increases the chances that inappropriate factors could influence which bidders are awarded some contracts. For some local governments, this additional subjectivity may be justified by the time and cost savings associated with integrating the design and construction process for complex infrastructure, like hospitals or medical clinics.

SB 785. SB 785 was enacted to harmonize the state’s design-build authorizations that had been scattered across sections of code. The particulars of SB 785 were carefully negotiated to balance the interests of project proponents, labor unions, contractors, and subcontractors. SB 785 specifically prohibited cities and counties from using the design-build project delivery method for the construction of water resources facilities. However, AB 2551 (Gallagher, 2016) created an exception to this rule as it allowed local agencies to use design-build for specific surface storage projects that receive funding from the water storage funding allocation in Proposition 1, the water bond measure approved by the voters in November of 2014. AB 851 creates another exception for the SCVWD. Although proponents may argue that these projects are distinctive and therefore warrant unique authority, AB 851 is just the most recent departure from the standard set by SB 785.

Mandate. The design-build procedures that AB 851 authorizes the SCVWD to use require that specified information provided by bidders in response to a request for qualifications must be certified under penalty of perjury. By creating a new crime, AB 851 also creates a new state-mandated program. But this bill disclaims the state's responsibility for reimbursing local governments for enforcing these new crimes. That's consistent with the California Constitution, which says that the state does not have to reimburse local governments for the costs of new crimes (Article XIIIB, 6[a][2]).

Special legislation. The California Constitution prohibits special legislation when a general law can apply (Article IV, §16). AB 851 contains findings and declarations explaining the need for legislation that applies only to the SCVWD and the City of San Diego.

Related/Prior Legislation

AB 851 is one of a number of bills in recent years to authorize specific local agencies to utilize design-build. For example, the Mayers Memorial Hospital District (AB 1290, Dahle, 2015) and the San Diego Association of Governments (SB 974, Committee on Governance and Finance, 2016) were given design-build authority since the adoption of SB 785. Additionally, SB 793 (Hill, 2017) allows the Peninsula Health Care District and the Midpeninsula Regional Open Space District to use design-build and passed out of the Senate Governance and Finance Committee with a vote of 7-0 on April 19th, and AB 994 (Muratsuchi, 2017) allows the Beach Cities Health District to use design-build and passed out of the Senate Governance and Finance Committee with a vote of 7-0 on June 21st. Lastly, SB 373 (Cannella, 2017), approved by the Senate Governance and Finance Committee at the May 3rd hearing with a vote of 6-0, allows the Stanislaus Regional Water Authority to utilize design-build to construct a surface water supply project.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 9/7/17)

Santa Clara Valley Water District (source)

Association of California Water Agencies

California Municipal Utilities Association

City of San Diego

Rural County Representatives of California

San Mateo County

Santa Clara County

Silicon Valley Leadership Group

State Building and Construction Trades Council

Urban Counties of California

OPPOSITION: (Verified 9/7/17)

Associated Builders and Contractors – Central California Chapter

Associated Builders and Contractors – San Diego Chapter

Associated Builders and Contractors – Southern California Chapter

California Chapters of American Fire Sprinkler Association

Independent Roofing Contractors of California, Inc.

Plumbing-Heating-Cooling Contractors Association of California

Western Electrical Contractors Association

ASSEMBLY FLOOR: 77-0, 5/30/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chávez, Chen, Chiu, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Chau, Choi, Eggman

Prepared by:

9/9/17 14:30:58

**** END ****

 THIRD READING  

Bill No: AB 851

Author:

Amended: 8/29/17 in Senate

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 7/5/17

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 77-0, 5/30/17 (Consent) - See last page for vote

SUBJECT:

SOURCE: Santa Clara Valley Water District

DIGEST:

This bill authorizes the Santa Clara Valley Water District (SCVWD) to use design-build for certain projects and extends the sunset date for counties to use the construction manager at-risk contracting method.

Senate Floor Amendments of 8/29/17 add findings and declarations stating the need for a special statute for the SCVWD.

ANALYSIS:

Existing law:

1. Requires, pursuant to the Local Agency Public Construction Act (LAPC Act), local officials 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, until January 1, 2025, cities, counties, and specified special districts and transit agencies to use design-build for specified public works contracts in excess of $1 million using either a low bid or best value process.
3. Provides the following parameters for cities and counties that use design-build pursuant to 2), above:
   1. Allows design-build for 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 and recreational facilities;
   2. Allow cities and counties that operate wastewater facilities, solid waste management facilities, or water recycling facilities to use design-build for the construction of such facilities, both local and regional; and,
   3. Prohibits cities and counties from using design-build for the construction of other infrastructure, including, but not limited to, streets and highways, public rail transit, or water resources facilities and infrastructure.
4. Authorizes counties to use construction manager at-risk method for projects costing in excess of $1 million, and allows the county to award the contract to the lowest responsible bidder or by the best value method until January 1, 2018.

This bill:

1. Authorizes the SCVWD, upon approval of its board of directors, to use the design-build contract procurement method that existing law authorizes for local agencies until January 1, 2025, for the following projects:
   1. Flood protection improvements.
   2. Habitat restorations or enhancements.
   3. Groundwater recharge or storage facilities.
   4. Water treatment facilities.
   5. The retrofit, repair, or expansion of existing surface water storage facilities.
2. Extends the sunset date of the authority for counties to utilize the construction manager at-risk contracting method until January 1, 2023.
3. Requires that a construction manager at-risk entity must not be prequalified, shortlisted, or awarded a contract unless the entity provides an enforceable commitment, to the county, that the entity and its subcontractors, at every tier, will use a skilled and trained workforce to perform all work as specified. This does not apply if any of the following conditions are met:
   1. The county had entered into a project labor agreement that binds all contractors and subcontractors performing work on the project or contract to use a skilled and trained workforce, and the entity agrees to be bound by that project labor agreement.
   2. The project or contract is being performed under the extension or renewal of a project labor agreement entered into by the county before January 1, 2018.
   3. The entity has entered into a project labor agreement that will bind the entity and all its subcontractors at every tier performing the project or contract to use a skilled and trained workforce.
4. Contains findings and declarations to support its purposes.

Background

The LAPC Act 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, and most widely-used, approach to public works construction. This approach splits construction projects into two distinct phases: design and construction. During the design phase, the local agency prepares detailed project plans and specifications using its own employees or by hiring outside architects and engineers. Once project designs are complete, local officials invite bids from the construction community and award the contract to the lowest responsible bidder.

Design-build. State law also allows some state and local agencies to use the design-build method to procure both design and construction services from a single company before the development of complete plans and specifications. Until January 1, 2025, all counties and cities can use the design-build method to construct buildings and related improvements and other specified types of public works that cost more than $1 million (SB 785, Wolk, 2014). Under design-build, the agency contracts with a single entity—which can be a single firm, a consortium, or a joint venture—to design and construct a project. Before inviting bids, the agency prepares documents that describe the basic concept of the project, as opposed to a complete set of drawings and specifications of the final product. In the bidding phase, the agency typically evaluates bids on a low-bid or best-value basis, incorporating technical factors, such as qualifications and design quality, in addition to price. The Department of General Services, the California Department of Corrections and Rehabilitation, cities, counties, transit districts, special districts operating wastewater, water recycling, or solid waste management facilities, and certain health care districts may use design-build.

Originally the authorizations for state agencies and local governments to use design-build were dispersed throughout state law in separate code sections. In 2014, the Legislature consolidated these provisions into consistent, generally-applicable statutes (SB 785, Wolk, 2014). SB 785 outlined a standardized design-build procurement process in which the awarding authority may prepare a list of qualified or short-listed entities, based on specified criteria. Once a list of qualified or short-listed entities is complete, the awarding authority may prepare a request for proposals (RFP) that invite prequalified or short-listed entities to submit competitive sealed proposals in the manner prescribed by the awarding authority.

For projects utilizing low bid as the selection method, the competitive bidding process must involve lump-sum bids by the prequalified or short-listed design-build entities. Awards must be made to the design-build entity that is the lowest responsible bidder.

For those projects utilizing best value as a selection method, proposals must be evaluated using only the criteria and selection procedures specifically identified in the RFP. The awarding authority may reserve the right to request revisions and conduct negotiations with responsive proposers, if the authority specifies in the RFP how it will ensure that negotiations are conducted in good faith. The authority may hold discussions or negotiations with responsive proposers using the process specified in the RFP. Responsive proposers are ranked based on value provided. The contract must be awarded to the responsible design-build entity whose proposal is determined by the authority to have offered the best value to the public. Upon issuance of a contract award, the awarding authority must publicly announce its award, identifying the design-build entity to which the award is made, along with a written decision supporting its contract award and stating the basis of the award.

The state’s design-build statutes also impose requirements for the use of skilled labor, the issuance of performance bonds, insurance coverage, and identification of subcontractors that will complete at least one-half of 1% of the value of a contract.

The SCVWD is the primary water resources agency for Santa Clara County. First formed as the Santa Clara Valley Water Conservation District in 1929, it now acts not only as the County's water wholesaler, but also as its flood protection agency and is the steward for its streams and creeks, underground aquifers and district-built reservoirs. The District owns and manages 10 local surface reservoirs and associated creeks and recharge facilities, manages the County’s groundwater basins and three water treatment plants, imports water from the Central Valley Project and the State Water Project, and delivers recycled water to parts of the County. The District is also responsible for flood protection within the County. Its stewardship responsibilities include creek restoration and wildlife habitat projects, pollution prevention efforts and a commitment to natural flood protection.

SCVWD was given the authority to utilize design-build by AB 674 (Dutra, 2001). However, when SB 785 consolidated the different design-build code sections, the code section that gave it this authority was repealed. To facilitate faster and more efficient local agency response to constantly changing environmental conditions from the SCVWD, the District wants the Legislature to give reactivate its authority to utilize design-build on certain projects.

Construction manager at-risk. A method known as construction manager at-risk is another approach to public works construction and delivery which combines elements of the design-bid-build and design-build methods, and uses construction project management services. The construction manager at-risk method allows the owner of a project to retain a “construction manager,” who provides pre-construction services during the design period and later becomes the general contractor during the construction process. The owner has separate contracts for design and construction services (the construction manager), similar to the design-bid-build method. The owner may establish the separate contracts at the same time, however, thereby allowing the design party and the construction manager to work together, similar to the design-build method. Before construction can begin on a project, the owner and construction manager must agree on either a fixed price or “guaranteed maximum price” for the project. The construction manager is responsible for delivering the project within the agreed upon price, thereby assuming the risk for cost-overruns. Besides counties, the California Administrative Office of the Courts, University of California, California State University System, school districts, and some cities have used the construction manager at-risk method for building construction projects.

Under the construction manager at-risk method, project delivery can occur in sequential or concurrent phases. Projects that have multiple components lend themselves to this method because the design and construction of different aspects of the project can occur at different times. In effect, the overall project can be broken into multiple components, which the construction manager must bid to subcontractors. SB 328 (Knight, 2013) authorized counties to use construction manager at-risk method for projects costing in excess of $1 million, and allowed the county to award the contract to the lowest responsible bidder or by the best value method until January 1, 2018. The author wants to extend the sunset date five years to January 1, 2023, to continue allowing counties to use this flexible contracting tool to complete better-designed, properly-phased, and cost-effective county building projects will benefit county residents throughout California.

Comments

Purpose of the bill. AB 851 will expand the types of public works projects the SCVWD may construct using the design-build project delivery method to include flood protection improvements, habitat restoration or enhancement, water treatment facilities, groundwater recharge or storage facilities, or the retrofit, repair, or expansion of existing surface water storage facilities. All the skilled and trained workforce requirements included in SB 785 will apply, as well as a prohibition on including facility operations in a design-build contract. State and local highway projects are not included, and a January 1, 2025 sunset date will apply. AB 851 is an incremental step that includes all the existing protections established by previous legislation. By authorizing these key water supply, habitat, and flood protection projects for design-build procurement, AB 851 will facilitate faster and more efficient response to climate change, drought, and sea level rise by the SCVWD. Additionally, to allow counties to continue utilizing the construction manager at-risk contracting method past this year, this bill will extend the sunset date for this authority to January 1, 2023.

Design-build. Advocates for the design-build method of contracting for public works contend that project 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 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 argue that design-build makes the procurement process for agencies’ construction projects more subjective. More subjectivity increases the chances that inappropriate factors could influence which bidders are awarded some contracts. For some local governments, this additional subjectivity may be justified by the time and cost savings associated with integrating the design and construction process for complex infrastructure, like hospitals or medical clinics.

SB 785. SB 785 was enacted to harmonize the state’s design-build authorizations that had been scattered across sections of code. The particulars of SB 785 were carefully negotiated to balance the interests of project proponents, labor unions, contractors, and subcontractors. SB 785 specifically prohibited cities and counties from using the design-build project delivery method for the construction of water resources facilities. However, AB 2551 (Gallagher, 2016) created an exception to this rule as it allowed local agencies to use design-build for specific surface storage projects that receive funding from the water storage funding allocation in Proposition 1, the water bond measure approved by the voters in November of 2014. AB 851 creates another exception for the SCVWD. Although proponents may argue that these projects are distinctive and therefore warrant unique authority, AB 851 is just the most recent departure from the standard set by SB 785.

Mandate. The design-build procedures that AB 851 authorizes the SCVWD to use require that specified information provided by bidders in response to a request for qualifications must be certified under penalty of perjury. By creating a new crime, AB 851 also creates a new state-mandated program. But this bill disclaims the state's responsibility for reimbursing local governments for enforcing these new crimes. That's consistent with the California Constitution, which says that the state does not have to reimburse local governments for the costs of new crimes (Article XIIIB, 6[a][2]).

Related/Prior Legislation

AB 851 is one of a number of bills in recent years to authorize specific local agencies to utilize design-build. For example, the Mayers Memorial Hospital District (AB 1290, Dahle, 2015) and the San Diego Association of Governments (SB 974, Committee on Governance and Finance, 2016) were given design-build authority since the adoption of SB 785. Additionally, SB 793 (Hill, 2017) allows the Peninsula Health Care District and the Midpeninsula Regional Open Space District to use design-build and passed out of the Senate Governance and Finance Committee with a vote of 7-0 on April 19th, and AB 994 (Muratsuchi, 2017) allows the Beach Cities Health District to use design-build and passed out of the Senate Governance and Finance Committee with a vote of 7-0 on June 21st. Lastly, SB 373 (Cannella, 2017), approved by the Senate Governance and Finance Committee at the May 3rd hearing with a vote of 6-0, allows the Stanislaus Regional Water Authority to utilize design-build to construct a surface water supply project.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/29/17)

Santa Clara Valley Water District (source)

Association of California Water Agencies

California Municipal Utilities Association

Rural County Representatives of California

San Mateo County

Santa Clara County

Silicon Valley Leadership Group

State Building and Construction Trades Council

Urban Counties of California

OPPOSITION: (Verified 8/29/17)

Associated Builders and Contractors – Central California Chapter

Associated Builders and Contractors – San Diego Chapter

Associated Builders and Contractors – Southern California Chapter

California Chapters of American Fire Sprinkler Association

Independent Roofing Contractors of California, Inc.

Plumbing-Heating-Cooling Contractors Association of California

Western Electrical Contractors Association

ASSEMBLY FLOOR: 77-0, 5/30/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chávez, Chen, Chiu, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Chau, Choi, Eggman

Prepared by:

8/30/17 13:46:23

**** END ****

 THIRD READING  

Bill No: AB 851

Author:

:

Vote:

SENATE GOVERNANCE & FIN. COMMITTEE: 7-0, 7/5/17

AYES: McGuire, Nguyen, Beall, Hernandez, Hertzberg, Lara, Moorlach

SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8

ASSEMBLY FLOOR: 77-0, 5/30/17 (Consent) - See last page for vote

SUBJECT:

SOURCE: Santa Clara Valley Water District

DIGEST:

This bill authorizes the Santa Clara Valley Water District (SCVWD) to use design-build for certain projects and extends the sunset date for counties to use the construction manager at-risk contracting method.

ANALYSIS:

Existing law:

1. Requires, pursuant to the Local Agency Public Construction Act (LAPC Act), local officials 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, until January 1, 2025, cities, counties, and specified special districts and transit agencies to use design-build for specified public works contracts in excess of $1 million using either a low bid or best value process.
3. Provides the following parameters for cities and counties that use design-build pursuant to 2), above:
   1. Allows design-build for 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 and recreational facilities;
   2. Allow cities and counties that operate wastewater facilities, solid waste management facilities, or water recycling facilities to use design-build for the construction of such facilities, both local and regional; and,
   3. Prohibits cities and counties from using design-build for the construction of other infrastructure, including, but not limited to, streets and highways, public rail transit, or water resources facilities and infrastructure.
4. Authorizes counties to use construction manager at-risk method for projects costing in excess of $1 million, and allows the county to award the contract to the lowest responsible bidder or by the best value method until January 1, 2018.

This bill:

1. Authorizes the SCVWD, upon approval of its board of directors, to use the design-build contract procurement method that existing law authorizes for local agencies until January 1, 2025, for the following projects:
   1. Flood protection improvements.
   2. Habitat restorations or enhancements.
   3. Groundwater recharge or storage facilities.
   4. Water treatment facilities.
   5. The retrofit, repair, or expansion of existing surface water storage facilities.
2. Extends the sunset date of the authority for counties to utilize the construction manager at-risk contracting method until January 1, 2023.
3. Requires that a construction manager at-risk entity must not be prequalified, shortlisted, or awarded a contract unless the entity provides an enforceable commitment, to the county, that the entity and its subcontractors, at every tier, will use a skilled and trained workforce to perform all work as specified. This does not apply if any of the following conditions are met:
   1. The county had entered into a project labor agreement that binds all contractors and subcontractors performing work on the project or contract to use a skilled and trained workforce, and the entity agrees to be bound by that project labor agreement.
   2. The project or contract is being performed under the extension or renewal of a project labor agreement entered into by the county before January 1, 2018.
   3. The entity has entered into a project labor agreement that will bind the entity and all its subcontractors at every tier performing the project or contract to use a skilled and trained workforce.

Background

The LAPC Act 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, and most widely-used, approach to public works construction. This approach splits construction projects into two distinct phases: design and construction. During the design phase, the local agency prepares detailed project plans and specifications using its own employees or by hiring outside architects and engineers. Once project designs are complete, local officials invite bids from the construction community and award the contract to the lowest responsible bidder.

Design-build. State law also allows some state and local agencies to use the design-build method to procure both design and construction services from a single company before the development of complete plans and specifications. Until January 1, 2025, all counties and cities can use the design-build method to construct buildings and related improvements and other specified types of public works that cost more than $1 million (SB 785, Wolk, 2014). Under design-build, the agency contracts with a single entity—which can be a single firm, a consortium, or a joint venture—to design and construct a project. Before inviting bids, the agency prepares documents that describe the basic concept of the project, as opposed to a complete set of drawings and specifications of the final product. In the bidding phase, the agency typically evaluates bids on a low-bid or best-value basis, incorporating technical factors, such as qualifications and design quality, in addition to price. The Department of General Services, the California Department of Corrections and Rehabilitation, cities, counties, transit districts, special districts operating wastewater, water recycling, or solid waste management facilities, and certain health care districts may use design-build.

Originally the authorizations for state agencies and local governments to use design-build were dispersed throughout state law in separate code sections. In 2014, the Legislature consolidated these provisions into consistent, generally-applicable statutes (SB 785, Wolk, 2014). SB 785 outlined a standardized design-build procurement process in which the awarding authority may prepare a list of qualified or short-listed entities, based on specified criteria. Once a list of qualified or short-listed entities is complete, the awarding authority may prepare a request for proposals (RFP) that invite prequalified or short-listed entities to submit competitive sealed proposals in the manner prescribed by the awarding authority.

For projects utilizing low bid as the selection method, the competitive bidding process must involve lump-sum bids by the prequalified or short-listed design-build entities. Awards must be made to the design-build entity that is the lowest responsible bidder.

For those projects utilizing best value as a selection method, proposals must be evaluated using only the criteria and selection procedures specifically identified in the RFP. The awarding authority may reserve the right to request revisions and conduct negotiations with responsive proposers, if the authority specifies in the RFP how it will ensure that negotiations are conducted in good faith. The authority may hold discussions or negotiations with responsive proposers using the process specified in the RFP. Responsive proposers are ranked based on value provided. The contract must be awarded to the responsible design-build entity whose proposal is determined by the authority to have offered the best value to the public. Upon issuance of a contract award, the awarding authority must publicly announce its award, identifying the design-build entity to which the award is made, along with a written decision supporting its contract award and stating the basis of the award.

The state’s design-build statutes also impose requirements for the use of skilled labor, the issuance of performance bonds, insurance coverage, and identification of subcontractors that will complete at least one-half of 1% of the value of a contract.

The SCVWD is the primary water resources agency for Santa Clara County. First formed as the Santa Clara Valley Water Conservation District in 1929, it now acts not only as the County's water wholesaler, but also as its flood protection agency and is the steward for its streams and creeks, underground aquifers and district-built reservoirs. The District owns and manages 10 local surface reservoirs and associated creeks and recharge facilities, manages the County’s groundwater basins and three water treatment plants, imports water from the Central Valley Project and the State Water Project, and delivers recycled water to parts of the County. The District is also responsible for flood protection within the County. Its stewardship responsibilities include creek restoration and wildlife habitat projects, pollution prevention efforts and a commitment to natural flood protection.

SCVWD was given the authority to utilize design-build by AB 674 (Dutra, 2001). However, when SB 785 consolidated the different design-build code sections, the code section that gave it this authority was repealed. To facilitate faster and more efficient local agency response to constantly changing environmental conditions from the SCVWD, the District wants the Legislature to give reactivate its authority to utilize design-build on certain projects.

Construction manager at-risk. A method known as construction manager at-risk is another approach to public works construction and delivery which combines elements of the design-bid-build and design-build methods, and uses construction project management services. The construction manager at-risk method allows the owner of a project to retain a “construction manager,” who provides pre-construction services during the design period and later becomes the general contractor during the construction process. The owner has separate contracts for design and construction services (the construction manager), similar to the design-bid-build method. The owner may establish the separate contracts at the same time, however, thereby allowing the design party and the construction manager to work together, similar to the design-build method. Before construction can begin on a project, the owner and construction manager must agree on either a fixed price or “guaranteed maximum price” for the project. The construction manager is responsible for delivering the project within the agreed upon price, thereby assuming the risk for cost-overruns. Besides counties, the California Administrative Office of the Courts, University of California, California State University System, school districts, and some cities have used the construction manager at-risk method for building construction projects.

Under the construction manager at-risk method, project delivery can occur in sequential or concurrent phases. Projects that have multiple components lend themselves to this method because the design and construction of different aspects of the project can occur at different times. In effect, the overall project can be broken into multiple components, which the construction manager must bid to subcontractors. SB 328 (Knight, 2013) authorized counties to use construction manager at-risk method for projects costing in excess of $1 million, and allowed the county to award the contract to the lowest responsible bidder or by the best value method until January 1, 2018. The author wants to extend the sunset date five years to January 1, 2023 to continue allowing counties to use this flexible contracting tool to complete better-designed, properly-phased, and cost-effective county building projects will benefit county residents throughout California.

Comments

Purpose of the bill. AB 851 will expand the types of public works projects the SCVWD may construct using the design-build project delivery method to include flood protection improvements, habitat restoration or enhancement, water treatment facilities, groundwater recharge or storage facilities, or the retrofit, repair, or expansion of existing surface water storage facilities. All the skilled and trained workforce requirements included in SB 785 will apply, as well as a prohibition on including facility operations in a design-build contract. State and local highway projects are not included, and a January 1, 2025 sunset date will apply. AB 851 is an incremental step that includes all the existing protections established by previous legislation. By authorizing these key water supply, habitat, and flood protection projects for design-build procurement, AB 851 will facilitate faster and more efficient response to climate change, drought, and sea level rise by the SCVWD. Additionally, to allow counties to continue utilizing the construction manager at-risk contracting method past this year, this bill will extend the sunset date for this authority to January 1, 2023.

Design-build. Advocates for the design-build method of contracting for public works contend that project 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 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 argue that design-build makes the procurement process for agencies’ construction projects more subjective. More subjectivity increases the chances that inappropriate factors could influence which bidders are awarded some contracts. For some local governments, this additional subjectivity may be justified by the time and cost savings associated with integrating the design and construction process for complex infrastructure, like hospitals or medical clinics.

SB 785. SB 785 was enacted to harmonize the state’s design-build authorizations that had been scattered across sections of code. The particulars of SB 785 were carefully negotiated to balance the interests of project proponents, labor unions, contractors, and subcontractors. SB 785 specifically prohibited cities and counties from using the design-build project delivery method for the construction of water resources facilities. However, AB 2551 (Gallagher, 2016) created an exception to this rule as it allowed local agencies to use design-build for specific surface storage projects that receive funding from the water storage funding allocation in Proposition 1, the water bond measure approved by the voters in November of 2014. AB 851 creates another exception for the SCVWD. Although proponents may argue that these projects are distinctive and therefore warrant unique authority, AB 851 is just the most recent departure from the standard set by SB 785.

Mandate. The design-build procedures that AB 851 authorizes the SCVWD to use require that specified information provided by bidders in response to a request for qualifications must be certified under penalty of perjury. By creating a new crime, AB 851 also creates a new state-mandated program. But this bill disclaims the state's responsibility for reimbursing local governments for enforcing these new crimes. That's consistent with the California Constitution, which says that the state does not have to reimburse local governments for the costs of new crimes (Article XIIIB, 6[a][2]).

Related/Prior Legislation

AB 851 is one of a number of bills in recent years to authorize specific local agencies to utilize design-build. For example, the Mayers Memorial Hospital District (AB 1290, Dahle, 2015) and the San Diego Association of Governments (SB 974, Committee on Governance and Finance, 2016) were given design-build authority since the adoption of SB 785. Additionally, SB 793 (Hill, 2017) allows the Peninsula Health Care District and the Midpeninsula Regional Open Space District to use design-build and passed out of the Senate Governance and Finance Committee with a vote of 7-0 on April 19th, and AB 994 (Muratsuchi, 2017) allows the Beach Cities Health District to use design-build and passed out of the Senate Governance and Finance Committee with a vote of 7-0 on June 21st. Lastly, SB 373 (Cannella, 2017), approved by the Senate Governance and Finance Committee at the May 3rd hearing with a vote of 6-0, allows the Stanislaus Regional Water Authority to utilize design-build to construct a surface water supply project.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 7/18/17)

Santa Clara Valley Water District (source)

Association of California Water Agencies

California Municipal Utilities Association

Rural County Representatives of California

San Mateo County

Santa Clara County

Silicon Valley Leadership Group

State Building and Construction Trades Council

Urban Counties of California

OPPOSITION: (Verified 8/21/17)

Associated Builders and Contractors – Central California Chapter

Associated Builders and Contractors – San Diego Chapter

Associated Builders and Contractors – Southern California Chapter

California Chapters of American Fire Sprinkler Association

Independent Roofing Contractors of California, Inc.

Plumbing-Heating-Cooling Contractors Association of California

Western Electrical Contractors Association

ASSEMBLY FLOOR: 77-0, 5/30/17

AYES: Acosta, Aguiar-Curry, Travis Allen, Arambula, Baker, Berman, Bigelow, Bloom, Bocanegra, Bonta, Brough, Burke, Caballero, Calderon, Cervantes, Chávez, Chen, Chiu, Chu, Cooley, Cooper, Cunningham, Dababneh, Dahle, Daly, Flora, Fong, Frazier, Friedman, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gomez, Gonzalez Fletcher, Gray, Grayson, Harper, Holden, Irwin, Jones-Sawyer, Kalra, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Quirk, Quirk-Silva, Reyes, Ridley-Thomas, Rodriguez, Rubio, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Voepel, Waldron, Weber, Wood, Rendon

NO VOTE RECORDED: Chau, Choi, Eggman

Prepared by:

8/21/17 10:11:39

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2017 - 2018 Regular

Local agency: contracts

Authorizes the Santa Clara Valley Water District to use design-build for certain projects and extends the sunset date for counties to use the construction manager at-risk contracting method.

Background

The Local Agency Public Construction Act 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, and most widely-used, approach to public works construction. This approach splits construction projects into two distinct phases: design and construction. During the design phase, the local agency prepares detailed project plans and specifications using its own employees or by hiring outside architects and engineers. Once project designs are complete, local officials invite bids from the construction community and award the contract to the lowest responsible bidder.

Design-build. State law also allows some state and local agencies to use the design-build method to procure both design and construction services from a single company before the development of complete plans and specifications. Until January 1, 2025, all counties and cities can use the design-build method to construct buildings and related improvements and other specified types of public works that cost more than $1 million (SB 785, Wolk, 2014). Under design-build, the agency contracts with a single entity—which can be a single firm, a consortium, or a joint venture—to design and construct a project. Before inviting bids, the agency prepares documents that describe the basic concept of the project, as opposed to a complete set of drawings and specifications of the final product. In the bidding phase, the agency typically evaluates bids on a low-bid or best-value basis, incorporating technical factors, such as qualifications and design quality, in addition to price. The Department of General Services, the California Department of Corrections and Rehabilitation, cities, counties, transit districts, special districts operating wastewater, water recycling, or solid waste management facilities, and certain health care districts may use design-build.

Originally the authorizations for state agencies and local governments to use design-build were dispersed throughout state law in separate code sections. In 2014, the Legislature consolidated these provisions into consistent, generally-applicable statutes (SB 785, Wolk, 2014). SB 785 outlined a standardized design-build procurement process in which the awarding authority may prepare a list of qualified or short-listed entities, based on specified criteria. Once a list of qualified or short-listed entities is complete, the awarding authority may prepare a request for proposals (RFP) that invite prequalified or short-listed entities to submit competitive sealed proposals in the manner prescribed by the awarding authority.

For projects utilizing low bid as the selection method, the competitive bidding process must involve lump-sum bids by the prequalified or short-listed design-build entities. Awards must be made to the design-build entity that is the lowest responsible bidder.

For those projects utilizing best value as a selection method, proposals must be evaluated using only the criteria and selection procedures specifically identified in the RFP. The awarding authority may reserve the right to request revisions and conduct negotiations with responsive proposers, if the authority specifies in the RFP how it will ensure that negotiations are conducted in good faith. The authority may hold discussions or negotiations with responsive proposers using the process specified in the RFP. Responsive proposers are ranked based on value provided. The contract must be awarded to the responsible design-build entity whose proposal is determined by the authority to have offered the best value to the public. Upon issuance of a contract award, the awarding authority must publicly announce its award, identifying the design-build entity to which the award is made, along with a written decision supporting its contract award and stating the basis of the award.

The state’s design-build statutes also impose requirements for the use of skilled labor, the issuance of performance bonds, insurance coverage, and identification of subcontractors that will complete at least one-half of 1% of the value of a contract.

The Santa Clara Valley Water District (SCVWD) is the primary water resources agency for Santa Clara County. First formed as the Santa Clara Valley Water Conservation District in 1929, it now acts not only as the County's water wholesaler, but also as its flood protection agency and is the steward for its streams and creeks, underground aquifers and district-built reservoirs. The District owns and manages 10 local surface reservoirs and associated creeks and recharge facilities, manages the County’s groundwater basins and three water treatment plants, imports water from the Central Valley Project and the State Water Project, and delivers recycled water to parts of the County. The District is also responsible for flood protection within the County. Its stewardship responsibilities include creek restoration and wildlife habitat projects, pollution prevention efforts and a commitment to natural flood protection.

SCVWD was given the authority to utilize design-build by AB 674 (Dutra, 2001). However, when SB 785 consolidated the different design-build code sections, the code section that gave it this authority was repealed. To facilitate faster and more efficient local agency response to constantly changing environmental conditions from the SCVWD, the district wants the legislature to give reactivate its authority to utilize design-build on certain projects.

Construction manager at-risk. A method known as construction manager at-risk is another approach to public works construction and delivery which combines elements of the design-bid-build and design-build methods, and uses construction project management services. The construction manager at-risk method allows the owner of a project to retain a “construction manager,” who provides pre-construction services during the design period and later becomes the general contractor during the construction process. The owner has separate contracts for design and construction services (the construction manager), similar to the design-bid-build method. The owner may establish the separate contracts at the same time, however, thereby allowing the design party and the construction manager to work together, similar to the design-build method. Before construction can begin on a project, the owner and construction manager must agree on either a fixed price or “guaranteed maximum price” for the project. The construction manager is responsible for delivering the project within the agreed upon price, thereby assuming the risk for cost-overruns. Besides counties, the California Administrative Office of the Courts, University of California, California State University System, school districts, and some cities have used the construction manager at-risk method for building construction projects.

Under the construction manager at-risk method, project delivery can occur in sequential or concurrent phases. Projects that have multiple components lend themselves to this method because the design and construction of different aspects of the project can occur at different times. In effect, the overall project can be broken into multiple components, which the construction manager must bid to subcontractors. SB 328 (Knight, 2013) authorized counties to use construction manager at-risk method for projects costing in excess of $1 million, and allowed the county to award the contract to the lowest responsible bidder or by the best value method until January 1, 2018. The author wants to extend the sunset date 5 years to January 1, 2023 to continue allowing counties to use this flexible contracting tool to complete better-designed, properly-phased, and cost-effective county building projects will benefit county residents throughout California.

Proposed Law

Assembly Bill 851 authorizes the SCVWD, upon approval of its board of directors, to use the design-build contract procurement method that existing law authorizes for local agencies until January 1, 2025, for the following projects:

• Flood protection improvements.
• Habitat restorations or enhancements.
• Groundwater recharge or storage facilities.
• Water treatment facilities.
• The retrofit, repair, or expansion of existing surface water storage facilities.

This bill extends the sunset date of the authority for counties to utilize the construction manager at-risk contracting method until January 1, 2023.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. AB 851 will expand the types of public works projects the Santa Clara Valley Water District may construct using the design-build project delivery method to include flood protection improvements, habitat restoration or enhancement, water treatment facilities, groundwater recharge or storage facilities, or the retrofit, repair, or expansion of existing surface water storage facilities. All the skilled and trained workforce requirements included in SB 785 will apply, as well as a prohibition on including facility operations in a design-build contract. State and local highway projects are not included, and a January 1, 2025 sunset date will apply. AB 851 is an incremental step that includes all the existing protections established by previous legislation. By authorizing these key water supply, habitat, and flood protection projects for design-build procurement, AB 851 will facilitate faster and more efficient response to climate change, drought, and sea level rise by the Santa Clara Valley Water District. Additionally, to allow counties to continue utilizing the construction manager at-risk contracting method past this year, this bill will extend the sunset date for this authority to January 1, 2023.

2. Design-build. Advocates for the design-build method of contracting for public works contend that project 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 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 argue that design-build makes the procurement process for agencies’ construction projects more subjective. More subjectivity increases the chances that inappropriate factors could influence which bidders are awarded some contracts. For some local governments, this additional subjectivity may be justified by the time and cost savings associated with integrating the design and construction process for complex infrastructure, like hospitals or medical clinics.

3. SB 785. SB 785 was enacted to harmonize the state’s design-build authorizations that had been scattered across sections of code. The particulars of SB 785 were carefully negotiated to balance the interests of project proponents, labor unions, contractors, and subcontractors. SB 785 specifically prohibited cities and counties from using the design-build project delivery method for the construction of water resources facilities. However, AB 2551 (Gallagher, 2016) created an exception to this rule as it allowed local agencies to use design-build for specific surface storage projects that receive funding from the water storage funding allocation in Proposition 1, the water bond measure approved by the voters in November of 2014. AB 851 creates another exception for the Santa Clara Valley Water District. Although proponents may argue that these projects are distinctive and therefore warrant unique authority, AB 851 is just the most recent departure from the standard set by SB 785. The Committee may wish to consider a discussion on broadening design-build authority for large projects to all local agencies regardless of the type of project.

4. Related legislation. AB 851 is one of a number of bills in recent years to authorize specific local agencies to utilize design-build. For example, the Mayers Memorial Hospital District (AB 1290, Dahle, 2015) and the San Diego Association of Governments (SB 974, Committee on Governance and Finance, 2016) were given design-build authority since the adoption of SB 785. Additionally, SB 793 (Hill) allows the Peninsula Health Care District and the Midpeninsula Regional Open Space District to use design-build and passed out of this Committee with a vote of 7-0 on April 19^th, and AB 994 (Muratsuchi) allows the Beach Cities Health District to use design-build and passed out of this Committee with a vote of 7-0 on June 21^st. Lastly, SB 373 (Cannella), approved by the Senate Governance and Finance Committee at the May 3^rd hearing with a vote of 6-0, allows the Stanislaus Regional Water Authority to utilize design-build to construct a surface water supply project.

5. Mandate. The design-build procedures that AB 851 authorizes the SCVWD to use require that specified information provided by bidders in response to a request for qualifications must be certified under penalty of perjury. By creating a new crime, AB 851 also creates a new state-mandated program. But the bill disclaims the state's responsibility for reimbursing local governments for enforcing these new crimes. That's consistent with the California Constitution, which says that the state does not have to reimburse local governments for the costs of new crimes (Article XIIIB, 6[a][2]).

Assembly Actions

Assembly Local Government 9-0
Assembly Appropriations 17-0
Assembly Floor 77-0

Support and Opposition

(6/30/17)

Support: Santa Clara Valley Water District (Sponsor), Association of California Water Agencies; California Municipal Utilities Association; Rural County Representatives of California; Santa Clara County; Silicon Valley Leadership Group; State Building and Construction Trades Council; Urban Counties of California.

Opposition: Unknown.

-- END --

Date of Hearing: May 24, 2017

ASSEMBLY COMMITTEE ON APPROPRIATIONS

Lorena Gonzalez Fletcher, Chair

ABPCA Bill Id:AB 851

Author:(Caballero) – As Amended Ver:May 10, 2017

Urgency: No State Mandated Local Program: Yes Reimbursable: No

SUMMARY:

This bill authorizes the Santa Clara Valley Water District (District) to use design-build when contracting for the construction of a building or buildings and improvements directly related to the construction of a building or buildings. Also authorizes the District to use design-build the following types of projects:

• 1. Flood protection improvements;
  2. Habitat restorations or enhancements;
  3. Groundwater recharge or storage facilities;
  4. Water treatment facilities; and,
  5. The retrofit, repair, or expansion of existing surface water storage facilities.

FISCAL EFFECT:

Negligible state fiscal impact.

COMMENTS:

1. Purpose. According to the author, "AB 851 will expand the types of public works projects the Santa Clara Valley Water District may construct using the design-build project delivery method to include flood protection improvements, habitat restoration or enhancement, water treatment facilities, groundwater recharge or storage facilities, or the retrofit, repair, or expansion of existing surface water storage facilities.

"All the skilled and trained workforce requirements included in SB 785 will apply, as well as a prohibition on including facility operations in a design-build contract. State and local highway projects are not included, and a January 1, 2025 sunset date will apply. AB 851 is an incremental step that includes all the existing law protections established by previous legislation.

“By authorizing these key water supply, habitat, and flood protection projects for design-build procurement, AB 851 will facilitate faster and more efficient response to climate change, drought, and sea level rise by the Santa Clara Valley Water District."

1. Background. Existing law authorizes a local agency to construct certain public works projects using the design-build project delivery method if the cost of the procurement exceeds one million dollars. Under the law, a local agency may use design-build to construct wastewater treatment facilities, solid waste facilities, water recycling facilities, or fire protection facilities.

Design-build is one of several methods of project delivery that are available to an entity seeking to design and construct a building or other infrastructure. The traditional procurement method for local agencies in California has been design-bid-build in which a project is designed by one entity and then constructed by another. Over the past fifteen years, the Legislature has expanded the number of public entities and projects that are authorized for the use of design-build. Today local agencies are authorized to construct buildings using design-build, and are authorized to build certain public works projects.

SB 785 (Wolk), Chapter 931, Statutes of 2014, was enacted to consolidate a variety of design-build statutes and to create uniform provisions for the use of design-build for specified public works projects. The bill was supported by local agencies, labor, and contractors, and both simplified compliance for contractors and protected workers with skilled and trained workforce requirements.

The District manages an integrated water resources system that includes the supply of clean, safe water, flood protection and stewardship of streams on behalf of Santa Clara County's nearly 1.9 million residents. The District effectively manages 10 dams and surface water reservoirs, three water treatment plants, an advanced recycled water purification center, a state-of-the-art water quality laboratory, nearly 400 acres of groundwater recharge ponds and more than 275 miles of streams. The agency provides wholesale water and groundwater management services to local municipalities and private water retailers who deliver drinking water directly to homes and businesses in Santa Clara County.

1. Related Legislation. AB 1523 (Obernolte) authorizes the San Bernardino County Transportation Authority to use design-build for the construction of the Mt. Vernon Avenue Viaduct project in the city of San Bernardino. AB 1523 is before this Committee today.

Analysis Prepared by: Jennifer Swenson / APPR. / (916) 319-2081

Date of Hearing: April 26, 2017

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Cecilia Aguiar-Curry, Chair

ABPCA Bill Id:AB 851 (

Author:Caballero) – As Amended Ver:April 17, 2017

SUBJECT: Local agency design-build projects.

SUMMARY: Allows additional types of special districts to use the design-build procurement method that is authorized for specified local agencies, and allows cities, counties and special districts to use design-build for additional types of projects. Specifically, this bill:

1. Allows additional types of special districts to use design-build, to include a special district that provides or operates any of the following: flood protection, habitat restoration or enhancement; groundwater recharge or storage; surface water storage; or, water treatment facilities.
2. Allows these additional types of special districts, the types of special districts already authorized to use design-build, and cities and counties to use design-build for these additional types of projects:
   1. Flood protection improvements;
   2. Habitat restorations or enhancements;
   3. Groundwater recharge or storage facilities;
   4. Water treatment facilities; and,
   5. The retrofit, repair, or expansion of existing surface water storage facilities.
3. Allows the Santa Clara Valley Water District to use design-build when contracting for improvements directly related to the construction of a building or buildings, and updates a cross-reference in the District's enabling statutes.
4. Provides that no reimbursement is required by this bill pursuant to the California Constitution because the only costs that may be incurred by a local agency will be incurred because this bill creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, as specified.

EXISTING LAW:

1. Requires, pursuant to the Local Agency Public Construction Act (LAPC Act), local officials 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, until January 1, 2025, cities, counties, and specified special districts and transit agencies to use design-build for specified public works contracts in excess of $1 million using either a low bid or best value process.
3. Provides the following parameters for cities and counties that use design-build pursuant to 2), above:
   1. Allows design-build for 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 and recreational facilities;
   2. Allow cities and counties that operate wastewater facilities, solid waste management facilities, or water recycling facilities to use design-build for the construction of such facilities, both local and regional; and,
   3. Prohibits cities and counties from using design-build for the construction of other infrastructure, including, but not limited to, streets and highways, public rail transit, or water resources facilities and infrastructure [with the exception of b), above].
4. Generally limits the types of special districts that may use design-build pursuant to 2), above, to transit districts, and special districts that operate wastewater facilities, solid waste management facilities, water recycling facilities, or fire protection facilities.
5. Limits the types of projects that special districts can construct using design-build pursuant to 2), above, to the following:
   1. Transit capital projects that begin project solicitation on or after January 1, 2015, excluding state highway construction or local street and road projects (for transit districts); and,
   2. Regional and local wastewater treatment facilities, regional and local solid waste facilities, regional and local water recycling facilities, or fire protection facilities (for special districts that operate those types of facilities).

FISCAL EFFECT: This bill is keyed fiscal and contains a state-mandated local program.

COMMENTS:

1. Bill Summary. This bill allows additional types of special districts to use design-build, to include a special district that provides or operates any of the following: flood protection, habitat restoration or enhancement; groundwater recharge or storage; surface water storage; or, water treatment facilities.

This bill allows these additional types of special districts, the types of special districts already authorized to use design-build, and cities and counties to use design-build for these additional types of projects:

• 1. Flood protection improvements;
  2. Habitat restorations or enhancements;
  3. Groundwater recharge or storage facilities;
  4. Water treatment facilities; and,
  5. The retrofit, repair, or expansion of existing surface water storage facilities.

This bill is sponsored by the Santa Clara Valley Water District.

1. Author's Statement. According to the author, "AB 851 will expand the types of public works projects a local agency may construct using the design-build project delivery method to include flood protection improvements, habitat restoration or enhancement, water treatment facilities, groundwater recharge or storage facilities, or the retrofit, repair, or expansion of existing surface water storage facilities. Increasing climate volatility is challenging local agencies to be more drought and flood resilient, and requires the delivery of public works projects by local agencies that go beyond those authorized under current design-build law. After years of drought that have threatened regional and local water supplies, local agencies are seeking to recharge groundwater basins, clean up contaminated groundwater, improve water treatment, and to retrofit, repair, or expand existing water storage facilities. Authorizing design-build procurement for these critical water supply, habitat, and flood protection projects provides local agencies with options that may enable faster delivery and at a lower cost, providing more public benefits with existing resources.

"AB 851 preserves all the skilled and trained workforce requirements included in existing law, as well as a prohibition on including facility operations in a design-build contract. State and local highway projects are not included, and the January 1, 2025 sunset date in existing statute will remain in effect. AB 851 is an incremental step that includes all the existing law protections established by previous legislation. By authorizing these key water supply, habitat, and flood protection projects for design-build procurement, AB 851 will facilitate faster and more efficient local agency response to climate change, drought, and sea level rise."

1. 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. The design-bid-build process was developed to protect taxpayers from extravagance, corruption, and other improper practices by public officials as well as to secure a fair and reasonable price for public works construction by injecting competition amongst bidders into the process.

Although design-bid-build generally results in the lowest cost construction contract, it is not without its drawbacks, including:

• 1. Projects generally take longer to complete because designs must be entirely completed, permits obtained, and right-of-way acquired before the construction contract can be bid and awarded.
  2. Designs prepared for a competitive low-bid procurement are developed to allow for a broad range of construction approaches. As a result, low-bid designs do not always equate to the most efficient design possible, depending on a particular contractor's particular strengths or capabilities.
  3. Because the project designer does not have the benefit of consulting with the entity that will ultimately be responsible for construction of the project, there may be significant issues that the designer does not anticipate, particularly constructability issues. This can result in change orders that ultimately drive up the price of the contract.
  4. Low-bid is not always the least expensive option, once change orders and contractor claims are factored into the overall project costs.

In the early 1990s, public works agencies grew frustrated with design-bid-build and began experimenting with other project delivery methods, including design-build. 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.

Design-build differs from design-bid-build in some key areas, including:

• 1. Shorter overall elapsed project delivery time because construction can begin before final design is complete;
  2. Project costs and schedule risks are more heavily borne by the design-build contractor;
  3. Construction claims and change orders are minimized;
  4. Designs can be developed to take advantage of particular contractor's strengths and abilities, thereby reducing the need to "over-design" for generic use as in design-bid-build;
  5. Project specifications are typically based on definitive performance criteria (which may or may not be well established by the project owner) rather than established specifications; and,
  6. Contracts are awarded based on best-value analyses rather than low-bid.

Design-build contracts are not without their drawbacks as well. For example, with a design-build project, the project owner must give up a good deal of control over the details of the project design. Additionally, design-build contractors are typically selected using qualifications-based selection criteria or best value analysis. These approaches are more subjective than a low-bid approach, potentially subjecting the public works owner to greater contract challenges and higher costs.

1. Design-Build in California Law. As noted above, the Legislature began granting design-build authority in the early 1990's, and has typically done so with specified parameters, such as the duration of the authority, the types of agencies allowed to use it, the types of projects for which it can be used, cost thresholds, and specified procedures that must be followed in preparing and awarding contracts. Over the years, this resulted in a plethora of statutes in a variety of code sections, which created confusion for public agencies and contractors alike.

In an effort to consolidate these statutes, SB 785 (Wolk), Chapter 931, Statutes of 2014, repealed 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 enacted uniform provisions authorizing DGS, CDCR, and specified local agencies to utilize the design-build procurement process for specified public works projects (with some exceptions, notably design-build authority for CalTrans). SB 785 created one set of codes for DGS and CDCR, and a separate set for specified local agencies, but with similar parameters.

1. Limits on Design-Build for Cities and Counties. Existing law now limits the use of design-build by cities and counties to the following types of projects:
   1. 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 and recreational facilities; and,
   2. Local and regional wastewater facilities, solid waste management facilities, or water recycling facilities (for cities and counties that operate such facilities).

Existing law expressly prohibits cities and counties from using design-build for the construction of other infrastructure, including, but not limited to, streets and highways, public rail transit, or water resources facilities and infrastructure [with the exception of b), above].

1. Limits on Design-Build for Special Districts. Existing law also limits the use of design-build for special districts by both type of district and type of project. The types of special districts that may use design-build include: transit districts; and, special districts that operate wastewater facilities, solid waste management facilities, water recycling facilities, or fire protection facilities.

For special districts that operate wastewater facilities, solid waste management facilities, water recycling facilities, or fire protection facilities, their use of design-build is limited to the following types of projects:

• 1. Regional and local wastewater treatment facilities;
  2. Regional and local solid waste facilities;
  3. Regional and local water recycling facilities; and,
  4. Fire protection facilities.

1. Policy Consideration. The Committee may wish to consider the following: while California's need for flood protection, habitat restoration, and water infrastructure improvements is clearly widespread and pressing, and while the use of design-build in the water sector has been growing steadily, the Legislature has historically granted design-build authority on a more limited and incremental basis. The sponsor of this bill estimates the number of special districts alone that would be impacted by this bill to be anywhere between 1,200 and 1,500 districts. As for the number of potential projects impacted, there is no estimate. The Committee may wish to consider the precedent of expanding design-build authority in such a broad manner, and whether this bill's expanded design-build authority should be narrowed in any way.

1. Related Legislation. AB 1523 (Obernolte) expands existing design-build authorization for transit agencies to include transportation agencies and allows these agencies, as well as cities and counties, to use design-build for projects on local streets and roads. AB 1523 is pending in this Committee.
2. Previous Legislation. SB 785 (Wolk), Chapter 931, Statutes of 2014, repealed existing law authorizing DGS, CDCR, and local agencies to use the design-build procurement process, and enacted uniform provisions authorizing DGS, CDCR, and specified local agencies to utilize the design-build procurement process for specified public works projects.
3. Arguments in Support. The Santa Clara Valley Water District, sponsor of this measure, writes, "The use of design-build project delivery has been growing in recent years, particularly for large projects. A 2014 study sponsored by the Design Build Institute of America found that over half of non-residential projects in the United States with a cost exceeding $10 million are delivered using design-build. That same study found that 59 percent of construction dollars spent in California are on design-build projects. The benefits of design-build for local agencies are realized by contracting with a single, unified team that is responsible for the successful completion of the project. Mistakes or miscommunications between the designer and the builder are avoided, and with only one contract to award and manage, the local agency may yield a faster project completion while reducing their liability for project failures."
4. Arguments in Opposition. The American Federation of State, County and Municipal Employees, in opposition, writes, "On behalf of AFSCME members working throughout California, including members working at Metropolitan Water District and East Bay Municipal Utilities District, whose jobs are at risk of being outsourced under this proposed expansion of design-build authority, we ask you to vote no on this bill."

REGISTERED SUPPORT / OPPOSITION:

Support

Santa Clara Valley Water District [SPONSOR]

American Council of Engineering Companies, California

California Municipal Utilities Association

California Special Districts Association

California State Association of Counties

Desert Water Agency

Design-Build Institute of America

El Dorado Irrigation District

Otay Water District (if amended)

Rural County Representatives of California

Santa Clara Valley Open Space Authority

State Building and Construction Trades Council, AFL-CIO

Valley Ag Water Coalition

Opposition

American Federation of State, County and Municipal Employees

Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958