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HomeMy WebLinkAboutPC - Public CommentsANIMAL`01►H0SPITAL October 25, 2005 Dear City Council members, My name is Eman W. Jassim and I am a veterinarian practicing at Peninsula Animal Hospital at 2915 Newport Blvd. Peninsula Animal Hospital is on the Balboa Peninsula in a commercially zoned area, and therefore is not zoned for the boarding of animals. My clients that live in and around the peninsula regularly request boarding for their pets, but I am forced to refer them to more distant boarding facilities as boarding is not permitted by zoning regulations. I would like the opportunity to offer my clients local boarding. I am requesting the city council to initiate an amendment of the Cannery Village/McFadden Square specific plan to permit boarding of animals in commercial areas subject to a conditional use permit. The use permit at a particular location would be subject to individual assessment to ensure that no detrimental effects would occur. Thank you very much for your time and consideration. Sincerely, Qyr Eman W. Jassim, DVM 2915 Newport Blvd., Newport Beach, CA 92663 • (949) 675 -4800 Oat 12 Ob 08:22a CIFAC t*W k vl�l 925 957 -1800 p.2 February 3, 2005 ELIZABETH G. HILL • LEGISLATIVE ANALYST .tq-a 1SIS S 13, Z ftrl � 3 -3 tz—::� Design build is o construction delivery method that is relatively new to state and local govern- ment. Seventeen statutes have been enacted since 1993 authorizing its limited use by the state and local agencies. In this report, we look of the experience of these agencies and exam- ine the advantages and disadvon"es of the design -build method compared to the tradi- tional design bid -build method. We find that design -build can be a useful option for some public construction projects. We make recom- mendations for statutory changes to provide that option while preserving the public's confi- dence in the procurement process, quality control, and access for small contractors to public contracts. ■ Oct 12 05 08.22a CIFAC AN LAO REPORT 925 957 -1800 p.3 This report was prepared by Pool Guyer, and To request publications call (916) 445 -4656. reviewed by Dona Curry. The Legislative This report and others, as well as an E -moa Analyst's Office (I.A.0) is o nonpartisan office ■ subscription service, are available an the which provides fiscal and policy information LAO'g tntamet sfto at www.loo.co.gov. The and advice to the Legislature. LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. LEGISLATIVE ANALYST'S OFFICE Oct 12 05 08:22a CIFAC AN LAO REPORT 925 957 -1800 p4 DESIGN - BUILD: AN ALTERNATIVE CONSTRUCTION SYSTEM For most of the last century the state --like all sectors of government across the nation — accomplished construction work using a system called 'design - bid - build." The state used this approach almost exclusively to build its roads and freeways, public buildings, correctional institutions, universities, hospitals, and water and natural resources infrastructure. Similarly, local governments have used mainly design-bid -build to construct public projects. In the 1990s, the state began to experiment with awarding and managing construction contracts using the "design- build" system. Figure 1 (see next page) summarizes the vari- ous legislation authorizing state and local entities to use desig bu under specified circumstances. Seven of the laws require local entities that use the process to report on their projects to the Legislative Analyst's Office (LAO) at various times between December 2004 and January 2007. Three of the law's (Chapters 594 of 2000, 637 of 2002, and 976 of 2002) require the LAO to report on these implementations of design - build. This report contains the LAO's consoli- dated findings on design -build to date. Specf- caliy, the report describes the differences between the primary construction delivery and procurement processes, and discusses their advantages and disadvantages. The report then reviews public sector experience using design - build in California, and makes recommendations regarding design -build authority for state and local agencies. CONSTRUCTION DELIVERY AND PROCUREMENT CoNSTRUCTIoN DELIVERY There are two primary construction delivery systems used in the public and private sectors. These are (1) the traditional design- bid -build and (2) the increasingly common design -build approaches. The construction delivery system defines the contractual and reporting relation- ship among the principal participants in the construction project and the methods and procedures used to complete construction. Figure 2 (see page 5) shows these relationships In simplified form. White there are variations to these approaches, most construction delivery systems fail into one or the other. LEGISLATIVE ANALYST'S OFFICE Design- Bid -Build Under the design - bid -build system, the public agency first awards an architect/engineer contract to design the project based on subjec- tive criteria of qualifications and experience of the architect/engineer- This contract generally accounts for a relatively small portion of the project's total costs —about 5 percent to 10 per- cent After detailed project plans and drawings are completed, a contractor is selected to perform the construction work, which accounts for 90 percent to 95 percent of the project's costs. In almost all cases, contracts for construc- tion work are awarded objectively based on competitive bidding, UCt 12 Ub U6:23a CIFAC AN LAO REPORT Design -Build With design-build, the public agency con- tracts with a general contractor to both design and build the project. The agency does not 925 957 -1800 p5 separately contract with an architect /engineer for design. That is the responsibility of the general contractor. The general contractor in turn subcontracts, through competitive bidding Figure 1 Recent State Laws Authorizing Design -Build Ch4M93 (AB 816 Bran) Juniparo Sena (Los AWIes)ard CrMCan* MW Frar4em) buiMlres. Ch 43093(SB72. Petwe Eft Harris(OWdend) h&r4 Ch 76'.,'87 {SB 7270, Johnsiat) East End Projcd {Seaamermj. -- blast Ova projeclsaudarized by Leg WWra buMtBty ltasAn9elesl• • Pr*cls nat exceeding $50 mt9on • Expires itir46. 079298 (S31934.Jotxu4o0) Oepaftenl d Coneelore lnadquarmrs(Saaamento}. . AWtused. Ch 73399(871290, Stelnberg)o DewWw+l cA Psft pd ReaedM Stanford lkenew Au$t rk-w kcal aWcies to enter N8o agreement l0r private reSWetlon ($aGmmanlD). C1672T6t (SB e1;9,+ker} West End Prajsa (Sacrsnuu4o). . Vt plsnrinA seAes Ch eM (AB 1717, Codeee) four speOrred caufft. • Pr*cls nat exceeding $50 mt9on • EOW ut101. Ch ID4d48 (AB 2660. Agular) Au$t rk-w kcal aWcies to enter N8o agreement l0r private ka*gend dev ftnws of revenueprodudng laftn Ch25M JAB 755,Corbd) Alameda Co0*,jutre**tL9bc8p. th 54t1W (88958, Scdga 7rareit operators. .Pmjsct<e3toea&rg $lOMAM. • Exp6'ed t110i Ch 5F = (AB 2288. WM)* $evsrspeci5ed com5ee. • PM)" Wowing $14 roan. • ErytestliNB. Ch 7e7MJS8 7144, Joharula M)e TwoAwdlled dlies• • Pmpds not emeeft M NV An Ch42tV 31402,81 mAlartia W*01*11icoc. • P10iedsecoe6dsg$1Ddfo(L . Eapi%11107. Ch 637:02 (A 31000, S MWn)ab 7Aree spedW comm Akicdoge dlift and I" adds ow as . Evhstlf708. selecbrtDy tte oanmunity coibpasChertwfdr. Ch 97602 (SB 1759, Jalenae$Wpb Foa 5pe86ed cities •Protects exeaeRng $5 m9rwn. E>rpres 1111% Ch 78N04 (SB 1130. ScoD} Tixreit ols6icts • Revtwd Q1541100. a peaASdbropodMmn�pamto Legafa4xs. El ttwteobrcparedmrepod antocd 6xgmraiNws LEGISLATIVE ANALYST'S OFFICE Figure 1 Recent State Laws Authorizing Design -Build Ch 429x93 (AS 896 Brawn) Junipero Serra (Los A%etes) and civic Canter (San Frarocism) tndldirga. Ch 430143 (SB 772. Petrls) EJDxr Hurls (C+aldand) UdIng. Ch 76.,^37 (581270, Jdmsw) East End Project {Sapamenla). Ch 2 CS8 776, Joharnsmn) Pennlhr Departmerl a General SwAoas to use desipbuk on at • Used for CaRram District 7 least fire projects authorfted by Legislature. bum (Las Angelesj. • bores 1!1/06. Ch 78298 (S819c34, Johrrslon) DeprYr rnenl a CorrecDors headqumtars (Saaamen10). • Not used Ch 73399 (AB 290, Stelrbn)a Deparowl of Perks and Recreation, Stanford Mansion restration (Sacrarmlo). Ci 672'01(58 809, Ortiz) West End Project (Secramenlo), • In OwAng stages 1 , r Ch 104x96 (AB 2660, Aguish At>antw bcal agencies to enter ft agreemeft for *a* lundktg and derelWmwt of revenue Produdng Ch 258199 (AB 756, Corbell) Alameda County, ju�erxle justice tactidy. Ch 541100 (A8 958, SOW T opmdom • Pro)acb aceedng $10 MUM. • Expired 111M5 Ch 594100 (A8 2288, Mire Seven spKiliad cmnSas. • P►o)eob mcceedfng $10 mRli n. . ExWs 1 /1A5. Ch 7670 (SB 1141, Jdtamesm)E� Two SPKRW cities. • Pmjacts not exceeding $50 rrriilion. Ch 4P Jot (AB 1402, 81reama School districts. • PioWs ewAedhg $10 m ition • Expires 11167. Ch 687102 (AS 1000, Simklanp Three commu* ccho &%* ts. and Dre addPWnW as • E pirmlflM. selected by the canna iN colepes Cher> ia. Ch 97&M (581759, .iotrernessea)ab Four spelled dies. • Projects exoeeding 65 rriIfion. • Expires UL06. Ch 18604 (S8113R Sco11) Traneit &hicis ■ RwAsed Ch, 541100. • Ex�m t!11D7. RegAed to *M klwwA6m b Lagelabae. The LAO t required to MPW oe total OWWtWm LEGISLATIVE ANALYST'S OFFIC Oct 12 05 08:23a CIFAC 925 957 -1800 p.6 AN LAO REPORT or otherwise, for an arcnitectlengineer and but most can be placed in one of two catego- various construction trade work. Design build ries — stipulated price and construction manage - delivery methods have a number of variations, mert. Stipulated Price. With stipulated price Figure 2 design -build a public Comparison of Two Primary Construction Delivery Systems agency specifies how much it will pay for Design -Bld -Build construction of a particu- lar building. For example, State the agency might provide only a program- matic description of the building it wants by specifying the size of the Architeet/Engitleer building, types of spaces, and perhaps some G�tdrahC43,11mr ." acceptable construction materials- The agency then asks competing firms to present propos- als that illustrate a Suheordractas: conceptual design and provide specifications for materials and build - Design -Build In systems that it Is willing to construct for State the price stipulated by the agency. Construction Management With construction manage- ment design -build the public agency awards a contract to a 'construc- tion manager' (fre- quendy a construction ArchNadlEngin9er. '.:_' Subcontractors .. '::_ firm, but sometimes an architect/engineer firm) LEGISLATIVE ANALYST'S OFFICE 5 Oct 12 05 08:24a 6 CIFAC 925 957 -1800 p.7 AN LAO REPORT on the basis of a fee. The construction manager designs the project and solicits bids from sub- contractors contractors and suppliers. The total of these bids plus the construction manager's fee determine the total price the agency pays for the building. CONSTRUCTION PROCUREMENT There are two principal construction pro- curement systems. These are: It l procurement by competitive bidding: and (2) procurement based on experience, qualifications, and best value. The construction procurement system defines the process used to select and award contracts for construction Projects. Competitive Bidding Procurement by competitive bidding means a public agency awards contracts for construc- tion or construction - related work objectively, based on bids_ Bids are offers to perform the work for a specific price, with the contract going to the lowest bidder. This is the way construc- tion contracts are awarded under design -bid- build. Competitive bidding also is used to procure most of the construction work when construction management design -build is used. Competitive biddine may or may not be used when stipulated price design -build is used. Experience, Qualifications, Best Value Procurement based on the experience and qualifications of competitors, or a judgment that a competitor will provide best value to the project, is subjective. It is used to award most design -build contracts, as well as architect/ engineer contracts in design- bidbuild.. Although these are subjective criteria and bidding is not used, this procurement system has competitive elements because contractors compete to show they have the most experience and are best qualified CONSTRUCTION DELIVERY PROCESSES: PROS AND CONS Each of the construction delivery processes has advantages and disadvantages. Figure 3 summarizes the pros and cons of the design -bid- build process versus the design -build (with stipulated price) process. DESIGN- BID -BUILD Advantages Building is Fully Wined. With design-bid- build, the facility the agency wants is fully defined by detailed working drawings and specifications before bids are solicited. This means there is little uncertainly about what the agency wants and what the contractor is re- quired to deliver. Competitive !ridding Results in Lowest Costs. With design- bid -build, the contract is awarded to the bidder who offers to construct the budding for the lowest price. This competi- tion motivates bidders to offer the lowest price they can because they know price is the only basis for award of the contract. Also, since the building the agency wants is fully defined by detailed working drawings and specifications, bidders do not need to increase their bids to LEGISLATIVE ANALYST'S OFFICE VLL , UJ VV.LYQ UII n, AN LAO REPORT cover contingencies that might arise if a building is not fully defined. Re /alive Ease of Assuring Quality Control. Quality in a construction project is controlled using detailed working drawings and specifica- tions, which are the basis of the contract be- tween the agency and a construction contrac- tor. This allows nn agency inspector to compare the materials and workmanship of the project under construction with what are required. If the requirements are not met, provisions of the contract can compel the contractor to correct the work. Without detailed working drawings and specifications, there is little an agency can do to control the quality of the contractor's work. objective Contract Award. Awarding construction work, which represents about 90 percent to 95 percent of the building cost, by competitive bidding, uses an objective criterion of lowest cost. This reduces the opportunity for bias and inappropriate influence to play a part in awarding the construction contract. The smaller architect, /engineer contract (representing about Figure 3 Design- Bid -Build Versus Design -Build Advantages and Disadvantages JLJ pJl'IUVV FLV 5 percent to 10 percent of the building cost) is awarded based on subjective criteria of experi- ence and qualifications because it is for profes- sional services that cannot be defined in detail before the building is designed. Good Access for Small Contractors. By awarding contractors based on price, the design- bid -build process provides the best opportunity for qualified small and new contrac- tors to obtain government contracts. Small and newly established contractors may be able to perform work at a lower cost than large com- petitors because of lower overhead and more efficient operations. Disadvantages Agency Gets Involved in Conflicts and Disputes. Design and construction of a building is a complex and difficult undertaking. There will always be conflicts and disputes that can lead to time - consuming and expensive legal action, no matter what construction delivery process is used. One major source of conflicts is errors and omissions in the working drawings and specifications prepared by the architect,/engi- neer. In the design -bid- build process the public agency hires the archi- tect /engineer directly, and the law holds the agency to be the guarantor of the com- pleteness and accuracy of the architect/ engineer's work. This draws the agency into disputes between the • Balft is hilly defined. •Agency gets involved in coraicin ann disputes, • Comyetiive bidding resuis in lowest cost • Builder not imOved in design process. • Reaarin ease of assuring quaitycontrol. •May be slower. • objecim contract award. • Price not certain untl construction bid Is received. • Good access ton small contractors. • Agency may need more technical staff. • prca nart'sty. • Agency may avoid conflicts and disputes. • BUWet involved in (105911 process. • Faster project daMrY • Agency needs less Whrical stall. • Limited assur,nceof quality coniw!. • Subjeciva contract award • Limited access for Small comractors. L= GISLAT VE ANALYST'S OFFICE 7 Uct 12 Ub Ut1:2ba UIF-AC AN LAO REPORT designer and builder and frequently subjects it to significant liability because or its perceived "deep pockets." Builder Not Involved in Design Process. With design - bid - build, the builder is not known until after the design work has been completed, bids have been submitted, and a construction contract awarded. This means the design cannot incorporate any input by the construction contractor on construction materials and meth- ods that could improve the building's design, functionality, and cost. May Be Slawer- The design - bid -build pro- cess is usually slower than the design -build process, mainly because of the sequential nature of the process. In contrast, under design - build, design and construction work may be undertaken concurrently. (This difference, however, may not be significant in the case of larger projects because procurement using subjective criteria of experience, qualifications, and best value often requires substantial time to allow competitors to prepare proposals and agency officials to evaluate them.) Price Not Certain Until Construction Bid is Received With design - bid - build, the architect/ engjneo-e� firm prepares cost estimates as the desigr work progresses, typically when the working drawings and specifications are about 10 percent, 33 percent, and 100 percent com- plete. While this gives the agency an early indication of the project's cost, there is no cost certainty until design is completed and construc- tion bids have been received. Agency May Need More Technical Staff- Design-bid-build requires the completion of detailed working drawings and specifications before bids are solicited, and then a substantial inspection and quality control effort during 925 957 -1800 p.9 construction. This may require an agency to employ a subsiantial number of technical staff to manage larger design- bid -build projects. DESIGN - BUILD_ USING STIPULATED PRICE Advantages Price Certainty. With the "stipulated price" method of implementing design - build, an agency has the best certainty of the cost of the building at the outset of the project. This is because the agency specifies what it is willing to pay for a building before it solicits proposals from design -build contractors for the configura- tion, features, and materials they are willing to provide for the specified price. The risk with this approach is that the agency may not get the best quality building for the price it pays. Agency May Avoid Conflicts and Dis- putes. Because the designer and builder are part of the same design -build entity, and the public agency is not the guarantor of the com- pleteness and accuracy of the work of the architect/engineer, the agency may avoid conflicts and disputes that can arise between the architect /engineer and construction contractor. Builder involved in Design Process. The construction contractor is involved in the design process from the beginning and can provide helpful insights on construction materials and methods that can make the design more effi- cient and less costly to construct. Faster Project Delivery. By overlapping design and construction to some extent, and by potentially reducing conflicts between designer and builder, design -build can usually deliver a project faster than the design- hid-build approach. With large projects, however, this may be less of LEGISLATIVE ANALYST'S OFFICE Uct 12 Ub U8:2ba CIFAO AN LAO REPORT an advantage because of the extra time needed for competitors to prepare their statements of qualifications and technical proposals. Agency Needs Less Technical Staff. Under design - build, the public agency does not have to review the accuracy and completeness of the architect/engineer's work. Thus, the agency may have less need for in -house technical staff to manage projects. Disadvantages Limited Assurance of Quality Control. Because the building the agency wants is not defined in detail at the time it enters into a contract with a design -build contractor, there is limited basis for enforcing a contract and the agencv may have little control over the quality of the construction work. Subjective Contract Award. With design - build, the design and construction work gener- ally is awarded based on subjective criteria such as experience, qualifications, and best value. Agencies have established contractor evaluation and selection processes and policies to try to mitigate the risks of subjective judgments, but drawbacks still exist, such as, Public Managers Have Discretion in Awarding uPoints." Agencies frequently use a points system. The number of points public officials award to competing firms on various criteria is arrived at subjectively. There is no objective way to determine the correct number of points to award a competitor on a given criterion. For example, there is no objective way to determine that one contractor's "waste management plan" warrants "43" points and another's only "40." 925 957 -1800 p.10 > Criteria Do Not Relate Directly to Specific Building Being Procured. While evaluating contractors based on qualifications and experience provides a measure of contractors' competence, it is not a guarantee on the project out- come. This is because under design - build a specifically designed building is not the 'deliverable." > Comparison of Alternative Proposals for Added Value" Difficult. It is difficult to make a reasoned comparison of alternative added value proposals. For example, it is impossible to directly compare the benefit from higher quality plumbing piping proposed by one contractor with the benefit from an enhanced electrical distribution system proposed by another. In addition, many of the benefits can only be realized over time —often after the building has been completed, adding to the difficulty of comparing alternative proposals. Limited Access for Small Contractors. Because design -build contracts mostly are awarded based on qualification and experience, this method may tend to work against small, nerdy established contractors, who do not have the range of experience of large, long- estab- lished firms. As a result, access to design -build contracts, especially the large contracts, may be limited for these contractors. DESIGN- BUILD — USING CONSTRUCTION MANAGEMENT The advantages and disadvantages of design -build construction delivery using con- struction management method's are similar to LEGISLATIVE ANALYST'S OFFICE 9 Oct 12 05 08:27a CIFAC AN LAO REPORT those for design -build using a stipulated price, with two main exceptions: Price. The public agency has far less price certainty under this method than if the stipulated price approach is used. Even so, construction management still provides more certainty than design -bid- build, where the total price is not known with reasonable certainty until design is finished and bids have been received. With construction management, a series of trade contracts is bid over time. This provides partial cost information earlier, and allows design 925 957 -1800 p11 changes to be made in subsequent trade pack- ages to control costs and keep the project within budget. Benefit of Competitive Bidding Flows to Agency. With the construction management approach to design-build delivery, the savings resulting from competitive bidding for subcon- tracts and supplies benefits the public agency rather than the design -build contractor. This is an important advantage construction management has over stipulated price. EXPERIENCE WITH DESIGN -BUILD Cities and Counties The authority for local governments to use ­ design-build by the state in 1995 and has been extended to various Califor- nia cities and counties. Figure 4 summarizes how these local governments have used this authority under those statutes that required them to report their design build activities to the Legislature. As the figure shows, of the 13 counties and cities that have been given the design -build option, six — Alameda, Sacramento, and Sclano counties, and the cities of Davis, West Sacramento, and Woodland —have used the option to construct one or more capital outlay projects. views on Design-Build Generally Favor- able. The counties and cities that have used design -build generally expressed favorable opinions of the process. Almost ail reported that compared to the traditional design - bid - build process, it took less staff time to construct a project and resulted in fewer claims and less litigation. To a substantial degree, this is because the local agency is removed from disputes E between the architect /engineer and the con- struction contractor. They also indicated that by awarding a fixed price contract, design -build provided more price certainty. Lessons Learned. These local agencies also made various observations about the general usage of design - build: a Project Cost Thresholds Not Needed. Statutory requirements regarding speci- fied maximum and /or minimum project costs prevented agencies from using design -build on certain projects. Local agencies do not see any compelling reason for imposing such cost thresh- olds. Adding Objectivity in Procurement Process Would Be a Plus for Public Projects. Marry of the officials we talked with acknowledged the benefit of applying some objective criteria in awarding design -build contracts, and not relying solely on subjective assessment of competitors' experience, qualifica- LEGISLATIVE ANALYST'S OFFICE Oct 12 05 08:28a CIFAC AN LAO REPORT tions, and proposals of best value. They indicated that this is one means to maintain the public's confidence in the procurement process. In an effort to provide objectivity, Sacramento, Solano (on the health and social services build- ing project), and Alameda Counties, and the cities of West Sacramento and Davis used a two -step process to select a design -build contractor. Details varied, Figure Al Summary of Design -Build Activities by Authorized Cities and Counties 925 957 -1800 p.12 but generally they first used subjective criteria such as experience and qualifica- tions to identify a limited group of finalists to compete for the design -build contract. The finalists then submitted design and cost proposals based on county criteria, and the contract was awarded based on the objective criteria of lowest cost Similarly, for the Solano County administration center and the Solano % • S2 3 mmrnnrwante hall expansion. SO.4 milion coanty recorders office renovafrn Alameda X • $15 million county recorders office buldnc. . $135 million juvenile jusfice center (under unutructlon). Contra Costa X Sac'mmento X . $2.5 mil bn branch library. Santa Clara X Solano X • $18 -4 million health and social servir bulding (under construclionl. . $80 mill'cn county administration center (under construction). Sonoma X Tulare X ^Woodland X • $14.4 million police station Danis X . $7.3 mil ion police station. West Sacrament; X • $2.6 m 1icn cramp station. Sremurood X Nesp ba X Vacaville X woodand X LEGISLATIVE ANALYST'S OFFICE 4) U) Oq 0-0 � a) N m E 0 S s rn 0 �� / f/ § ( � § / f ) k � ` k ¢ j \ Pim =8»�ty = � r3 111.31, Ln cv) to 44 &W 4 >< x X X >< X X U Wr u cn U) (n U) i- CQ CR x ll x x x >< X x Cd k Oct 12 05 08:28a CIFAC 925 957 -1800 p.13 AN !AO REPORT Woodland police facility, the design -build statute was too short to coordinate with contracts were based on a mixture of the timing of the projects the county (1) the subjective criteria of experience, needed to build. qualifications, and proposals of best value, ➢ Sonoma County did not use design - and (2) the objective criterion of cost. build because of the high threshold of Good Project Definition Is Needed project cost set by Chapter 594. County Before Awarding Design -Build Con- staff also indicated that due to a general tract Agency officials indicated that it is lack of public sector experience in using important to thoroughly specify the desigo-build, it is not inclined to use a building it wants using conceptual new delivery system for large projects. drawings, specifications, program state- Had the cost threshold been lower, the ments, and similar documentation so county would have considered using (t) design -build proposers understand design -build for relatively smaller -scale what is required and (2) there is docu- projects, such as an office building. mentation to form a basis for the con. y The City of Hesperia indicated it did not tract between the agency and the use the design-build authority granted design�huild contractor- under Chapter 976 because the legisla- n Best Suited for Straighffonvard tion contained a requirement that the Projects. Most agencies seemed to feel city establish a labor force compliance design -build was best suited to projects program and contract with a third party of conventional design and construction, for its operation, unless all contractors such as office buildings and parking on the project entered into collective garages. When buildings are more bargaining agreements - The city felt this specialized, such as jails and hospitals, provision would negate any economic there was less certainty that design -build benefit it might gain from the design - was the best construction delivery pro- build process. cess. This is because the user agency y The Cities of Brentwood and Vacaville often has more unique design preferences did not use their design -build authority it wants accommodated in the building. because they did not have projects they Reasons for Not Using Design - Build. Local considered suitable for desiga-build agencies that did not use design -build provided delivery due to size, complexity, or different reasons for not doing so. For example: scheduling considerations. n Contra Costa County indicated it did not All of the cities and counties that did not use use design -build authority granted it the design -build authority, however, indicated because of the high cost threshold for that they would like to have design -build author - qualifying projects, and the time avail - ity available to them as an alternative construe able to utilize design -build under the tion delivery method. 12 LEGISLATIVE ANALYST'S OFFICE Oct 12 05 08:29a CIFAC 925 957 -1800 p.14 AN LAO REPORT The Slate The Department of General Services (DGS) has completed several major projects using design - build. Generally, the DGS- managed design -build contracts have been completed on schedule and within budget, although there have been exceptions- For example, the East End project required an $18 million augmenta- tion and was completed about a year and a half after its original scheduled completion date. The Caltrans District 7 building is currently under (On5trUftiOn and has required no augmenta- tions to date- it is currently estimated to be completed about 15 months after its originally scheduled completion date. Nonetheless, DGS has indicated general satisfaction with the design -build approach used on all of these projects, pointing primarily to the advantages of using the process discussed above. Federal Federal agencies have been authorized to use a design -build construction delivery process since 'i 996, and federal officials have expressed general - i) tisfaction with it as an option. The federal n? er(. urement process has two phases. In the firs '' a ,, . federal officials reduce the numbe: _ .ipetfors to no more than five based ur.:, ),wcuve criteria of experience and qualificati. ins In phase two, competitors submit technical a;,o price proposals which are evalu- ated and &.,ign-build contract is awarded based or, a combination of subjective ( "best value') and objective (price) criteria. Issues to Address To date, experience in design -build by state and local agencies in California as well as the federal government has generally been positive, Nevertheless, the experience has been relatively recent and limited. As such, questions and issues remain in how design -build can best be imple- mented in the public sector. The key issues include: s How to Ensure Integrity of the Pro- curement Process- Local and state officials we talked with were almost uniformly in favor of the authority to use subjective criteria such as experience, qualifications, and best value as a basis for awarding design -build contracts. However, they also recognize that allowing subjectivity in the award of public contracts may permit inappropri- ate influence to be brought to bear on the procurement process. There have been incidents in other states where the integrity of the process was compro- mised- n How to Ensure Cost and Quality Control- With design - build, the project an agency wants constructed is inher- ently only minimally defined at the time the contract is awarded to a contractor - Depending on how the process is implemented and how well defined the project is at the outset, the agency may not get the building it thought it was paying for. n How to Ensure Access for Small and Newly Established Contractors Using criteria such as experience and qualifica- tions to award contracts reduces the likelihood that contracts are awarded to small and newly organized contractors. Over time, this may limit competition for public agency construction contracts. LEGISLATIVE ANALYST'S OFFICE 13 Oct 12 05 08:30a CIFAC 925 957 -1800 AN LAO REPORT WHERE DOES THE STATE GO FROM HERE? 14 Figure 5 shows that many of the statutes authorizing design -build in California included expiration dates, after which authority to use the design -build process ends. As these statutes expire, the Legislature likely will be asked to extend the authority, either for limited terms or permanently. The Legislature will also likely be requested to provide the authority to a larger number of public entities. Based on our review, we recommend the Legislature provide the design -build authority on an ongoing basis to local agencies and the state - within a framework that protects the integrity of the procurement process, controls the quality of the construction work, and provides access to public contracts for small and newly established contractors. Specifically, we recommend: �i- inclusive, Uniform Statute. Instead of separate legislation providing the design - build authority for different time spans for different groups of state and local entities, as currently exist, we recom- mend that a single statute be adopted that applies to all public entities provid- ing the same authority and limitations, if any. This would provide contractors and public officials with a consistent business environment within which to Figure 5 P.15 v Design -Build Should Be Optional to— And Not Replace— Design -Sid- Build. Design -build should be an available option for state and local agencies, but not a replacement of design- bid - build. This is because for many projects agen- cies may want the greater control over the design that they would have with desfgn- bid- build. v Contracts for Most of Project Cost Should Be Objectively Awarded Based On Competitive Bidding. In order to preserve the integrity of public sector procurement and provide prudent stewardship of public funds, we recom- mend that most of the cost of a project be procured by competitive bidding. As discussed above, one way to do this is by using construction management with competitive bidding of subcontracts. Any savings resulting from competitive bidding would flow to the public agency. Another way is sometimes called the "two - envelope system." With this system the agency defines its building require- ments with conceptual draevings and operate DeSigtt -Build Legistation Expiration Dates throughout the , [ti encli�'`' 3 _w- t il [Ja>$ state. '54112000 7 ramie operators 111105 252(1996 Department of General Services 111{06 59412000 Seven specified counties 111106 976/2002 Four spedlied cities 111106 421/2001 SOON di6triGts 111107 196,2004 Transit operators 111107 63712002 Eight community cot egs districts 1tim LEGISLATIVE ANALYST'S OFFICE Figure 5 Design.- Bulld.Legislabon Expiration Dates 54112000 Transit operators 594/2000 specified wuntles 976/2002 Four spedfied d*)s Inc ' 2 l/Ml SOON Mb rW: 196=04 Trargeit operators • a1 Eight community ..� :.: • ..i C 1M105 111106 111106 1M106 111107 111107 VMS LEGISLATIVE ANALYST'S OFi 0 Oct 12 05 08:31a CIFAC AN LAO REPORT specifications, as well as functional requirements. Statements of qualifica- tions are submitted by design -build contractors, and the agency selects a short list based on qualifications and experience -- -typically three to five firms. The agency then usually pays each of the finalists a modest amount to develop a technical proposal, which is submitted in one envelope, with their price in a second envelope. The agency reviews the technical proposals to see it they satisfy its requirements- For those finalists whose technical proposals are satisfactory, the agency opens the second envelopes and the contract is awarded to the proposal having the lowest cost Ensure Access for Greatest Number of Contractors. As discussed above, legislation permitting design -build con- tracts to be awarded based on qualifica- tions and experience may have the practical result over time of restricting contract awards primarily to the biggest CONCLUSION Design -build can provide state and local agencies with a useful alternative to the more commonh, u ed design - bid -build process to deliver .onstiuction projects. However, to the extent design -build contracts are awarded based solely on subjective criteria, there Is an opportu- nity for compromising the public procurement process. Thus, it is important that statutory 925 957 -1800 p.16 and longest - established firms. To encour- age competition and access, we recom- mend statutory language which provides that design -build contracts be accessible to design -build contractors with experi- ence and qualifications that are consis- tent with needs of the project, rather than limited to the biggest and longest - established firms. > No Cost Limitations. We recommend there be no maximum or minimum project cost threshold imposed on the authority. s Buildings Only. At this time, we recom- mend that the Legislature grant design - build authority only to buildings and directly related infrastructure. There are more complex issues associated with other public works projects such as transportation, public transit, and water resources facilities. Evaluation of design build as a construction delivery option for these other infrastructure facilities is beyond the scope of this report. changes that make the design - build process more widely available to state and local agen- cies also preserve the public's confidence in the procurement process. Using construction management with competitive bidding of subcontracts or a two-envelope system can achieve that. LEGISLATIVE ANALYST'S OFFICE is