Progressive design-build contracts on the table for California issuers

California has expanded the ability of its local agencies to use progressive design-build contracts for certain infrastructure projects in a bid to control costs and remain on schedule.

Gov. Gavin Newsom in July signed into law the latest progressive design-build measure, Senate Bill 146, which allows the Department of Water Resources and the California Department of Transportation to each use a progressive design-build structure for up to eight projects that cost more than $25 million.

On Thursday, the state Assembly passed a pair of bills that would expand the same ability to transit agencies and municipalities. Senate bills 617 and 706 have been sent back to the Senate, which already passed them, to resolve differing amendments.

The measures build on the state’s law enacted last year that expanded local agencies’ authority to use progressive design-build contracts for certain water-related infrastructure projects. And separately, as part of the fiscal 2021-2022 budget, the General Assembly authorized a handful of state agencies, which did not include Caltrans or the water department, to use the progressive design-build method, with state approval.

The use of progressive design-build structures for infrastructure has grown in popularity in the last three years since it was first introduced as a delivery model in Canada in 2020, said Mary Salamone, an attorney with Procopio, Cory, Hargreaves & Savitch LLP, in a Sept. 20 article.

Most public agencies use traditional design-bid-build in which the public entity completes the design of the project before awarding a contract, which by law must go the lowest responsible bidder. Under a progressive design-build method, a qualified private partner is brought in early in the project for design and preconstruction work. Once a design is roughly half complete, the public agency and private partner will negotiate a total maximum price and then move to the second phase to complete the design and construction.

The method can “allow for collaboration between everyone from the beginning, which helps ensure projects meet agency needs, control costs, and remain on schedule,” according to a legislative summary of California’s SB 607, the bill that would allow municipalities to use the procurement method.

As opposed to full-fledged public-private partnerships, in which a contractor is typically locked into a price, the progressive design build model allows for price flexibility that is particularly important in the current high inflationary environment.

The progressive design-build measures have put California on Squire Patton Boggs’ radar, the law firm said Thursday in a post on public-private partnerships.

“It’s time for the private sector to pay attention and interact with state governments as each state is marching to the beat of its own drums when it comes to P3 legislation,” the firm said. “While not necessarily efficient, the market is full of opportunities for the private sector in terms of procurement and financing. Even with state and federal funds, there is a huge need for private sector investment.”