[House Report 113-668]
[From the U.S. Government Publishing Office]
113th Congress Report
HOUSE OF REPRESENTATIVES
2d Session 113-668
======================================================================
DESIGN-BUILD EFFICIENCY AND JOBS ACT OF 2014
_______
December 12, 2014.--Committed to the Committee of the Whole House on
the State of the Union and ordered to be printed
_______
Mr. Issa, from the Committee on Oversight and Government Reform,
submitted the following
R E P O R T
[To accompany H.R. 2750]
[Including cost estimate of the Congressional Budget Office]
The Committee on Oversight and Government Reform, to whom
was referred the bill (H.R. 2750) to amend title 41, United
States Code, to require the use of two-phase selection
procedures when design-build contracts are suitable for award
to small business concerns, and for other purposes, having
considered the same, report favorably thereon with an amendment
and recommend that the bill as amended do pass.
CONTENTS
Page
Committee Statement and Views.................................... 3
Section-by-Section............................................... 10
Explanation of Amendments........................................ 11
Committee Consideration.......................................... 11
Application of Law to the Legislative Branch..................... 11
Statement of Oversight Findings and Recommendations of the
Committee...................................................... 11
Statement of General Performance Goals and Objectives............ 11
Duplication of Federal Programs.................................. 11
Disclosure of Directed Rule Makings.............................. 12
Federal Advisory Committee Act................................... 12
Unfunded Mandate Statement....................................... 12
Earmark Identification........................................... 12
Committee Estimate............................................... 12
Budget Authority and Congressional Budget Office Cost Estimate... 12
Changes in Existing Law Made by the Bill as Reported............. 14
The amendment is as follows:
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Design-Build Efficiency and Jobs Act
of 2014''.
SEC. 2. DESIGN-BUILD SELECTION PROCEDURES.
(a) Civilian Agency Contracts.--Section 3309 of title 41, United
States Code, is amended--
(1) in subsection (d), by striking ``agency determines with
respect to'' and all that follows through the period at the
end, and inserting the following: ``head of the agency approves
the contracting officer's justification that an individual
solicitation must have greater than 5 finalists to be in the
Federal Government's interest. The contracting officer must
provide written documentation of how a maximum number of
offerors exceeding 5 is consistent with the purposes and
objectives of the two-phase selection process.''; and
(2) by adding at the end the following:
``(f) Design and Construction Contracts.--Two-phase selection
procedures shall be used for entering into a contract for the design
and construction of a public building, facility, or work when a
contracting officer determines that the contract has a value of
$1,500,000 or greater, as adjusted for inflation in accordance with
section 1908 of this title, unless the head of the agency approves the
contracting officer's justification that procedures other than two-
phase selection procedures are in the best interest of the Federal
Government.
``(g) Reports.--
``(1) Agency reports.--Beginning on the date that is 1 year
after the effective date of this subsection, and for each of
the 4 years thereafter, each agency shall submit to the
Comptroller General of the United States and publish in the
Federal Register an annual report regarding all cases in the
preceding year--
``(A) in which more than 5 finalists were selected
for phase-two requests for competitive proposals; or
``(B) for a contract that has a value of $1,500,000
(as adjusted for inflation in accordance with section
1908 of this title) or greater for which the two-phase
selection procedures were not used.
``(2) GAO report.--In the first full fiscal year that is 5
years after the effective date of this subsection, the
Comptroller General of the United States shall publish a report
that, based on the information provided in the agency reports
required under paragraph (1), analyzes the degree to which
agencies have complied with the requirements of this
section.''.
(b) Defense Contracts.--Section 2305a title 10, United States Code,
is amended--
(1) in subsection (d), by striking ``agency determines with
respect to'' and all that follows through the period at the
end, and inserting the following: ``head of the agency approves
the contracting officer's justification that an individual
solicitation must have greater than 5 finalists to be in the
Federal Government's interest. The contracting officer must
provide written documentation of how a maximum number of
offerors exceeding 5 is consistent with the purposes and
objectives of the two-phase selection process.''; and
(2) by adding at the end the following:
``(g) Design and Construction Contracts.--Two-phase selection
procedures shall be used for entering into a contract for the design
and construction of a public building, facility, or work when a
contracting officer determines that the contract has a value of
$1,500,000 or greater, as adjusted for inflation in accordance with
section 1908 of title 41, unless the head of the agency approves the
contracting officer's justification that procedures other than two-
phase selection procedures are in the best interest of the Federal
Government.
``(h) Reports.--(1) Beginning on the date that is 1 year after the
effective date of this subsection, and for each of the 4 years
thereafter, each agency shall submit to the Comptroller General of the
United States and publish in the Federal Register an annual report
regarding all cases in the preceding year--
``(A) in which more than 5 finalists were selected for phase-
two requests for competitive proposals; or
``(B) for a contract that has a value of $1,500,000 (as
adjusted for inflation in accordance with section 1908 of title
41) or greater for which the two-phase selection procedures
were not used.
``(2) In the first full fiscal year that is 5 years after the
effective date of this subsection, the Comptroller General of the
United States shall publish a report that, based on the information
provided in the agency reports required under paragraph (1), analyzes
the degree to which agencies have complied with the requirements of
this section.''.
Committee Statement and Views
PURPOSE AND SUMMARY
The Federal Government spends roughly $500 billion per year
on the procurement of goods and services.\1\ Of this figure,
approximately $40 billion, or eight percent, is spent on
federal construction and architect and engineering (A&E)
projects.\2\ The federal sector is a significant and growing
portion of the nation's overall construction market, accounting
for 40 percent of the value of all ongoing private and public
sector construction activity in 2010, compared to about 20
percent share in the previous decade.\3\ Furthermore, of the
$40 billion the Federal Government spends each year on federal
construction and A&E projects, approximately $17 billion, or 42
percent, goes to small business prime contractors,\4\
indicating particularly strong participation by small
businesses in these fields. These figures demonstrate the need
to further streamline the construction and A&E contracting
process to allow for vibrant participation by all commercial
businesses including small businesses and to effectively
provide services to the taxpayers.
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\1\Prime Award Spending Data, USASpending.gov, available at http://
www.usaspending.gov.
\2\Id. For purposes of this report, ``federal construction'' means
the initial construction, alteration, or repair (including dredging,
excavating, and painting) of buildings, structures, or other real
property. See 48 C.F.R. Sec. 2.101, Sec. 22.502 (2010). ``A&E'' is
statutorily defined as the professional services of an architectural or
engineering nature performed by contract that are associated with
research, planning, development, design, construction, alteration, or
repair of real property, [or] other professional services of an
architectural or engineering nature, or incidental services, which
members of the architectural and engineering professions (and
individuals in their employ) may logically or justifiably perform,
including studies, investigations, surveying and mapping, tests,
evaluations, consultations, comprehensive planning, program management,
conceptual designs, plans and specifications, value engineering,
construction phase services, soils engineering, drawing reviews,
preparation of operating and maintenance manuals, and other related
services'' as regulated by state laws. 40 U.S.C. Sec. 1102 (2012).
\3\U.S. Census Bureau, Value of Construction Put in Place, Annual
Data, available at https://www.census.gov/construction/c30/
c30index.html.
\4\Federal Procurement Data System ad hoc report, available at
https://www.fpds.gov (last accessed Nov. 22, 2013).
\5\Id.
FISCAL YEAR 2012 FEDERAL CONTRACTS FOR CONSTRUCTION AND A&E\5\
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FY 2012 Total Contract Spend Construction Spend A&E Spend
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All Prime Contractors..................... $516.9B..................... $41.5B
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$36.2B $5.3B
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Small Business Prime Contractors.......... $89.9B (17.4%, or 22.3% of $17.3B (41.7%)
total eligible dollars*).
---------------------------------------
$15.9B (43.9%) $1.4B (26.4%)
----------------------------------------------------------------------------------------------------------------
*Some contracts, such as those under federal mandatory sources authority (e.g., supplies which are on the
Procurement List maintained by the Committee for Purchase From People Who Are Blind or Severely Disabled), are
excluded.
To procure construction and A&E services, federal agencies
typically use one of two approaches. Under the traditional
``design-bid-build'' approach, design and construction are
treated as two separate requirements and contracted
sequentially and separately with two contracts and two
companies. In contrast, under ``design-build'' contracts,
design and construction are combined into a single requirement.
A single contract is awarded to one company (often a team)
responsible for both the design and construction.\6\
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\6\48 C.F.R. Sec. 36.102 (Federal Acquisition Regulation).
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Within design-build contracting, there are two source-
selection techniques. Under a ``single-step design-build'' (or
``turn-key'') process, all construction and design teams must
submit full proposals up front. The procuring agency then
evaluates all proposals received and selects a winner.
A more frequently used technique is ``two-phase design-
build'' selection procedures (also referred to as ``two-step''
design-build). Under this technique, companies are required to
submit information related to experience and past performance
in step one. Based on this information, the procuring agency
selects a limited number of the most qualified offerors,
generally three to five, to advance to phase two of the
competition. The down-selected offerors then submit much more
detailed price and technical proposals for evaluation.\7\
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\7\Id. See also 48 C.F.R. Sec. 36.3.
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Design-build contracts hold substantial benefits for the
government, since they combine design and construction in a
single contract with a single prime contractor with clear
accountability for delivery and performance. However, because
these contracts would previously have been performed as two
separate contracts, they require highly complicated and costly
proposals. In order to develop an accurate construction cost,
teams must complete up to 80 percent of the design work and
determine detailed space and material needs.\8\ Some in
industry report that developing a full proposal for a design-
build contract can exceed three percent of the value of the
project.\9\
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\8\Assessing Government's Use of Design-Build Contracts: Hearing
before the Subcomm. on Federal Workforce, US Postal Service and the
Census of the H. Comm. on Oversight and Gov't Reform, 113th Cong.
(2013) (statement of Charles D. Dalluge on behalf of the American
Institute of Architects), available at http://oversight.house.gov/
hearing/assessing-governments-use-design-build-contracts/.
\9\Memorandum from Staff of the H. Comm. on Small Business to
Members, Subcomm. on Contracting and the Workforce of the H. Comm. on
Small Business (May 17, 2013), available at http://
smallbusiness.house.gov/calendar/eventsingle.aspx?EventID=331473.
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For example, bidding on a $20 million design-build project
could cost more than $600,000 for each offeror. The winning
offeror can recover its bid and proposal (B&P) costs, but that
remedy is not available to the losing offerors. Thus, if ten
firms bid on a $20 million project, that would amount to $5.4
million (i.e., $600,000 times nine) in unrecovered B&P costs.
Likewise, if a firm bids on ten jobs in a year and wins one
fifth of those jobs, the firm still must absorb $4.8 million
(i.e., $600,000 times eight) in unrecovered B&P costs. Further,
these B&P costs are not isolated to the prime contractor, but
also apply to subcontractors, that are often small businesses.
Given that a subcontractor may be part of several teams bidding
on any given job, each with its own approach, the
subcontractors' expenses may be more than the prime contractor.
Recognizing this B&P cost burden associated with preparing
a full proposal, current law encourages agencies to use a two-
step process when design-build contracts are employed. When the
two-step process is used, current law generally requires no
more than five firms be selected for phase two.\10\ The basis
for restricting phase two to five firms is to not make it cost-
prohibitive for potential offerors to bid.
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\10\See 41 U.S.C. Sec. 3309(d).
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However, concerns exist that current law has not deterred
agencies from over-relying on one-step design build contracts
or from allowing too many offerors into phase two, when the
two-step process is used. Critics contend that procuring
agencies such as the U.S. Army Corp of Engineers (USACE) and
the General Services Administration continue to solicit
proposals through the one-step design-build procurement for
large projects and that, even when two-step process is used,
some contracting officers are short-listing as many as eight to
ten firms after the first-step evaluation.\11\
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\11\See Assessing Government's Use of Design-Build Contracts, supra
note.
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H.R. 2750, the Design-Build Efficiency and Jobs Act of
2013, attempts to address the imperfect application of the two-
step design-build contracting process. The bill, as amended and
reported by the House Committee on Oversight and Government
Reform requires the use of two-phase selection procedures for
any design-build requirements with a value of $1.5 million or
greater. The bill also requires that any contracting officer
selecting more than five offerors for step two of the design-
build process provide written justification as to why more
offerors are necessary.
BACKGROUND AND NEED FOR LEGISLATION
Benefits of Design-Build Contracts
Design-build contracts combine the design and construction
of a project into a single contract, which is then awarded to
one company.\12\ This process provides clear accountability for
performance and increases efficiency related to contract award
and administration.\13\ An industry group claims that the use
of the design-build process ``[c]uts costs by 6.1%, [i]ncreases
overall project delivery speed by . . . 33.5%,'' and
``[g]reatly reduces claims and litigation,'' among other
benefits.\14\
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\12\48 C.F.R. Sec. 36.102.
\13\Ralph C. Nash & John Cibinic, Design-Build Contracting: Can the
Federal Government Use This Technique Effectively?, 8 No. 12 Nash &
Cibinic Rep. 68 (1994).
\14\Assessing Government's Use of Design-Build Contracts (written
testimony for the record of the Design-Build Institute of America),
supra note, available at http://www.dbia.org/advocacy/federal/
Documents/DBIA%20Dec%203%20Testimony_Assessing%20gov't%20use%20of
%20design-build.pdf.
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Design-build contracting increases accountability by
consolidating liability for both the design and construction
processes. Under the traditional design-bid-build method of
contracting, liability for the design phase is separated from
liability in the construction phase.\15\ While the government
is liable to the contractor on a standard approaching strict
liability, its claim against the architect or engineer for
design defects is judged by a negligence standard, leaving the
government liable for all defects in between these
standards.\16\
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\15\See Nash & Cibinic, supra note.
\16\Id.
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Recognizing its benefits, private-sector contractors began
to use the design-build method more frequently.\17\ Government
agencies like the General Services Administration, the Postal
Service, and the USACE have used the design-build method of
contracting since the late 1980s and early 1990s,\18\ while the
Naval Facilities Engineering Command (NAVFAC) used an early
variation of the design-build method on housing projects in the
1940s.\19\
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\17\Id.
\18\Id.
\19\Casey Halsey and William Quatman, Design-Build Contracts:
Revisited, 25 Years Later, 34-SPG Construction Lawyer 5 at 6 (2014).
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Design-Build Reforms Have Been Successfully Implemented by Most States
At present, 47 States have passed laws authorizing the use
of the design-build method of contracting on public projects in
various forms, and with varying degrees of authority given to
the Government.\20\ Illustrating this point, industry experts
have noted that ``California . . . has perhaps the most design-
build laws of any state, but some of the most limiting. For
example, redevelopment agencies can use design-build in
California but only for 10 total projects.''\21\ The only
States that have not specifically authorized the use of design-
build are Wisconsin, Iowa and North Dakota.\22\
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\20\Id.
\21\Id.
\22\Id.
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More recently, in 2013, California enacted a law
authorizing State and local transportation authorities to
implement a design-build procurement process for contracts on
transportation projects.\23\ The bill has been praised by the
Orange County Transportation Authority (OCTA), which issued a
news release stating ``[w]ith design-build authority,
transportation agencies will have the ability to streamline the
delivery of highway projects key to the implementation of local
sales tax measures, thereby saving local agencies additional
costs and delays in project delivery.''\24\
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\23\A.B. 401, 2013-2014 Sess. (Cal. 2013).
\24\OCTA Praises Passage of Design-Build Legislation, Orange County
on the Move (Oct. 21, 2013), available at http://blog.octa.net/octa-
praises-passage-of-design-build-legislation.
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The Use of Design-Build Contracting Has Resulted in Savings and
Improved Build Quality of Public Works
In 2007, the I-35 Bridge in Minneapolis, Minnesota
collapsed during rush hour, a disaster that federal safety
investigators attributed to a design flaw.\25\ Soon after the
incident, the Minnesota Department of Transportation, using the
two-phase design-build technique, selected a joint venture to
construct a replacement bridge, with a projected timeline of 14
months from design to completion.\26\ After the selection
process, the parties entered into a lump-sum contract, which
incentivized the joint venture to complete the project in a
timely manner by assessing a $2 million penalty for every ten
days that the project went on past the projected date of
completion, and awarding a $27 million maximum bonus for early
completion.\27\
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\25\Frederic J. Frommer, NTSB: Design errors factor in 2007 bridge
collapse, Associated Press, Nov. 13, 2008, available at http://
usatoday30.usatoday.com/news/world/2008-11-13-628592230 _x.htm.
\26\2009 National Design-Build Awards Competition, Transportation
Over $50 million, I-35W Bridge at 1-2 (on file with the Committee).
\27\Id. at 10.
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These incentives worked. The joint venture completed the
project more than three months before the estimated date of
completion, 17 months after the disastrous collapse of the
bridge, expeditiously restoring the much-needed public service.
The joint venture received a $25 million bonus.\28\
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\28\Id. at 10, 13.
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The final cost of the new I-35W Bridge was $265,590,000,
and the project was completed on budget.\29\ The new bridge
``is a sustainable, redundant, high-strength, high-performance
smart bridge' equipped with vibrating wire strain gauges,
accelerometers and chloride sensors which are embedded to
monitor its anticipated 100-year service life.''\30\ The I-35W
Bridge can serve as a model of public sector design-build
success, illustrating the utility of the design-build
contracting method in such projects.
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\29\Id. at 1, 17.
\30\Id. at 27.
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Proponents of the design-build method of procurement claim
that such method continues to produce favorable results in
other ongoing projects. For example, the first span of the New
NY Bridge, the replacement for the Tappan Zee Bridge across the
Hudson River, is scheduled to open in 2016.\31\ Plans for the
project were initially discussed in 1999, and $88 million was
spent in the following 11 years without any action taken to
advance the project.\32\ Among other factors, in 2011, New York
enacted design-build legislation that helped spur the project
forward.\33\ The state government claims that the use of
design-build contracting will ``help keep the project on-budget
and on-time.''\34\ The total cost of the new bridge is $3.9
billion, significantly less than initial projections.\35\ The
bridge ``will be designed to last 100 years without major
structural maintenance,'' and should be completed by 2018.\36\
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\31\The New NY Bridge, http://www.newnybridge.com/about/index.html
(last visited July 30, 2014).
\32\Id.
\33\Id.
\34\Id.
\35\Id.
\36\Id.
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Additionally, the San Diego Freeway (I-405) Improvement
Project will be completed using the design-build contracting
method.\37\ Interstate 405 is one of the busiest highways in
the United States, carrying more than 300,000 daily vehicle
trips in some of its sections, a number that is expected to
increase.\38\ OCTA stated regarding the Project, ``it is
estimated that the use of design-build will shave off two to
three years from the project delivery date, allowing for cost
savings up to $100 million.''\39\
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\37\See OCTA, supra note.
\38\Id.
\39\Id.
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``Single-step Design-Build'' vs. ``Two-phase Design-Build''
The Federal Acquisition Regulation currently allows for two
source selection procedures in design-build contracting.\40\
Under single-step design-build or turn-key selection procedure,
a request for proposal (RFP) is issued to the offerors, and all
parties must respond with full proposals up front. Under the
two-phase design-build selection process, potential offerors
initially submit information regarding their experience and
past performance history in step one, after which the procuring
agency selects a limited number of offerors to advance to step
two.\41\ In step two of the process, the offerors are required
to submit full, detailed price and technical proposals.\42\
Typically, whether in the single-step process or in the step
two of the two-phase process, once full proposals are received,
a ``best value'' selection process is then used to determine
the winning proposal, which allows for the government to have
flexibility in balancing other factors in addition to cost,
such as the design, the technical approach, the risk associated
with the proposal, past performance and experience demonstrated
in the proposal.\43\
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\40\48 C.F.R. Sec. 36.303.
\41\48 C.F.R. Sec. 36.303-1.
\42\48 C.F.R. Sec. 36.303-2.
\43\Acquisition.gov, Select the Right Contractor: Use best-value
evaluation and source selection, http://www.acquisition.gov/comp/
seven_steps/step6_use-best.html (last visited July 30, 2014).
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The advantage of the single-step selection process is, in
some cases, speed. Requiring all offerors to submit full
proposals up front can result in a faster award of a contract
and delivery of the final project. However, industry groups
look upon the single-step selection process unfavorably,
claiming that it is more expensive, burdensome and time-
consuming for contractors, and result in wasteful
practices.\44\ These groups argue that ``the burden is
disproportionately larger on the design community, many of
which are small businesses, because such businesses have little
or no chance of ever recouping their proposal costs under the
single-step process.''\45\
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\44\Rick Laezman, Army Corps of Engineers Clarifies Single-Phase
Procurement in Design/Build Projects, Electrical Contractor (November
2012), http://www.ecmag.com/section/your-business/army-corps-engineers-
clarifies-single-phase-procurement-designbuild-projects.
\45\While Two-Step Design-Build Is Preferred Method For Government
Contracting Officers, Single-Step Method May Be Used In Specific
Circumstances, 37 Construction Contracts Law Report 122 (July 19,
2013).
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According to a witness who testified at the Committee's
December 2013 hearing, in order to develop an accurate
construction cost, which is needed for a full proposal, teams
must complete as much as 80 percent of the design work in
advance.\46\ These teams must employ architectural, mechanical,
electrical, HVAC, structural building supply, materials and
construction experts throughout this very costly and time-
intensive process.\47\ A 2012 survey from the American
Institute of Architects Large Firm Roundtable reported that
between 2007 and 2011, architecture firms spent a median of
$260,000 per project in public and private sector design-build
projects, creating models, plans and other preparatory
materials.\48\ According to this witness, ``[d]esign firms face
the dilemma of betting it all on a contract they may not get or
self selecting out of the federal design-build market all
together.''\49\
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\46\Assessing Government's Use of Design-Build Contracts (statement
of Charles D. Dalluge on behalf of the American Institute of
Architects), supra note.
\47\Id.
\48\Id.
\49\Id.
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The two-phase selection design-build selection process
ensures that only the most qualified offerors compete in step
two, which in theory, may increase `effective' competition by
ensuring that qualified small business contractors are not
precluded from the procurement process by their relatively
limited resources, in conjunction with the cost of submitting a
full proposal up front.\50\ Presumably, offerors who advance to
step two have much greater odds of winning the contract, and
thus they are incentivized to submit more competitive
proposals.\51\ At the same time, agencies save administrative
resources that would otherwise be expended having to evaluate
large number of would-be proposals from less qualified
offerors.\52\
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\50\Id.
\51\James C. Dalton and Lloyd Caldwell, Limitations on the Use of
One-Step Procedures for Design-Build, U.S. Army Corps of Engineers
Engineering and Construction Bulletin (Aug. 6, 2012), available at
http://wbdg.org/ccb/ARMYCOE/COEECB/ecb_2012_23.pdf.
\52\Id.
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Industry groups have criticized the government for its
ongoing use of the single-step process. However, USACE, the
single largest procurer of design-build services, has stated
that ``[t]he two-phase selection procedure is the only design-
build contracting method authorized for Civil Works and Support
for Other projects,'' and is the ``highly preferred method''
for contracting military construction and design-build
services.\53\ USACE further stated that it only uses the turn-
key (i.e., single-step) process for military construction
contracts when certain limiting criteria are met.\54\ USACE's
preference for the two-phase process over the single-step
process provides a useful example of a federal agency adapting
more efficient contracting methods that also align with
industry preferences.
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\53\Dalton and Caldwell, supra note.
\54\Id.
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Oversight by the House Oversight and Government Reform Committee
On December 3, 2013, the Subcommittee on Federal Workforce,
U.S. Postal Service and the Census of the House Oversight and
Government Reform Committee held a hearing entitled,
``Assessing Government's Use of Design-Build Contracts.'' This
hearing examined the government's use of design-build contracts
in the procurement process, and reviewed the reforms proposed
by H.R. 2750. The hearing also highlighted the benefits the
government could obtain from the use of two-phase design-build
contracts, such as cost savings, and discussed the positive
impact that the legislation would have on small businesses and
other contractors, underscoring the need for design-build
reforms in the federal construction contracting process.
LEGISLATIVE AND POLICY HISTORY
Title 41, Section 3309 of the United States Code was
enacted on January 4, 2011, and currently provides design-build
selection procedures for public contracts.\55\ The statute
states that ``[u]nless the traditional acquisition approach of
design-bid-build . . . or another acquisition procedure
authorized by law is used, the head of an executive agency
shall use the two-phase selection procedures. . . .''\56\
Section 3309 also outlines criteria for determining whether
two-phase selection procedures are appropriate, describes
procedures for the two-phase selection process, and requires a
solicitation stating the number of offerors to be selected,
limiting the maximum number of potential offerors to five,
``unless the agency determines . . . that a specified number
greater than 5 is in the Federal Government's interest and is
consistent with the purposes and objectives of the two-phase
selection process.''\57\
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\55\See 41 U.S.C. Sec. 3309 (2012).
\56\Id.
\57\Id.
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Considering the advantages of two-phase selection
procedures when compared to the single-step selection process,
the current statute is not descriptive enough and allows for
too many public contracts to circumvent the two-phase selection
process without appropriate documentation.
In August 2012, USACE published a memorandum entitled,
``Limitations on the Use of One-Step Selection Procedures for
Design-Build.''\58\ The memorandum discussed USACE's efforts to
distance itself from the use of single-step selection
procedures and implement two-step selection procedures because
of the additional expenses single-step procedures impose on
contractors, and citing the superiority of two-phase procedures
in allowing for the selection of only the most qualified
bidders.\59\ USACE indicated that it had limited the use of
one-step selection procedures to only authorized military
construction contracts that meet three separate conditions,\60\
further restricting the use of single-step selection procedures
in favor of the two-step method.
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\58\Dalton and Caldwell, supra note.
\59\See id.
\60\Id.
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On May 23, 2013, the Subcommittee on Contracting and
Workforce of the House Committee on Small Business held a
hearing entitled, ``Building America: Challenges for Small
Construction Contractors.'' This hearing examined the obstacles
faced by small business construction and A&E contractors,
including ``the misapplication of the current laws regarding
design build contracting,'' which ``makes bidding on contracts
cost prohibitive for qualified small business prime and
subcontractors.''\61\
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\61\Memorandum from Staff of the H. Comm. on Small Business to
Members, Subcomm. on Contracting and the Workforce of the H. Comm. on
Small Business (May 17, 2013).
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In July 2013, Representative Sam Graves, Chairman of the
Committee on Small Business, introduced the Design-Build
Efficiency and Jobs Act of 2013 (H.R. 2750), which was
cosponsored by 16 Representatives listed as follows: Rep. Matt
Cartwright, Rep. Gerald Connolly, Rep. Blake Farenthold, Rep.
Richard Hanna, Rep. Jaime Herrera Beutler, Rep. Mark Meadows,
Rep. Grace Meng, Rep. Jeff Miller, Rep. Mick Mulvaney, Rep.
Erik Paulsen, Rep. Dennis Ross, Rep. Bradley Schneider, Rep.
Kurt Schrader, Rep. Lee Terry, Rep. Scott Tipton, and Rep.
Peter Welch.
Section-by-Section
(as Amended and Reported by the Committee)
Section 1. Short title
Provides the title.
Section 2. Design-build selection procedures
For civilian agencies under Title 41 of the U.S. Code and
Department of Defense under Title 10:
i) Requires a written justification to the head of an
agency when selecting more than five finalists in the
design-build bidding process;
ii) Mandates the use of two-phase selection
procedures for any design-build requirements with a
value of $1,500,000 or greater (as adjusted for
inflation), unless the agency head approves the
contracting officer's justification that other
procedures are in the Federal Government's best
interest; and
iii) Requires each agency that awards design and
construction contracts to submit to the Comptroller
General of the United States (GAO) and publish in the
Federal Register an annual report for the next 5 years
on: (1) all contracts for which more than five
finalists were selected for phase-two requests for
competitive proposals; or (2) contracts having a value
of $1,500,000 or greater for which the two-phase
selection process was not used. Also requires GAO to
assess the agency reports and publish a report.
Explanation of Amendments
On May 21, 2014, the Committee on Oversight and Government
Reform held a markup of H.R. 2750. Committee Chairman Darrell
Issa offered an Amendment in the Nature of a Substitute (ANS),
making those policies effective government-wide by applying the
same language to defense contracts.
Representative Stephen Lynch offered an amendment to
Chairman Issa's ANS, which raised the dollar threshold for the
requirement of two-phase selection procedures in design-build
contracts to $3 million, which agency heads would be permitted
to waive under compelling circumstances. The $3 million
threshold provided in the Lynch Amendment reflects the notion
that the previous $750,000 threshold in the original bill would
apply too broadly to small-scale projects. Chairman Issa
offered an amendment to the Lynch amendment, adjusting the $3
million threshold down to $1.5 million, which was agreed to by
voice vote. The Lynch amendment, as amended, was agreed to by
voice vote. H.R. 2750, as amended, was agreed to by voice vote.
Committee Consideration
On May 21, 2014, the Committee met in open session and
ordered reported favorably the bill, H.R. 2750, as amended, by
voice vote, a quorum being present.
Application of Law to the Legislative Branch
Section 102(b)(3) of Public Law 104-1 requires a
description of the application of this bill to the legislative
branch where the bill relates to the terms and conditions of
employment or access to public services and accommodations.
This bill mandates the use of two-phase selection procedures
for any design-build requirements with a value of over
$1,500,000. As such this bill does not relate to employment or
access to public services and accommodations.
Statement of Oversight Findings and Recommendations of the Committee
In compliance with clause 3(c)(1) of rule XIII and clause
2(b)(1) of rule X of the Rules of the House of Representatives,
the Committee's oversight findings and recommendations are
reflected in the descriptive portions of this report.
Statement of General Performance Goals and Objectives
In accordance with clause 3(c)(4) of rule XIII of the Rules
of the House of Representatives, the Committee's performance
goals and objectives are reflected in the descriptive portions
of this report.
Duplication of Federal Programs
No provision of H.R. 2750 establishes or reauthorizes a
program of the Federal Government known to be duplicative of
another Federal program, a program that was included in any
report from the Government Accountability Office to Congress
pursuant to section 21 of Public Law 111-139, or a program
related to a program identified in the most recent Catalog of
Federal Domestic Assistance.
Disclosure of Directed Rule Makings
The Committee estimates that enacting H.R. 2750 does not
direct the completion of any specific rule makings within the
meaning of 5 U.S.C. 551.
Federal Advisory Committee Act
The Committee finds that the legislation does not establish
or authorize the establishment of an advisory committee within
the definition of 5 U.S.C. App., Section 5(b).
Unfunded Mandate Statement
Section 423 of the Congressional Budget and Impoundment
Control Act (as amended by Section 101(a)(2) of the Unfunded
Mandates Reform Act, P.L. 104-4) requires a statement as to
whether the provisions of the reported include unfunded
mandates. In compliance with this requirement the Committee has
received a letter from the Congressional Budget Office included
herein.
Earmark Identification
H.R. 2750 does not include any congressional earmarks,
limited tax benefits, or limited tariff benefits as defined in
clause 9 of Rule XXI.
Committee Estimate
Clause 3(d)(2) of rule XIII of the Rules of the House of
Representatives requires an estimate and a comparison by the
Committee of the costs that would be incurred in carrying out
H.R. 2750. However, clause 3(d)(3)(B) of that rule provides
that this requirement does not apply when the Committee has
included in its report a timely submitted cost estimate of the
bill prepared by the Director of the Congressional Budget
Office under section 402 of the Congressional Budget Act.
Budget Authority and Congressional Budget Office Cost Estimate
With respect to the requirements of clause 3(c)(2) of rule
XIII of the Rules of the House of Representatives and section
308(a) of the Congressional Budget Act of 1974 and with respect
to requirements of clause 3(c)(3) of rule XIII of the Rules of
the House of Representatives and section 402 of the
Congressional Budget Act of 1974, the Committee has received
the following cost estimate for H.R. 2750 from the Director of
Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 23, 2014.
Hon. Darrell Issa,
Chairman, Committee on Oversight and Government Reform,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 2750, the Design-
Build Efficiency and Jobs Act of 2014.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Matthew
Pickford.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 2750--Design-Build Efficiency and Jobs Act of 2014
H.R. 2750 would amend federal law to modify the federal
government's procedures for awarding design and construction
contracts for federal facilities. The legislation would require
contracting officers to provide written justification if they
decide to allow more than five finalists into the bidding
process for federal construction projects. H.R. 2750 also would
require agencies to use a two-phase selection process. In phase
one, firms would provide basic information on their experience
and past performance; agencies then would select a few firms
and invite them to submit more detailed proposals for
evaluation for any contract that has a value greater than $1.5
million.
CBO estimates that implementing H.R. 2750 would have no
significant net impact on the budget over the 2015-2019 period.
CBO reviewed information on the process of awarding
construction contracts by the Army Corps of Engineers and the
General Services Administration. In general, those offices
often use a two-phase process to select firms for construction
projects. Under the bill, CBO expects that for projects that
are not currently using this two-phase process, there would be
some additional administrative costs for agencies; however,
agencies also would spend less to analyze fewer construction
bids. Consequently, CBO estimates that implementing H.R. 2750
would not require agencies to make a significant change in
their typical contracting process and thus would not have a
significant net effect on the federal budget.
Enacting the bill could affect direct spending by agencies
not funded through annual appropriations; therefore, pay-as-
you-go procedures apply. CBO estimates, however, that any net
change in spending by those agencies would be negligible.
Enacting the bill would not affect revenues.
H.R. 2750 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act and
would impose no costs on state, local, or tribal governments.
The CBO staff contact for this estimate is Matthew
Pickford. This estimate was approved by Theresa Gullo, Deputy
Assistant Director for Budget Analysis.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TITLE 41, UNITED STATES CODE
* * * * * * *
SUBTITLE I--FEDERAL PROCUREMENT POLICY
* * * * * * *
CHAPTER 33--PLANNING AND SOLICITATION
* * * * * * *
Sec. 3309. Design-build selection procedures
(a) * * *
* * * * * * *
(d) Solicitation To State Number of Offerors To Be Selected
for Phase-Two Requests for Competitive Proposals.--A
solicitation issued pursuant to the procedures described in
subsection (c) shall state the maximum number of offerors that
are to be selected to submit competitive proposals pursuant to
subsection (c)(4). The maximum number specified in the
solicitation shall not exceed 5 unless the [agency determines
with respect to an individual solicitation that a specified
number greater than 5 is in the Federal Government's interest
and is consistent with the purposes and objectives of the two-
phase selection process.] head of the agency approves the
contracting officer's justification that an individual
solicitation must have greater than 5 finalists to be in the
Federal Government's interest. The contracting officer must
provide written documentation of how a maximum number of
offerors exceeding 5 is consistent with the purposes and
objectives of the two-phase selection process.
* * * * * * *
(f) Design and Construction Contracts.--Two-phase selection
procedures shall be used for entering into a contract for the
design and construction of a public building, facility, or work
when a contracting officer determines that the contract has a
value of $1,500,000 or greater, as adjusted for inflation in
accordance with section 1908 of this title, unless the head of
the agency approves the contracting officer's justification
that procedures other than two-phase selection procedures are
in the best interest of the Federal Government.
(g) Reports.--
(1) Agency reports.--Beginning on the date that is 1
year after the effective date of this subsection, and
for each of the 4 years thereafter, each agency shall
submit to the Comptroller General of the United States
and publish in the Federal Register an annual report
regarding all cases in the preceding year--
(A) in which more than 5 finalists were
selected for phase-two requests for competitive
proposals; or
(B) for a contract that has a value of
$1,500,000 (as adjusted for inflation in
accordance with section 1908 of this title) or
greater for which the two-phase selection
procedures were not used.
(2) GAO report.--In the first full fiscal year that
is 5 years after the effective date of this subsection,
the Comptroller General of the United States shall
publish a report that, based on the information
provided in the agency reports required under paragraph
(1), analyzes the degree to which agencies have
complied with the requirements of this section.
* * * * * * *
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TITLE 10, UNITED STATES CODE
* * * * * * *
SUBTITLE A--GENERAL MILITARY LAW
* * * * * * *
PART IV--SERVICE, SUPPLY, AND PROCUREMENT
* * * * * * *
CHAPTER 137--PROCUREMENT GENERALLY
* * * * * * *
Sec. 2305a. Design-build selection procedures
(a) * * *
* * * * * * *
(d) Solicitation to State Number of Offerors to Be Selected
for Phase Two Requests for Competitive Proposals.--A
solicitation issued pursuant to the procedures described in
subsection (c) shall state the maximum number of offerors that
are to be selected to submit competitive proposals pursuant to
subsection (c)(4). The maximum number specified in the
solicitation shall not exceed 5 unless the [agency determines
with respect to an individual solicitation that a specified
number greater than 5 is in the Government's interest and is
consistent with the purposes and objectives of the two-phase
selection process.] head of the agency approves the contracting
officer's justification that an individual solicitation must
have greater than 5 finalists to be in the Federal Government's
interest. The contracting officer must provide written
documentation of how a maximum number of offerors exceeding 5
is consistent with the purposes and objectives of the two-phase
selection process.
* * * * * * *
(g) Design and Construction Contracts.--Two-phase selection
procedures shall be used for entering into a contract for the
design and construction of a public building, facility, or work
when a contracting officer determines that the contract has a
value of $1,500,000 or greater, as adjusted for inflation in
accordance with section 1908 of title 41, unless the head of
the agency approves the contracting officer's justification
that procedures other than two-phase selection procedures are
in the best interest of the Federal Government.
(h) Reports.--(1) Beginning on the date that is 1 year after
the effective date of this subsection, and for each of the 4
years thereafter, each agency shall submit to the Comptroller
General of the United States and publish in the Federal
Register an annual report regarding all cases in the preceding
year--
(A) in which more than 5 finalists were selected for
phase-two requests for competitive proposals; or
(B) for a contract that has a value of $1,500,000 (as
adjusted for inflation in accordance with section 1908
of title 41) or greater for which the two-phase
selection procedures were not used.
(2) In the first full fiscal year that is 5 years after the
effective date of this subsection, the Comptroller General of
the United States shall publish a report that, based on the
information provided in the agency reports required under
paragraph (1), analyzes the degree to which agencies have
complied with the requirements of this section.
* * * * * * *