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[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.
---------------------------------------------------------------------------
    \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\
----------------------------------------------------------------------------------------------------------------
                  FY 2012                       Total Contract Spend      Construction Spend       A&E Spend
----------------------------------------------------------------------------------------------------------------
All Prime Contractors.....................  $516.9B.....................                  $41.5B
                                                                         ---------------------------------------
                                                                                      $36.2B               $5.3B
----------------------------------------------------------------------------------------------------------------
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).
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \10\See 41 U.S.C. Sec. 3309(d).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \11\See Assessing Government's Use of Design-Build Contracts, supra 
note.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \15\See Nash & Cibinic, supra note.
    \16\Id.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------
    \20\Id.
    \21\Id.
    \22\Id.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \28\Id. at 10, 13.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \29\Id. at 1, 17.
    \30\Id. at 27.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \37\See OCTA, supra note.
    \38\Id.
    \39\Id.
---------------------------------------------------------------------------

``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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \53\Dalton and Caldwell, supra note.
    \54\Id.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------
    \55\See 41 U.S.C. Sec. 3309 (2012).
    \56\Id.
    \57\Id.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \58\Dalton and Caldwell, supra note.
    \59\See id.
    \60\Id.
---------------------------------------------------------------------------
    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\
---------------------------------------------------------------------------
    \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).
---------------------------------------------------------------------------
    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.

           *       *       *       *       *       *       *

                              ----------                              

                      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.

           *       *       *       *       *       *       *
```