BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 2498
Author: Gordon (D)
Amended: 8/14/12 in Senate
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 9-0, 6/26/12
AYES: DeSaulnier, Gaines, Harman, Kehoe, Lowenthal,
Pavley, Rubio, Simitian, Wyland
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/6/12
AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price,
Steinberg
ASSEMBLY FLOOR : 71-0, 5/25/12 - See last page for vote
SUBJECT : Construction Manager/General Contractor
procurement
SOURCE : Department of Transportation
DIGEST : This bill authorizes the Department of
Transportation (Caltrans) to use an alternative procurement
method referred to as Construction Manager/General
Contractor (CM/GC) for up to four projects.
ANALYSIS : Under the State Contract Act, public entities
must fully complete the design of a project prior to
awarding a construction contract and must award that
contract to the "lowest responsible bidder." This process,
commonly known as design-bid-build, is intended to ensure
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that the project is built for the lowest possible cost.
Although this is by far the most common method of public
contracting, for certain projects it may not result in the
lowest cost, nor be the most efficient method of delivery.
Under design-bid-build, the project designer (whether
consultants or employees of a public entity) has sole
ownership of the project design and does not have the
benefit of consultation with the contractor that will
ultimately be responsible for construction of the project.
Thus, there may be significant construction issues that the
designer does not anticipate which can result in change
orders later in the process. This can drive up the project
cost and shift all the risk to the agency commissioning the
project. Moreover, because under design-bid-build, all
design, permits, right-of-way acquisition, etc., must occur
prior to contract award, the opportunity to save time by
fast-tracking certain elements of a project while work
continues on other elements is lost.
Existing law establishes the Design-Build Demonstration
Program, which authorizes Caltrans to use the design-build
method of procurement for up to ten projects, subject to
the California Transportation Commission (CTC) approval.
The design-build entity is made up of a design firm and a
construction firm. This ensures collaboration between the
designer and the contractor. It also allows the
design-build firm to fast track aspects of a project as
issues around other elements are resolved. However, the
potential weakness of this method is that the owner of the
project relinquishes substantial control over the design.
Collaboration occurs between the design and construction
members of the design-build team, but design-build limits
the role of the project owner.
This bill:
1. Defines a CM/GC method of procurement as one in which
Caltrans selects the construction manager to provide
preconstruction services during the design phase of a
project, plus actual construction services when the
project is being built.
2. Authorizes Caltrans to use CM/GC procurement method for
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four projects, with at least three of the projects
having a construction value greater than $10 million
each.
3. Selection of the CM/GC team is a competitive procurement
process where Caltrans evaluates bids on the basis of
qualifications of the firm, proposed approach to design,
experience, and other factors.
4. Requires Caltrans to prepare and submit a status report
to the Legislature no later than July 1 of each year
during which a CM/GC project is underway or completed,
as specified.
Comments
Purpose of the bill . According to Caltrans, the bill's
sponsor, the purpose of the bill is to use CM/GC to
expedite project delivery. Caltrans states that it intends
to use CM/GC "where unusual constructability issues are
likely to emerge. In such cases, having the insight and
cooperation of the construction contractor early in the
process can yield innovative solutions that save
significant time and cost."
Alternative project delivery methods . In the last several
years, public agencies have been adopting alternative
project delivery methods. The principal reason for this is
the desire to shift construction risk from the agency/owner
to the project contractor. The most widely used
alternative project delivery technique is design-build.
The CM/GC. The CM/GC project delivery method allows an
agency to engage a construction manager during the design
process to provide assistance to the design team, including
advice regarding scheduling, pricing, phasing, and other
matters that helps the owner design a more constructible
project. According to the Federal Highway Administration
(FHWA), when design reaches approximately 60-90%
completion, the agency and the construction manager
negotiate a guaranteed maximum price for the construction
of the project based on the defined scope and schedule. If
this price is acceptable to both parties, a contract is
executed for construction services, and the construction
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manager becomes the general contractor. The FHWA has found
that the benefits of this procurement method include that
the public agency does not sacrifice control over the
design of the project and during the construction phase,
the contractor is very familiar with the project design
resulting in less disputes over design issues.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
According to the Senate Appropriations Committee, unknown
project costs or savings to Caltrans (State Highway Account
and federal funds) by providing authority to use a new
project delivery method. Caltrans costs to administer and
report on the new contracting method would be minor.
Caltrans anticipates significant long term savings, based
on other states' experience. However, that early
experience with any new project delivery method usually
proves to be more costly than traditional design-bid-build
in the initial implementation period.
In addition, since a contract for preconstruction and
construction services for CM/GC is a negotiated process
with the most qualified construction manager, rather than a
traditional "lowest responsible bidder" process, it is
difficult to determine whether the negotiated price would
be lower or higher than project delivery costs through a
traditional design-bid-build process. It is expected that
use of the CM/GC method would minimize change orders, which
is currently a significant factor in unexpected cost
escalation on Caltrans projects.
SUPPORT : (Verified 8/13/12)
Department of Transportation (source)
Associated General Contractors
Automobile Club of Southern California
ASSEMBLY FLOOR : 71-0, 5/25/12
AYES: Achadjian, Alejo, Allen, Ammiano, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Cedillo,
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Chesbro, Conway, Cook, Davis, Dickinson, Donnelly, Eng,
Feuer, Fong, Fuentes, Furutani, Beth Gaines, Galgiani,
Garrick, Gatto, Gordon, Gorell, Hagman, Halderman,
Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso,
Huffman, Jeffries, Jones, Lara, Logue, Bonnie Lowenthal,
Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell,
Nestande, Nielsen, Norby, Olsen, Pan, V. Manuel Pérez,
Portantino, Skinner, Smyth, Solorio, Swanson, Torres,
Valadao, Wagner, Wieckowski, Williams, Yamada, John A.
Pérez
NO VOTE RECORDED: Atkins, Bill Berryhill, Fletcher, Grove,
Hall, Knight, Ma, Perea, Silva
JJA:m 8/13/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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