BILL ANALYSIS Ó
AB 2498
Page 1
( Without Reference to File )
CONCURRENCE IN SENATE AMENDMENTS
AB 2498 (Gordon)
As Amended August 31, 2012
Majority vote
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|ASSEMBLY: |71-0 |(May 25, 2012) |SENATE: |21-13|(August 31, |
| | | | | |2012) |
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Original Committee Reference: TRANS .
SUMMARY : Authorizes the California Department of Transportation
(Caltrans) to use an alternative procurement method referred to
as Construction Manager/General Contractor (CM/GC) for up to
four projects.
The Senate amendments:
1)Add legislative findings and declarations citing the benefits
of Caltrans' use of CM/GC.
2)Require Caltrans to advertise, award, and administer CM/GC
contracts and prohibits Caltrans from delegating the CM/GC
contracting authority.
3)Increase from four to six the number of projects for which
Caltrans can use the CM/GC method.
4)Require that, of the six projects for which Caltrans may use
CM/GC, at least five of the projects have to have construction
costs greater than $10 million.
5)Require that, on at least four of the six projects, all of the
design and engineering services have to be performed by
Caltrans employees or Caltrans consultants. Similarly, on all
six contracts, all construction inspection services have to be
performed by Caltrans employees or Caltrans consultants.
Require Caltrans' capital outlay support program budget to
reflect the needed resources for these contracts.
6)Prescribe elements of the report required to be submitted by
Caltrans at the completion of the CM/GC contracts.
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FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
AS PASSED BY THE ASSEMBLY , this bill was substantially similar
to the version passed by the Senate.
COMMENTS : For decades, the traditional process for procuring
public works projects has been the design-bid-build process.
This process relies on: 1) a design entity preparing complete
project design specifications and estimates; 2) the project
owner putting the complete package out to bid for construction;
and, 3) awarding the construction contract to the lowest
responsible bidder. The design-bid-build process was developed
to protect taxpayers from extravagance, corruption, and other
improper practices by public officials as well as to secure a
fair and reasonable price for public works construction by
injecting competition amongst bidders into the process.
Although design-bid-build generally results in the lowest cost
construction contract, it is not without its drawbacks,
including:
1)Projects generally take longer to complete because designs
must be entirely completed, permits obtained, and right-of-way
acquired before the construction contract can be bid and
awarded.
2)Designs prepared for a competitive low-bid procurement are
developed to allow for a broad range of construction
approaches. As a result, low-bid designs do not always equate
to the most efficient design possible, depending on a
particular contractor's particular strengths or capabilities.
3)Because the project designer does not have the benefit of
consulting with the entity that will ultimately be responsible
for construction of the project, there may be significant
issues that the designer does not anticipate, particularly
constructability issues. This can result in change orders
that ultimately drive up the price of the contract.
4)Low-bid is not always the least expensive option, once change
orders and contractor claims are factored into the overall
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project costs.
In the early 1990s, public works agencies grew frustrated with
design-bid-build and began experimenting with more innovative
project delivery methods, namely design-build. Design-build is
an alternate method for procuring design and construction
services that provides for the delivery of public works projects
from a single entity. Design-build combines project design,
permit, and construction schedules in order to streamline the
traditional design-bid-build environment.
Design-build differs from design-bid-build in some key areas,
including:
1)Shorter overall elapsed project delivery time because
construction can begin before final design is complete.
2)Project costs and schedule risks are more heavily borne by the
design-build contractor.
3)Construction claims and change orders are minimized.
4)Designs can be developed to take advantage of particular
contractor's strengths and abilities, thereby reducing the
need to "over-design" for generic use as in design-bid-build.
5)Project specifications are typically based on definitive
performance criteria (which may or may not be well established
by the project owner) rather than established specifications.
6)Contracts are awarded based on best-value analyses rather than
low-bid.
Design-build contracts are not without their drawbacks as well.
For example, with a design-build project, the project owner must
give up a good deal of control over the details of the project
design. Additionally, design-build contractors are typically
selected using qualifications-based selection criteria or best
value analysis. These approaches are more subjective than a
low-bid approach, potentially subjecting the public works owner
to greater contract challenges and higher costs.
This bill authorizes Caltrans to use CM/GC, an emerging project
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delivery method that potentially combines the best of both
design-bid-build and design-build, for up to four projects.
Using CM/GC, Caltrans will be able to engage a design and
construction management consultant (construction manager) to act
as the department's consultant during the pre-construction phase
and as the general contractor during construction. During the
design phase, the construction manager acts in an advisory role,
providing constructability reviews, value engineering
suggestions, construction estimates, and other
construction-related recommendations. Later, Caltrans and the
construction manager can agree that the project design has
progressed to a sufficient enough point that construction may
begin. The two parties then work out mutually agreeable terms
and conditions for the construction contract, and, if all goes
well, the construction manager becomes the general contractor
and construction on the project commences, well before design is
entirely complete.
The CM/CG process is meant to provide continuity and
collaboration between the design and construction phases of the
project. Construction managers have an incentive to provide
input during the design phase that will enhance constructability
of the project later because they know that they will have the
opportunity to become the general contractor for the project.
Furthermore, CM/CG promises to save project delivery time,
provide earlier cost certainty, transfer risks from Caltrans to
the contractor, and ensure project constructability.
Additionally, CM/CG allows Caltrans to have greater control of
design decisions. It also allows Caltrans to design the project
to compliment the CM/CG's strengths and capabilities, thereby
avoiding the need to over-design the project to provide maximum
competitiveness in a low-bid procurement.
The American Council of Engineering Companies (ACEC) is
concerned about amendments to the bill that would require
construction inspection services to be performed by Caltrans
employees or Caltrans consultants. ACEC argues that this
requirement violates provisions of Proposition 35 (Article XXII
of the State Constitution) that requires that state and local
agencies must be allowed to contract with qualified private
entities for architectural and engineering services for all
public works of improvement. ACEC argues that this bill
essentially removes a local agency's ability to procure
construction inspection services by requiring, instead, that
these services be performed by Caltrans.
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Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093
FN: 0005904