BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



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          |SENATE RULES COMMITTEE            |                  SB 1102|
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                                 THIRD READING


          Bill No:  SB 1102
          Author:   DeSaulnier (D)
          Amended:  As introduced
          Vote:     21

           
           SENATE TRANSPORTATION & HOUSING COMMITTEE  :  7-0, 3/27/12
          AYES:  DeSaulnier, Gaines, Harman, Kehoe, Pavley, Simitian, 
            Wyland
          NO VOTE RECORDED:  Lowenthal, Rubio

           SENATE APPROPRIATIONS COMMITTEE  :  Senate Rule 28.8


           SUBJECT :    Transportation capital support costs

           SOURCE  :     Author


           DIGEST  :    This bill requires the California Transportation 
          Commission to review and approve the Department of 
          Transportation's project construction support cost overruns 
          of 20 percent or more on certain transportation projects.

           ANALYSIS  :    Existing law assigns the Department of 
          Transportation (Caltrans) the responsibility of overseeing 
          the design, construction, maintenance, and operation of the 
          California state highway system.  The capital outlay 
          support (COS) program within Caltrans provides the 
          resources necessary to develop and deliver the majority of 
          highway projects on this system. COS functions encompass 
          all project development efforts required to begin 
          construction of projects, including engineering and design 
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          work, environmental studies, and right of way acquisition.  
          Once under construction, the COS program also conducts 
          construction support management, such as testing materials 
          used in the project and working with the contractor when 
          changes or problems arise.  Private contractors undertake 
          the actual construction of most highway projects.

          In addition, existing law requires the California 
          Transportation Commission (CTC) to adopt the State 
          Transportation Improvement Program (STIP) every 
          even-numbered year, with each new STIP adding two new years 
          to prior programmed commitments.  The STIP is the biennial 
          five-year plan for future allocations of certain state 
          transportation funds for state highway improvements, 
          intercity rail, and regional highway and transit 
          improvements.  

          Besides adopting the STIP every other year, the CTC is also 
          responsible for allocating the construction funding for 
          STIP projects when these projects are fully developed and 
          ready to begin construction.  The CTC does not allocate 
          funding for any of the COS functions conducted by Caltrans. 
           These functions are funded separately through the annual 
          budget process, and that annual appropriation is only 
          loosely tied to projects in the STIP.

          This bill: 

           Requires the CTC to allocate construction support funding 
            for each project in the STIP overseen by Caltrans at the 
            time it allocates construction capital funding.  

           Requires the CTC to review and approve a supplemental 
            project allocation request for a project that experiences 
            a construction support cost overrun of 20 percent or 
            more.  

           Requires Caltrans to report to the Legislature on the 
            difference between construction costs allocated on each 
            project and the actual costs after the project has been 
            completed.

           Comments
           

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          Local partners most often choose Caltrans to do 
          construction support activities.  Local and regional 
          transportation agencies have the ability to either use 
          Caltrans for construction support or hire a private 
          contractor to do the work on STIP projects.  If the local 
          agency chooses not to use Caltrans, then the CTC allocates 
          the construction support funds at the same time as the 
          construction capital funding.  If the local agency 
          overspends by more than 20 percent, including on 
          construction support, then it must request a supplemental 
          allocation from the CTC which is taken from the county's 
          share of future STIP funds.  

          If a local entity uses Caltrans for construction support, 
          then the support costs are not allocated by the CTC.  In 
          addition, as the auditor indicates, if Caltrans spends more 
          than budgeted on construction support, neither Caltrans nor 
          the project sponsor is penalized.  Local partners can 
          benefit from this situation and often choose Caltrans to 
          oversee STIP projects, because if Caltrans underestimates 
          the support costs for a project it creates more capacity 
          within the local jurisdiction's allotment of STIP funds to 
          program additional projects.

           2011 State Auditor report  .  In April 2011, the auditor 
          conducted a review of Caltrans' COS program.  Among the 
          auditor's conclusions was that neither counties nor 
          Caltrans is held accountable when capital support costs 
          exceed estimates.  The CTC does not allocate construction 
          support funds at the time of capital construction 
          allocation.  In addition, the CTC cannot change project 
          budgets to reflect variations in construction expenditures 
          after construction funds are allocated, except through 
          supplemental project allocations.  Because the CTC does not 
          track support cost budgets, it is unable to charge any cost 
          overruns against either Caltrans' budget or the local 
          project sponsor's share of future funding.  Therefore, no 
          one is held accountable for deviating from construction 
          support cost budgets.

          The auditor examined 55 STIP projects that completed 
          construction during fiscal years 2007-08 through 2009-10 
          and found that 47 percent of these projects experienced 
          overrun greater than 20 percent.  Caltrans experienced 

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          budget overruns totaling $305 million out of the $1.4 
          billion expended on the COS program for the highway 
          projects completed between fiscal years 2007-08 and 
          2009-10.  To increase accountability for budget overruns of 
          capital support costs, the auditor recommended legislation 
          that would expressly require the CTC to review and approve 
          project construction support costs when they differ from 
          the amount budgeted by 20 percent or more.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  Yes   
          Local:  No

           SUPPORT  :   (Verified  4/30/12)

          American Federation of State, County and Municipal 
          Employees
          California Transportation Commission


           ARGUMENTS IN SUPPORT  :    This bill seeks to implement the 
          California State Auditor's recommendation relating to 
          Caltrans' construction support costs for STIP projects.  
          According to the author's office, given limited state 
          transportation funds, overruns on current projects directly 
          diminish the state's ability to undertake future projects.  
          Granting the CTC a greater oversight role during the 
          construction phase of projects that Caltrans oversees will 
          reduce cost overruns on these projects.


          JJA:do  4/30/12   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

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