BILL ANALYSIS Ó SB 1549 Page 1 Date of Hearing: August 16, 2012 ASSEMBLY COMMITTEE ON APPROPRIATIONS Felipe Fuentes, Chair SB 1549 (Vargas) - As Amended: August 6, 2012 Policy Committee: Local GovernmentVote: 9-0 Transportation 12-0 Urgency: No State Mandated Local Program: Yes Reimbursable: No SUMMARY This bill authorizes the San Diego Association of Governments (SANDAG) to use alternative contracting methods for public transit projects. Specifically, this bill: 1)Authorizes SANDAG to use one of two alternative contracting methods, each consisting of specified procedures, and referred to respectively as "design-sequencing," whereby each phase of a project can commence construction when the design of that phase is complete, and "construction manager/general contractor" (CM/GC), whereby a construction manager is procured to provide preconstruction services during a project's design phase and construction services during the construction phase. 2)Requires SANDAG, in order to use an alternative project delivery method, to make a written finding that it's use in lieu of the traditional design-bid-build contracting method will reduce project costs, expedite completion, or provide other benefits otherwise not achievable. 3)Provides that Caltrans, for projects on state right-of-way, is responsible for specified project development services and documents. 4)Requires SANDAG, upon completion of a project using an alternative delivery method, to prepare a specified project report and post that report on its website. FISCAL EFFECT SB 1549 Page 2 Costs for SANDAG to administer and report on the alternative contracting method will be absorbable and are not state reimbursable. To the extent the use of either of these alternative methods is successful, there should be significant savings on those projects selected by SANDAG. COMMENTS 1)Background and Purpose . The traditional public works contracting method is known as design-bid-build, whereby project design is done under contract by an architectural/engineering firm, then upon completion of the design phase, the construction phase is put out to bid and the contract is awarded to the lowest responsible bidder. In the last 10-15 years, the state has selectively used an alternative contracting method known as design/build, whereby entities with both design and construction management capabilities compete for a single contract for both project phases, typically for a fixed price. The intent of the design/build alternative is to reduce the contracting agency's risk with regard to project costs and schedule, expedite project completion, and minimize change orders and claims. Design/build has some drawbacks, however, including that the contracting agency relinquishes significant control over the details of project design. In addition, at the point when the design/build entity bids on a project, there are still many unknowns, and thus a degree of risk, which are factored into their bids. Therefore, even though the contracting agency is transferring risk, they are still paying for it in some manner. The use of CM/GC seeks to achieve the best of both worlds, i.e maintaining design control while minimizing overall risk. Under CM/GC, SANDAG would engage a design and construction management consultant to act as its consultant during the preconstruction 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, SANDAG 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 SB 1549 Page 3 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. Design-sequencing was first authorized in 1999, which established the original design-sequencing pilot program within Caltrans for up to six projects. Under the traditional means, construction of any portion of the project cannot commence until after plans and specifications for the entire project are completed and the construction contract is placed out for bid and then awarded to the lowest responsible bidder. Design-sequencing is intended to expedite project completion by allowing construction on one phase of the project to be started while other phases of the project were still under design. 2)Opposition. Professional Engineers in California Government (PECG) believes that if design-sequencing authorization is provided for the State Highway System it should be done on a statewide basis and not limited to SANDAG. PECG also suggests that the use of CM/CG, an "untested procurement methodology," should be limited to a trial of no more than four projects. The American Council of Engineering Companies (ACEC) objects to provisions that name Caltrans the responsible agency for performing project development services and construction inspection services for projects on the State Highway System. 3)Related Legislation . AB 2498 (Gordon), pending in Senate Appropriations, authorizes Caltrans to use CM/GC for up to four projects, using a process similar to that prescribed in this bill. Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081