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  








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          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 








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            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