BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                      



           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                  SB 1549|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 651-1520         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                              UNFINISHED BUSINESS


          Bill No:  SB 1549
          Author:   Vargas (D)
          Amended:  8/13/12
          Vote:     21

           
           SENATE TRANSPORTATION & HOUSING COMMITTEE  :  9-0, 4/17/12
          AYES:  DeSaulnier, Gaines, Harman, Kehoe, Lowenthal, 
            Pavley, Rubio, Simitian, Wyland

           SENATE APPROPRIATIONS COMMITTEE  :  7-0, 5/24/12
          AYES:  Kehoe, Walters, Alquist, Dutton, Lieu, Price, 
            Steinberg

           SENATE FLOOR  :  38-0, 5/31/12
          AYES:  Alquist, Anderson, Berryhill, Blakeslee, Calderon, 
            Cannella, Corbett, Correa, De León, DeSaulnier, Dutton, 
            Emmerson, Evans, Fuller, Gaines, Hancock, Harman, 
            Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu, 
            Lowenthal, Negrete McLeod, Padilla, Pavley, Price, Rubio, 
            Simitian, Steinberg, Vargas, Walters, Wolk, Wright, 
            Wyland, Yee
          NO VOTE RECORDED:  Runner, Strickland

          ASSEMBLY FLOOR  :  45-24, 8/21/12 - See last page for vote


           SUBJECT :    Transportation projects:  alternative project 
          delivery methods

           SOURCE  :     San Diego Association of Governments


                                                           CONTINUED





                                                               SB 1549
                                                                Page 
          2

           DIGEST  :    This bill authorizes the San Diego Association 
          of Governments (SANDAG) to use specified alternative 
          project delivery methods for an unlimited number of transit 
          projects.

           Assembly Amendments (1) delete the provision allowing the 
          contract for construction services to be entered into at 
          the same time as the contract for preconstruction services; 
          (2) delete the option for SANDAG to operate a labor 
          compliance program approved by the Department of Industrial 
          Relations (DIR) to monitor and enforce prevailing wage 
          requirements on the project if it requests and receives 
          approval from the DIR to use its own labor compliance 
          program; (3) delete the requirement that construction  not 
          commence on any phase, package, or element until SANDAG and 
          the construction manager agree in writing on either a fixed 
          price or guaranteed maximum price that SANDAG will pay for 
          the construction to be commenced and the construction 
          schedule for the project; (4) delete the provisions 
          clarifying that Department of Transportation (Caltrans) is 
          responsible for pre-construction project development 
          services and construction inspection services when projects 
          are constructed on state highways; (5) delete the provision 
          requiring SANDAG to award all construction manager/general 
          contractor (CMGC) projects according to the procedures 
          authorized in existing law for design-build contracts, 
          including awarding contracts using the best value selection 
          methodology; and (6) delete provision requiring 
          design-sequencing projects be awarded pursuant to existing 
          requirements in the Public Contract Code.

           ANALYSIS  :    Existing law establishes the Design-Build 
          Demonstration Program, which authorizes local entities to 
          use the design-build method of procurement for up to five 
          projects and Caltrans to use IT for up to 10 projects, 
          subject to the California Transportation Commission (CTC) 
          approval.  The design-build projects must be in one of the 
          following:  State Transportation Improvement Program, 
          Traffic Congestion Relief Program, Proposition 1B, and the 
          State Highway Operations and Protection Program.  In 
          addition, regional transportation planning agencies and 
          Caltrans may enter into an unlimited number of public 
          private partnerships for transportation projects until 
          January 1, 2017.   Finally, state law allows use of the 

                                                           CONTINUED





                                                               SB 1549
                                                                Page 
          3

          best value selection method for procuring design-build 
          services.

          This bill:

           1. Authorizes SANDAG to use alternative project delivery 
             methods, specifically design sequencing and the CMGC 
             method, as defined, for public transit projects within 
             its jurisdiction. 

           2. Requires SANDAG, if it desires to enter into an 
             alternative project delivery method contract, to first 
             evaluate the traditional design-bid-build process of 
             construction and the alternative project delivery method 
             in a public meeting, and make a written finding that use 
             of the alternative project delivery method on the 
             specific project under consideration will reduce project 
             costs, expedite the project's completion, or provide 
             features not achievable through the design-bid-build 
             method. 

           3. Requires SANDAG to comply with specified provisions of 
             the Labor Code pertaining to labor compliance programs, 
             and to reimburse the state DIR for its reasonable and 
             directly-related costs of performing prevailing wage 
             monitoring and enforcement on public works projects. 

           4. Authorizes SANDAG, in lieu of complying with the labor 
             compliance program and reimbursement provisions 
             described in #3 above, to enter into a collective 
             bargaining agreement binding all of the contractors 
             performing work on the project and that includes a 
             mechanism for resolving disputes about the payment of 
             wages. 

           5. Requires SANDAG, when using the CMGC method and 
             entering into a contract with a construction manager for 
             preconstruction services, to include in the written 
             contract a fee for those services. 

           6. Prohibits SANDAG from requesting or obtaining a fixed 
             price or guaranteed maximum price for a CMGC 
             construction contract or entering into a CMGC 
             construction contract until after it has entered into a 

                                                           CONTINUED





                                                               SB 1549
                                                                Page 
          4

             services contract with the construction manager. 

           7. Requires a CMGC preconstruction contract to provide for 
             the subsequent negotiation for construction of all or 
             any discrete phase or phases of the project, and further 
             provides for ownership by SANDAG of the design plans and 
             other preconstruction services work product. 

           8. Requires a CMGC contract for construction services to 
             be awarded after plans are sufficiently developed and 
             either a fixed price or guaranteed maximum price has 
             been negotiated, although SANDAG may award the contract 
             utilizing any other permitted procurement method if 
             negotiations are not successfully concluded. 

           9. Requires a construction manager to perform not less 
             than 30% of the work covered by the negotiated price of 
             a CMGC contract, with the remainder being performed by 
             subcontractors pursuant to existing law. 

           10.Requires all subcontractors bidding on design 
             sequencing and CMGC contracts to be afforded the 
             protections of the Subletting and Subcontracting Fair 
             Practices Act within the Public Contract Code. 

           11.Requires SANDAG, upon completion of projects using an 
             alternative delivery method, to prepare a progress 
             report for its governing body that shall include a 
             description of the project, the entity awarded the 
             contract, the estimated and actual costs of the project, 
             the estimated and actual schedule for project 
             completion, a description of any written protests, an 
             assessment of the prequalification process, a 
             description of the bid evaluation method, a description 
             of challenges or unexpected problems, and 
             recommendations. 

           12.Requires SANDAG to post completed progress reports on 
             its website. 

           13.Provides that nothing in this bill affects, expands, 
             alters, or limits any rights or remedies otherwise 
             available at law. 


                                                           CONTINUED





                                                               SB 1549
                                                                Page 
          5

           14.Defines the following key terms: 

              A.    "Alternative project delivery method" means 
                "either Construction Manager/General Contractor 
                method or design sequencing"; 

              B.    "Construction Manager/General Contractor method" 
                or "CMGC" means "a project delivery method using a 
                best value procurement process in which a 
                construction manager is procured to provide 
                preconstruction services during the design phase of 
                the project and construction services during the 
                construction phase of the project.  The execution of 
                the design and the construction of the project may be 
                in sequential phases or concurrent phases"; 

              C.    "Construction manager" means "a partnership, 
                corporation, or other legal entity that is able to 
                provide appropriately licensed contracting and 
                engineering services as needed pursuant to a CMGC 
                contract"; and, 

              D.    "Design sequencing" means "a method of project 
                delivery that enables the sequencing of design 
                activities to permit each construction phase to 
                commence when the design for that phase is complete, 
                instead of requiring design for the entire project to 
                be completed before commencing construction." 

           1. Declares that the provisions of this bill are 
             severable. 

           2. Makes findings and declarations relative to the need 
             for and benefits of alternative project delivery 
             methods, such as design sequencing and CMGC, and further 
             declares that the bill espouses no preference over other 
             methods. 

           3. Makes findings and declarations that a special law is 
             necessary because of the unique need for alternative 
             contracting authority for local public transportation 
             projects under the jurisdiction of SANDAG. 

           Comments

                                                           CONTINUED





                                                              SB 1549
                                                                Page 
          6

           
           Purpose of this bill  .  SANDAG is the regional 
          transportation planning agency under state for San Diego 
          County and under federal law is the metropolitan planning 
          organization for the region.  SANDAG also manages a local, 
          voter approved half-percent transportation sales tax.  
          SANDAG has a broad scope of authority.  Central to all its 
          activities is the $214 billion regional transportation plan 
          that it intends to implement between now and 2050.  SANDAG 
          believes that the authorization provided will provide it 
          with additional tools for constructing transportation 
          projects in San Diego County. 

           Alternative project delivery methods  .  The traditional 
          project delivery process is the design-bid-build.  This 
          method requires the public agency to design a project and 
          put the plans out to bid to general contractors.  The 
          agency awards the contract to the lowest, responsible 
          bidder.  Design-bid-build procurement results in project 
          risks being largely borne by the agency that designs the 
          project.  If plans are inadequate or there are 
          unanticipated construction issues, the agency bears the 
          financial burden through the issuance of change orders or 
          having to resolve construction claims by contractors. 

          In the last several years, public agencies have been 
          adopting alternative project delivery methods.  The 
          principle 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.  This method requires 
          the public agency to prepare plans to 30% completion and 
          then put them out to bid to teams of engineers and general 
          contractors.  The teams bid a fixed cost for the project.  
          The bids are evaluated using the best value methodology, 
          which includes evaluating a bid on the basis of 
          qualifications of the firm, proposed approach to design, 
          experience, and other factors.  The design-contractor team 
          completes the project and commences construction.  Because 
          the team finishes the design work, it carries most of the 
          risk associated with the adequacy of plans.  Often 
          construction can commence on a phase of the project before 
          the entire project is designed, reducing the construction 
          time. 

                                                           CONTINUED





                                                               SB 1549
                                                                Page 
          7


           Design-sequencing  .  Design-sequencing is a method of 
          contracting that enables the sequencing of design 
          activities to permit each project construction phase to 
          commence when design for that phase is complete, rather 
          than requiring design for the entire project to be 
          completed before commencing construction.  When the 
          contractor bids, the first phase of the project is 
          completed and the remaining phases must be at 30% 
          completion according to Caltrans guidelines.  The award is 
          made to the lowest, responsible bidder.  There is little 
          risk transfer from the public agency to the contractor 
          because the public agency is responsible for design.  The 
          benefit of design-sequencing is assumed to be time savings. 


          State law has authorized design-sequencing but Caltrans' 
          authority lapsed in 2010.  This bill authorizes Caltrans to 
          resume design-sequencing procurement for projects in San 
          Diego County.

           CMGC  .  The CMGC 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 input 
          that helps the owner design a more constructible project.  
          The agency selects the construction manager on the basis of 
          qualifications, past experience, or a best-value basis.  
          According to the Federal Highway Administration, when 
          design reaches approximately 60 to 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 manager becomes 
          the general contractor.  The benefits of this procurement 
          method is 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:  Yes   Fiscal Com.:  Yes   
          Local:  Yes


                                                           CONTINUED





                                                               SB 1549
                                                                Page 
          8

          According to the Senate Appropriations Committee, potential 
          for increased transit project costs (Public Transportation 
          Account, State Transit Assistance Account, or Local Funds) 
          to the extent that the alternative project delivery method 
          chosen by SANDAG results in a higher overall project cost 
          than the traditional design-bid-build method.  If an 
          alternative delivery method is chosen, SANDAG must make a 
          written finding in a public meeting that the alternative 
          method would provide a benefit that may be deemed to have a 
          greater value than project cost alone, such as expedited 
          project delivery or other features not achievable through 
          design-bid-build.  The overall value of a project may be 
          measured by criteria other than cost.

           SUPPORT  :   (Verified  8/28/12)

          San Diego Association of Governments (source)
          Associated General Contractors of California
          Metropolitan Transit System
          North County Transit District
          Riverside County Transportation Commission

           OPPOSITION  :    (Verified  8/28/12)

          Professional Engineers in California Government


           ASSEMBLY FLOOR  :  45-24, 8/21/12
          AYES:  Alejo, Allen, Ammiano, Atkins, Beall, Block, 
            Blumenfield, Bonilla, Bradford, Brownley, Buchanan, 
            Charles Calderon, Campos, Carter, Cedillo, Chesbro, 
            Davis, Feuer, Fletcher, Fong, Fuentes, Furutani, 
            Galgiani, Gordon, Hall, Hayashi, Hill, Huber, Hueso, 
            Huffman, Jeffries, Lara, Bonnie Lowenthal, Ma, Mendoza, 
            Mitchell, Monning, Perea, V. Manuel Pérez, Portantino, 
            Solorio, Torres, Wieckowski, Williams, John A. Pérez
          NOES:  Achadjian, Bill Berryhill, Conway, Cook, Donnelly, 
            Beth Gaines, Garrick, Gatto, Grove, Hagman, Halderman, 
            Harkey, Jones, Knight, Logue, Mansoor, Morrell, Nielsen, 
            Norby, Olsen, Silva, Skinner, Smyth, Wagner
          NO VOTE RECORDED:  Butler, Dickinson, Eng, Gorell, Roger 
            Hernández, Miller, Nestande, Pan, Swanson, Valadao, 
            Yamada


                                                           CONTINUED





                                                               SB 1549
                                                                Page 
          9


          JJA:k   8/28/12   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****







































                                                           CONTINUED