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