BILL ANALYSIS                                                                                                                                                                                                    

                                                                  AB 797
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          Date of Hearing:   May 11, 2013

                                  Mike Gatto, Chair

                    AB 797 (Gordon) - As Amended:  April 15, 2013 

          Policy Committee:                               

          Urgency:     No                   State Mandated Local Program:  
          No     Reimbursable:               


          This bill authorizes the Santa Clara County Valley  
          Transportation Authority (VTA) and the San Mateo County Transit  
          District (SMCTD) to use an alternative contracting method,  
          consisting of specified procedures, referred to as 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. Specifically, this bill requires each of the  
          two transit authorities:

          1)In order to use CM/GC, to make a written finding that its use  
            in lieu of the traditional design-bid-build contracting method  
            will reduce project costs, expedite completion, or provide  
            other benefits otherwise not achievable.

          2)On projects using CM/GC, to comply with existing prevailing  
            wage monitoring and enforcement requirements, including  
            providing reimbursement to the Department of Industrial  
            Relations, or alternatively to enter into a project labor  
            agreement that includes a mechanism for resolving disputes  
            regarding payment of wages. 

          3)Upon completion of a project using CM/GC, to prepare a  
            specified project report and post that report on its website.

           FISCAL EFFECT  

          Costs for VTA and SMCTD to administer and report on the CM/GC  
          contracting, including prevailing wage monitoring and  


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          enforcement, will be absorbable and are not state reimbursable.  
          To the extent the use of this alternative methods is successful,  
          there should be significant savings on those projects selected  
          by VTA and SMCTD.


           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, contracting agencies have 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, VTA or SMCTD 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, the agencies 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 mutually agreeable terms and conditions for the  
            construction contract, and, if all goes well, the construction  


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            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. 

           2)Prior Legislation  . SB 1549 (Vargas)/Chapter 767 of 2012,  
            authorized the San Diego Association of Governments to use  
            CM/GC for public transit projects within its jurisdiction.

            AB 2498 (Gordon)/Chapter 752 of 2012 authorized Caltrans to  
            use CM/GC on a pilot basis for six projects.

          Analysis Prepared by  :    Chuck Nicol / APPR. / (916) 319-2081