BILL ANALYSIS                                                                                                                                                                                                    






           SENATE TRANSPORTATION & HOUSING COMMITTEE       BILL NO: ab 797
          SENATOR MARK DESAULNIER, CHAIRMAN              AUTHOR:  gordon
                                                         VERSION: 4/15/13
          Analysis by:  Eric Thronson                    FISCAL:  YES
          Hearing date:  June 11, 2013



          SUBJECT:

          Alternative project delivery methods

          DESCRIPTION:

          This bill authorizes the Santa Clara County Valley  
          Transportation Authority and the San Mateo Transit District to  
          utilize the construction manager/general contractor project  
          delivery method for transit projects within their respective  
          jurisdictions.

          ANALYSIS:

          Traditionally, state and local entities develop and construct  
          transportation projects with a process known as the  
          design-bid-build delivery method.  This method requires the  
          public agency to fully design a project and then ask general  
          contractors to bid on the construction contract based on the  
          agency's design.  Design-bid-build procurement results in  
          project risks being largely borne by the agency that designs the  
          project, because the agency bears the financial burden if the  
          plans are inadequate or there are unanticipated construction  
          issues. 

          In 2012, the Legislature passed and the governor signed SB 1549  
          (Vargas), Chapter 767, which authorized the San Diego  
          Association of Governments (SANDAG) to utilize other alternative  
          project delivery methods for transit projects within its  
          jurisdiction, including the construction manager/general  
          contractor (CM/GC) method.  Unlike traditional design-bid-build  
          procurement, the CM/GC project delivery method allows an agency  
          to engage a construction manager during the design process to  
          provide assistance to the design team, which ultimately leads to  
          a more constructible project.  When design is nearly complete,  
          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  




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          parties, they execute a contract for construction services, and  
          the construction manager becomes the general contractor.   
          Studies suggest the CM/GC method often leads to less costly or  
          more expediently delivered projects because of the construction  
          manager's involvement in the design process.

          Before electing to use the CM/GC method, SB 1549 requires that  
          SANDAG make a written finding declaring that the CM/GC project  
          delivery method will either reduce costs, expedite completion,  
          or provide features not achievable through the design-bid-build  
          method.  In addition, to determine the benefits of CM/GC, SB  
          1549 requires SANDAG staff to present a report to the agency's  
          governing body on its experience upon completion of a CM/GC  
          project and to post the report on its internet web site.  

          Existing law creates the Santa Clara County Valley  
          Transportation Authority (VTA) as the congestion management  
          agency in Santa Clara County and vests it with the  
          responsibility for countywide transportation planning,  
          congestion management, and design and construction of specific  
          highway, pedestrian, and bicycle improvement projects.  In  
          addition, VTA operates bus, light rail, and paratransit services  
          throughout Santa Clara County.  Existing law also creates the  
          San Mateo Transit District (SamTrans), which is responsible for  
          providing public transit and transportation programs in San  
          Mateo County.

           This bill  authorizes VTA and SamTrans to utilize the CM/GC  
          project delivery method for transit projects within their  
          respective jurisdictions, similar to SANDAG's authority.
          
          COMMENTS:

           1.Purpose  .  According to the author, VTA and SamTrans seek the  
            additional contract flexibility of the CM/GC project delivery  
            method so that they can deliver ambitious new transit projects  
            in a manner that makes the most efficient use of limited  
            transit funding.  The CM/GC method maintains full public  
            agency control over the design of the project, but by allowing  
            for contractor input during the design phase, it allows for  
            the development of reliable cost estimates of different design  
            alternatives.  The author contends that this can reduce design  
            costs and accelerate construction timelines, leading to  
            overall cost savings.

           2.Why pursue alternative project delivery approaches  ?  For  




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            decades, state and local agencies have relied on the  
            design-bid-build procurement method for transportation  
            projects.  Design-bid-build reduces the risk for the  
            construction contractor because the owner has a completed  
            design, procured right-of-way, and achieved environmental  
            clearance before letting the contract.  Agencies using this  
            traditional method generally receive the lowest initial cost  
            construction contracts for a given project, because  
            contractors are competitively bidding on a relatively  
            risk-free project.  Drawbacks to design-bid-build can include  
            longer completion times, constructability challenges  
            unforeseen by the designers, and increasing costs over time  
            due to change orders and claims.

            The CM/GC process is meant to provide continuity and  
            collaboration between the design and construction phases of  
            the project.  Construction managers have an incentive to  
            provide input during the design phase that will enhance  
            constructability of the project later because they know that  
            they will have the opportunity to become the general  
            contractor for the project.  Furthermore, CM/GC promises to  
            save project delivery time, provide earlier cost certainty,  
            transfer risks from the public agency to the contractor, and  
            ensure project constructability.  Finally, it allows each  
            agency to design the project to complement the general  
            contractor's strengths and capabilities, thereby providing  
            maximum competitiveness in a low-bid procurement.  

           3.Opposition  .  While not opposing the authorization of  
            alternative construction contracting methods, opponents object  
            to this bill because it potentially exempts some projects from  
            reimbursing the Department of Industrial Relations (DIR) for  
            its costs of performing prevailing wage monitoring and  
            enforcement.  As an alternative to reimbursing DIR for  
            prevailing wage work, this bill permits the agencies to adopt  
            a collective bargaining agreement that includes a mechanism  
            for resolving disputes about the payment of wages.  Opponents  
            contend that this alternative is not a suitable replacement  
            for the enforcement of the entirety of the Labor Code by DIR.   


            The language in this bill related to DIR's enforcement of  
            prevailing wage law mirrors the language in SB 1549, the bill  
            granting SANDAG authority to employ the CM/GC procurement  
            method.  On April 17, 2012, this committee unanimously passed  
            SB 1549.




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          Assembly Votes:
               Floor:    53-22
               Appr: 12-5
               Trans:    12-4

          POSITIONS:  (Communicated to the committee before noon on  
          Wednesday,                                             June 5,  
          2013.)

               SUPPORT:  Santa Clara Valley Transportation Authority  
          (sponsor)
                         Peninsula Corridor Joint Powers Board (Caltrain)
                         San Mateo County Transit District
                         San Mateo County Transportation Authority

               OPPOSED:  Air Conditioning Trade Association
                         Plumbing-Heating-Cooling Contractors Association  
          of California
                         Western Electrical Contractors Association