BILL ANALYSIS Ó
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
AB 797 (GORDON) Page 3
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.
AB 797 (GORDON) Page 4
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