BILL ANALYSIS                                                                                                                                                                                                    Ó




                   Senate Appropriations Committee Fiscal Summary
                            Senator Kevin de León, Chair


          AB 797 (Gordon) - Transit districts: alternative project  
          delivery methods.
          
          Amended: April 15, 2013         Policy Vote: T&H 11-0
          Urgency: No                     Mandate: No
          Hearing Date: June 24, 2013                             
          Consultant: Mark McKenzie       
          
          This bill does not meet the criteria for referral to the  
          Suspense File. 

          
          Bill Summary: AB 797 would authorize the Santa Clara County  
          Valley Transportation Authority (VTA) and the San Mateo County  
          Transit District (SamTrans) to utilize the construction  
          manager/general contractor (CMGC) project delivery method for  
          transit projects.

          Fiscal Impact: 
              Unknown transit project costs or savings (State Transit  
              Assistance funds, local funds, federal funds).  Before using  
              the CMGC method, the transit district must make a finding  
              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.  This  
              could result in a higher overall project costs than  
              design-bid build, but use of CMGC must be justified by  
              providing other benefits, as specified.

              Likely minor costs to the Department of Industrial  
              Relations (DIR) to perform prevailing wage monitoring and  
              enforcement, reimbursed by VTA and SamTrans (State Public  
              Works Enforcement Fund).

          Background: The traditional project delivery process is the  
          design-bid-build method, whereby complete plans and  
          specifications are prepared prior to the advertising, bidding,  
          and awarding of any construction contracts.  The agency awards  
          the contract to the lowest, responsible bidder.  Although this  
          method is structured to ensure a project is built for the lowest  








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          cost, oftentimes project costs escalate dramatically as change  
          orders are necessary to address unforeseen problems encountered  
          during the construction phase.  In addition, the bulk of project  
          risk remains with the sponsoring agency.

          Existing law also allows public agencies to use alternative  
          project delivery methods.  The most widely used alternative  
          project delivery technique is design-build, which allows both  
          design and construction services to be performed by a single  
          entity before the development of completed plans and  
          specifications.  Design-build contracts may be awarded on the  
          basis of "best value" or "lowest responsible bidder," as  
          specified in existing law.  Design-build is structured to shift  
          risk associated with the adequacy of plans to the contractor and  
          expedite project delivery by allowing construction to begin  
          before design is complete.  AB 985 (Scott), Chap 541/2000,  
          authorized transit districts to use design-build for public  
          transit projects.
          The construction manager/general contractor (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  
          percent 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  
          fewer disputes over design issues.  

          The Legislature has authorized the Department of Transportation  
          to use the CMGC method on a pilot basis to construct up to four  
          projects (AB 2498, Gordon, Chap 752/2012).  In addition, the San  
          Diego Association of Governments (SANDAG) has been provided with  
          general authority to use CMGC for public transit projects (SB  
          1549, Vargas, Chap 767/2012).  Before electing to use the CMGC  








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

          Existing law creates the VTA as the congestion management agency  
          in Santa Clara County.  In addition to other specified  
          transportation responsibilities, VTA operates bus, light rail,  
          and paratransit services in Santa Clara County.  Existing law  
          also creates SamTrans, which is responsible for providing public  
          transit and transportation programs in San Mateo County.

          Proposed Law: AB 797 would authorize VTA and SamTrans to use the  
          CMGC project delivery method for transit projects in their  
          jurisdictions.  VTA and SamTrans would be subject to the same  
          criteria and requirements that apply to SANDAG in existing law.

          Staff Comments: AB 797 would require VTA and SamTrans to adopt a  
          finding at a public meeting prior to authorizing the use of the  
          CMGC method for a transit project only after evaluating the  
          traditional design-bid-build methodology and making a  
          determination that use of the alternative methodology would  
          provide lower costs, accelerated project schedule, or provide  
          features that are not achievable through traditional project  
          delivery.  Staff notes that "features not achievable through the  
          design-bid-build method" is a subjective and very broad term to  
          describe a benefit of using an alternative delivery method.  It  
          is assumed that the transit agency would make a determination  
          that the alternative method would provide some public benefit  
          that may be a local priority, but could result in a higher  
          contract cost than design-bid-build.  Even if costs are higher  
          for some projects, the bill is not expected to result in an  
          increased allocation of State Transit Assistance funds to the  
          specified transit agencies.