BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 797|
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THIRD READING
Bill No: AB 797
Author: Gordon (D)
Amended: 4/15/13 in Assembly
Vote: 21
SENATE TRANSPORTATION & HOUSING COMMITTEE : 11-0, 6/11/13
AYES: DeSaulnier, Gaines, Beall, Cannella, Galgiani, Hueso,
Lara, Liu, Pavley, Roth, Wyland
SENATE APPROPRIATIONS COMMITTEE : 7-0, 6/24/13
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
ASSEMBLY FLOOR : 53-22, 5/13/13 - See last page for vote
SUBJECT : Alternative project delivery methods
SOURCE : Santa Clara Valley Transportation Authority
DIGEST : This bill authorizes the Santa Clara County Valley
Transportation Authority (VTA) and the San Mateo Transit
District (SamTrans) to utilize the construction manager/general
contractor (CM/GC) 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
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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.
The Legislature passed and the Governor signed SB 1549 (Vargas,
Chapter 767, Statutes of 2012) which authorized the San Diego
Association of Governments (SANDAG) to utilize other alternative
project delivery methods for transit projects within its
jurisdiction, including the 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 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 required 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 required 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 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 SamTrans, which is
responsible for providing public transit and transportation
programs in San Mateo County.
This bill:
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1. Defines CM/GC and CM by reference to existing law to mean,
the following:
A. CM/GC to mean 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.
B. CM to mean a partnership, corporation, or other legal
entity that is able to provide appropriately licensed
contracting and engineering services as needed pursuant
to a CM/GC contract.
2. Specifically authorizes VTA to use the CM/GC project delivery
method for public transit projects within its jurisdictions,
under the condition that after evaluating the traditional
design-bid-build process as well as the CM/GC process in a
public meeting, VTA makes a written finding that use of the
CM/GC process on a particular project will result in one or
more of the following objectives:
A. Reduce project costs;
B. Expedite the project's completion; or,
C. Provide features not achievable through a
design-bid-build process.
3. Requires VTA to comply with prevailing wages laws on projects
for which CM/GC is used or, alternatively, to enter into a
collective bargaining contract that will bind all contractors
on a project and that includes provisions governing the
resolution of disputes about wage payments.
4. Requires, if VTA enters into a CM/GC contract that includes
preconstruction services by the construction manager, VTA to
pay a fee for preconstruction services for a mutually agreed
to price. VTA may not request or obtain from the
construction manager a fixed price or a guaranteed maximum
price for a construction contract nor enter into a
construction contract with the construction manager until
after it has entered into a preconstruction services
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contract. The preconstruction services contract is to
provide for subsequent negotiation for the construction phase
of the project.
5. Authorizes VTA to enter into a contract for construction
services after a project has been sufficiently developed and
either a fixed price or guaranteed maximum price has been
successfully negotiated. Should VTA not be able to come to
terms for the construction services phases, then it may award
the contract using any other procurement method authorized by
law.
6. Requires the construction manager to perform at least 30% of
the work covered by the construction services contract.
7. Requires any work not performed by the construction manager
to be bid to subcontractors pursuant to the Subletting and
Subcontracting Fair Practices Act.
8. Requires VTA to prepare a progress report to its governing
body, with specified elements, and to make the report
available on its Internet Web site.
9. Provides that the provisions of this bill are severable and
that contracts awarded pursuant to the provisions of this
bill are valid until the project is completed.
10.Duplicates all of these provisions to apply to San Mateo
County Transit District as well.
Background
For 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.
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The CM/GC process is meant to provide continuity and
collaboration between the design and construction phases of the
project. CMs 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Unknown transit project costs or savings (State Transit
Assistance funds, local funds, federal funds). Before using
the CM/GC 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 CM/GC must be justified by providing other
benefits, as specified.
Likely minor costs to DIR to perform prevailing wage
monitoring and enforcement, reimbursed by VTA and SamTrans
(State Public Works Enforcement Fund).
SUPPORT : (Verified 6/26/13)
Santa Clara Valley Transportation Authority (source)
California Transit Association
Peninsula Corridor Joint Powers Board
San Mateo County Transit District
San Mateo County Transportation Authority
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OPPOSITION : (Verified 6/26/13)
Air Conditioning Trade Association
Plumbing-Heating-Cooling Contractors Association of California
Western Electrical Contractors Association
ARGUMENTS IN SUPPORT : 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."
ARGUMENTS IN 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.
ASSEMBLY FLOOR : 53-22, 5/13/13
AYES: Achadjian, Alejo, Atkins, Bloom, Blumenfield, Bocanegra,
Bonilla, Bonta, Bradford, Brown, Buchanan, Ian Calderon,
Campos, Chau, Chesbro, Cooley, Daly, Dickinson, Eggman, Fong,
Fox, Frazier, Garcia, Gatto, Gomez, Gordon, Gray, Hall, Roger
Hernández, Jones-Sawyer, Levine, Medina, Mitchell, Mullin,
Muratsuchi, Nazarian, Pan, Perea, V. Manuel Pérez, Quirk,
Quirk-Silva, Rendon, Salas, Skinner, Stone, Ting, Torres,
Weber, Wieckowski, Wilk, Williams, Yamada, John A. Pérez
NOES: Bigelow, Chávez, Conway, Dahle, Donnelly, Beth Gaines,
Gorell, Grove, Hagman, Harkey, Jones, Linder, Logue,
Maienschein, Mansoor, Melendez, Morrell, Nestande, Olsen,
Patterson, Wagner, Waldron
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NO VOTE RECORDED: Allen, Ammiano, Holden, Lowenthal, Vacancy
JJA:d 6/26/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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