BILL ANALYSIS                                                                                                                                                                                                    Ó


          |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

          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  

          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  

          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:  



                                                                    AB 797

          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  



                                                                     AB 797

             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  

          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.

          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.



                                                                     AB 797

          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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