BILL ANALYSIS Ó
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: SB 328 HEARING: 4/3/13
AUTHOR: Knight FISCAL: No
VERSION: 4/1/13 TAX LEVY: No
CONSULTANT: Weinberger
CONSTRUCTION MANAGER AT-RISK CONTRACTS FOR COUNTIES
Allows counties to use construction manager at-risk
contracts for projects worth more than $1,000,000.
Background and Existing Law
The Local Agency Public Construction Act requires local
officials to invite bids for construction projects and then
award contracts to the lowest responsible bidder. This
design-bid-build method is the traditional approach to
public works construction. By contrast, state law also
allows local officials to use the design-build method to
procure both design and construction services from a single
company before the development of complete plans and
specifications.
Existing law also allows local officials to contract with
private construction project management firms for
professional management and supervision services for
construction projects. Construction project management
firms provide expertise and experience in construction
project design review and evaluation, construction
mobilization and supervision, bid evaluation, project
scheduling, cost benefit analysis, claims review and
negotiation, and general management and administration of a
construction project. Local officials award contracts
based on demonstrated competence and qualifications.
Construction project management services can be used with
any project delivery method.
A method known as construction manager at-risk is another
approach to public works construction and delivery which
combines elements of the design-bid-build and design-build
methods, and uses construction project management services.
The construction manager at-risk method allows the owner
of a project to retain a "construction manager," who
SB 328 -- 4/1/13 -- Page 2
provides pre-construction services during the design period
and later becomes the general contractor during the
construction process. The owner has separate contracts for
design and construction services (the construction
manager), similar to the design-bid-build method. The
owner may establish the separate contracts at the same
time, however, thereby allowing the design party and the
construction manager to work together, similar to the
design-build method. Before construction can begin on a
project, the owner and construction manager must agree on
either a fixed price or "guaranteed maximum price" for the
project. The construction manager is responsible for
delivering the project within the agreed upon price,
thereby assuming the risk for cost-overruns. The
California Administrative Office of the Courts, University
of California, California State University System, school
districts, and some cities have used the construction
manager at-risk method for building construction projects.
Under the construction manager at-risk method, project
delivery can occur in sequential or concurrent phases.
Projects that have multiple components lend themselves to
this method because the design and construction of
different aspects of the project can occur at different
times. In effect, the overall project can be broken into
multiple components, which the construction manager must
bid to subcontractors.
State law does not authorize counties to use the
construction manager at-risk method for county construction
projects.
Proposed Law
Senate Bill 328 allows a county, with the board of
supervisors' approval, to use construction manager at-risk
construction contracts for erecting, constructing,
altering, repairing, or improving buildings owned or leased
by the county. SB 328 provides that a county may use a
construction manager at-risk construction contract only for
projects in the county in excess of $1,000,000. The bill
allows a county to award the construction manager at-risk
construction contract using either the lowest responsible
bidder or best value method.
SB 328 -- 4/1/13 -- Page 3
SB 328 defines "best value" as a value determined by
objective criteria related to the experience of the entity
and project personnel, project plan, financial strength of
the entity, safety record of the entity, and price.
The bill defines "construction manager at-risk contract" as
a competitively
procured contract by a county with an individual,
partnership, joint venture, corporation, or other
recognized legal entity, that is appropriately licensed in
this state and that guarantees the cost of a project and
furnishes construction management services, including,
preparation and coordination of bid packages, scheduling,
cost control, value engineering, evaluation,
preconstruction services, and construction administration.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . SB 328 gives counties the same
authority to use construction manager at-risk contracting
that state law already grants to other local governments.
Private sector developers and some public entities in
California commonly use the construction manager at-risk
method to complete construction projects in an efficient
and cost-effective manner. This method benefits
construction project owners by:
Allowing them to exercise discretion in selecting a
construction management contractor;
Preserving the cost-control benefits of
competitively bidding the construction subcontracts;
and,
Shifting the risk of cost overruns to a third
party.
Allowing counties to use this flexible contracting tool to
complete better-designed, properly-phased, and
cost-effective county building projects will benefit county
residents throughout California.
2. Oversight . In California, there is limited local
government experience - and no county experience - with
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construction manager at-risk contracting. The new project
delivery method authorized by SB 328, although similar to
counties' existing design-build authority, will expand
county officials' discretion in awarding contracts for some
construction projects. Given the importance of ensuring
the prudent expenditure of public funds, legislators should
exercise their oversight duties. To give legislators and
the general public an opportunity to evaluate how SB 328's
provisions are implemented, the Committee may wish to
consider amending SB 328 to:
Sunset counties' ability to use construction
manager at-risk contracting on January 1, 2021.
Require counties to submit every contract they
enter into subject to SB 328's provisions to the State
Controller's Office, in electronic format, to be
posted online.
3. Sub-contracting . Typically, the construction manager
at-risk method relies on the construction manager to award
subcontracts for construction through a competitive process
to the lowest responsible bidder. While SB 328 specifies
that a construction manager must be responsible for the
"preparation and coordination of bid packages," it does not
specify the method by which subcontracts must be awarded to
bidders. The Committee may wish to consider amending SB
328 to describe more specifically how a construction
manager must award subcontracts.
Support and Opposition (3/28/13)
Support : San Bernardino County; Rural County
Representatives of California.
Opposition : Unknown.