BILL ANALYSIS Ó
AB 1171
Page 1
Date of Hearing: April 27, 2015
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
AB 1171
(Linder) - As Amended April 21, 2015
SUBJECT: Construction Manager/General Contractor method:
regional transportation agencies: projects on expressways
SUMMARY: Authorizes regional transportation agencies (RTAs) to
use an alternative procurement method referred to as
construction manager/general contractor (CMGC) contracts, under
limited circumstances. Specifically, this bill :
1)Describes the CMGC procurement method and makes legislative
findings and declarations regarding benefits related to risk
transfer and project phasing using CMGC.
2)Defines key terms as follows:
a) "Construction manager/general contractor method" to mean
a project delivery method 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. Contracts
for preconstruction services and construction services can
be, but need not be, entered into at the same time and the
design and construction phases of a project may be carried
out sequentially or concurrently;
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b) "Preconstruction services" to mean advice given during
the design phase of a project related to, for example,
scheduling, pricing, and phasing;
c) "Project" to mean the construction of an expressway that
is not on the state highway system; and
d) "Regional transportation agency" to broadly include,
among other entities, regional transportation planning
agencies, county transportation commission, joint powers
authorities, and local transportation authorities.
2)Authorizes an RTA to use the CMGC project delivery method to
design and construct projects on expressways that are not on
the state highway system if the projects are developed in
accordance with an expenditure plan approved by the voters as
of January 1, 2014.
3)Provides that the entity responsible for maintenance of local
streets and roads within the same jurisdiction of the
expressway shall be responsible for the maintenance of the
expressway.
5)Sets forth provisions governing the process for procuring CMGC
services.
EXISTING LAW:
1)Sets forth provisions governing public works contracting.
These provisions generally prohibit public agencies from
contracting with the same firm for both the design and the
construction phases of a project.
2)Generally requires public works construction contracts to be
awarded to the lowest responsible bidder.
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3)Authorizes the California Department of Transportation
(Caltrans) to use CMGC on no more than six projects, at least
five of which must have construction costs greater than
$10,000,000.
4)Authorizes the Santa Clara County Valley Transportation
Authority, the San Mateo County Transit District, and the San
Diego Association of Governments to use CMGC for transit
projects.
FISCAL EFFECT: Unknown
COMMENTS: For decades, the traditional process for procuring
public works projects has been the design-bid-build process.
This process relies on: 1) a design entity preparing complete
project design specifications and estimates; 2) the project
owner putting the complete package out to bid for construction;
and 3) awarding the construction contract to the lowest
responsible bidder. The design-bid-build process was developed
to protect taxpayers from extravagance, corruption, and other
improper practices by public officials as well as to secure a
fair and reasonable price for public works construction by
injecting competition amongst bidders into the process.
Although design-bid-build generally results in the lowest cost
construction contract, it is not without its drawbacks,
including:
1)Projects generally take longer to complete because designs
must be entirely completed, permits obtained, and right-of-way
acquired before the construction contract can be bid and
awarded.
2)Designs prepared for a competitive low-bid procurement are
developed to allow for a broad range of construction
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approaches. As a result, low-bid designs do not always equate
to the most efficient designs possible, depending on a
particular contractor's strengths or capabilities.
3)Because the project designer does not have the benefit of
consulting with the entity that will ultimately be responsible
for construction of the project, there may be significant
issues that the designer does not anticipate, particularly
constructability issues. This can result in change orders
that ultimately drive up the price of the contract.
4)Low-bid is not always the least expensive option, once change
orders and contractor claims are factored into the overall
project costs.
In the early 1990s, public works agencies grew frustrated with
design-bid-build and began experimenting with more innovative
project delivery methods, namely design-build. Design-build is
an alternate method for procuring design and construction
services that provides for the delivery of public works projects
from a single entity. Design-build combines project design,
permit, and construction schedules in order to streamline the
traditional design-bid-build environment.
Design-build differs from design-bid-build in some key areas,
including:
1)Overall elapsed project delivery times are shorter because
construction can begin before final design is complete.
2)Project costs and schedule risks are more heavily borne by the
design-build contractor.
3)Construction claims and change orders are minimized.
4)Designs can be developed to take advantage of a particular
contractor's strengths and abilities, thereby reducing the
need to "over-design" for generic use as in design-bid-build.
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5)Project specifications are typically based on definitive
performance criteria (which may or may not be well established
by the project owner) rather than established specifications.
6)Contracts are awarded based on best-value analyses rather than
low-bid.
Design-build contracts are not without their drawbacks as well.
For example, with a design-build project, the project owner must
give up a good deal of control over the details of the project
design. Additionally, design-build contractors are typically
selected using qualifications-based selection criteria or best
value analysis. These approaches are more subjective than a
low-bid approach, potentially subjecting the public works owner
to greater contract challenges and higher costs.
This bill provides limited authority for RTAs to use CMGC, an
emerging project delivery method that potentially combines the
best of both design-bid-build and design-build, similar to
authority already granted to Caltrans, the Santa Clara County
Valley Transportation Authority, the San Mateo County Transit
District, and the San Diego Association of Governments. Using
CMGC, RTAs will be able to engage a design and construction
management consultant (construction manager) to act as its
consultant during the pre-construction phase and as the general
contractor during construction. During the design phase, the
construction manager acts in an advisory role, providing
constructability reviews, value engineering suggestions,
construction estimates, and other construction-related
recommendations. Later, each agency and the construction
manager can agree that the project design has progressed to a
sufficient enough point that construction may begin. The two
parties then work out mutually agreeable terms and conditions
for the construction contract, and, if all goes well, the
construction manager becomes the general contractor and
construction on the project commences, well before design is
entirely complete.
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The CMGC process provides 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, CMGC
promises to save project delivery time, provide earlier cost
certainty, transfer risks from the RTA to the contractor, and
ensure project constructability. Additionally, CMGC allows each
agency to have greater control of design decisions. It also
allows each agency to design the project to compliment the
CMGC's strengths and capabilities, thereby avoiding the need to
over-design the project to provide maximum competitiveness in a
low-bid procurement.
At one point, the Federal Highway Administration (FHWA)
considered CMGC "innovative" and required prior approval before
states could use the process on a federal-aid contract; however,
that approval is no longer necessary. According to FHWA,
projects that are best suited for the CMGC process are those for
which the owner needs contractor feedback during the design
phase. These projects include complex components that require
innovation and are typically located in urban, more congested
areas. Other projects that are a good fit for the CMGC process
are projects that entail extensive public involvement or include
right-of-way or utility issues that affect the overall schedule.
Seventeen states authorize the use of CMCG contracts for
transportation.
There are potential drawbacks of using CMGC contracts.
According to guidance published by the City of Seattle, CMGC
contracts carry risks, including:
1)They are difficult and complex.
2)The procurement process takes longer and consumes greater
project staff time than traditional design-bid-build
contracts.
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3)Project teams face steep learning curves.
4)Successful construction cost negotiations require experienced
staff.
Other literature on the use of CMGC contracts is generally
consistent with Seattle's guidance regarding concerns for risks
associated with CMGC contracts and cautions that CMGC is not
appropriate for every project. However, the same literature
suggests that, if carefully implemented, CMGC has the potential
to significantly improve project delivery.
AB 1171 provides limited authority for RTAs to use CMGC on
expressway projects that are not on the state highway system,
similar to authority already granted to Caltrans, Santa Clara
County Valley Transportation Authority, the San Mateo County
Transit District, and the San Diego Association of Governments
to use CMGC for transit projects. These other entities have not
yet completed any projects using CMGC so their overall
experience with this procurement method is not yet known.
Supporters of this bill suggest that early collaboration and
coordination between the designer and the construction
contractor should lead to innovations that reduce costs,
increase efficiency, or accelerate project delivery,
particularly on large and complex projects. One of the projects
for which CMGC would be used if this bill is successful is the
Capital Southeast Connector project in Sacramento County.
Previous legislation: AB 1724 (Frazier) of 2014 would have
granted RTAs broad authority to use CMGC. AB 1724 passed the
Assembly but was held in Senate Transportation and Housing
Committee.
AB 2498 (Gordon), Chapter 752, Statutes of 2012, authorized
Caltrans to use CMGC on no more than six projects, at least five
of which must have construction costs greater than $10 million.
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SB 1549 (Vargas), Chapter 767, Statutes of 2012, authorized the
San Diego Association of Governments to use CMGC contracting on
transit projects.
AB 797 (Gordon), Chapter 320, Statutes of 2013, authorized the
Santa Clara Valley Transportation Authority and the San Mateo
County Transit District to use CMGC contracting on transit
projects.
REGISTERED SUPPORT / OPPOSITION:
Support
Associated General Contractors
Capital SouthEast Connector JPA Board of Directors
Riverside County Transportation Commission
Sacramento Metropolitan Chamber of Commerce
AB 1171
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Opposition
None on file
Analysis Prepared by:Janet Dawson / TRANS. / (916) 319-2093