BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 1171


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          Date of Hearing:  May 6, 2015


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                                 Jimmy Gomez, Chair


          AB  
          1171 (Linder) - As Amended April 21, 2015


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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          No


          SUMMARY:


          This bill authorizes regional transportation agencies, for  
          expressway projects not on the state highway system, to use an  
          alternative contracting method, consisting of specified  








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          procedures, referred to as construction manager/general  
          contractor (CM/GC), whereby a construction manager is procured  
          to provide preconstruction services during a project's design  
          phase and construction services during the construction phase.


          FISCAL EFFECT:


          To the extent the use of this alternative method is successful,  
          there should be significant savings on those projects selected  
          by the transportation agencies.


          COMMENTS:


          1)Background and Purpose. The traditional public works  
            contracting method is known as design-bid-build, whereby  
            project design is done under contract by an  
            architectural/engineering firm, then upon completion of the  
            design phase, the construction phase is put out to bid and the  
            contract is awarded to the lowest responsible bidder. 

            In the last 10-15 years, contracting agencies have selectively  
            used an alternative contracting method known as design/build,  
            whereby entities with both design and construction management  
            capabilities compete for a single contract for both project  
            phases, typically for a fixed price. The intent of the  
            design/build alternative is to reduce the contracting agency's  
            risk with regard to project costs and schedule, expedite  
            project completion, and minimize change orders and claims.  
            Design/build has some drawbacks, however, including that the  
            contracting agency relinquishes significant control over the  
            details of project design. In addition, at the point when the  
            design/build entity bids on a project, there are still many  
            unknowns, and thus a degree of risk, which are factored into  
            their bids. Therefore, even though the contracting agency is  
            transferring risk, they are still paying for it in some  








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            manner. The use of CM/GC seeks to achieve the best of both  
            worlds, i.e maintaining design control while minimizing  
            overall risk. 

            Under CM/GC, an agency would engage a design and construction  
            management consultant to act as its consultant during the  
            preconstruction 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, the agencies 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.  
            The CM/CG process is meant to provide continuity and  
            collaboration between the design and construction phases of  
            the project. 

            According to the Federal Highway Administration, projects best  
            suited for the CM/GC 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 entail extensive public  
            involvement or include right-of-way or utility issues that  
            affect the overall schedule. According to guidance published  
            by the City of Seattle, CM/GC contracts carry risks,  
            including: 

             a)   Difficulty and complexity. 
             b)   A longer procurement process consuming greater project  
               staff time than traditional contracts.
             c)   The project teams face steep learning curves.
             d)   Successful construction cost negotiations require  
               experienced staff. 








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          2)Prior Legislation. 
          
             a)   AB 1724 (Frazier) of 2014, which was held in Senate  
               Transportation and Housing Committee, would have granted  
               RTAs broad authority to use CMGC.  AB 1724 passed the  
               Assembly but.

             b)   AB 797 (Gordon)/Statutes of 2013, authorized the Santa  
               Clara Valley Transportation Authority and the San Mateo  
               County Transit District to use CMGC contracting on transit  
               projects. 

             c)   SB 1549 (Vargas)/Statutes of 2012, authorized the San  
               Diego Association of Governments to use CMGC contracting on  
               transit projects. 

             d)   AB 2498 (Gordon)/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  
               $10,000,000.



          Analysis Prepared by:Chuck Nicol / APPR. / (916)  
          319-2081