BILL ANALYSIS Ó AB 1171 Page 1 Date of Hearing: May 6, 2015 ASSEMBLY COMMITTEE ON APPROPRIATIONS Jimmy Gomez, Chair AB 1171 (Linder) - As Amended April 21, 2015 ----------------------------------------------------------------- |Policy |Transportation |Vote:|16 - 0 | |Committee: | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | |-------------+-------------------------------+-----+-------------| | | | | | | | | | | | | | | | ----------------------------------------------------------------- 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 AB 1171 Page 2 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 AB 1171 Page 3 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. AB 1171 Page 4 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