BILL ANALYSIS Ó SENATE COMMITTEE ON TRANSPORTATION AND HOUSING Senator Jim Beall, Chair 2015 - 2016 Regular Bill No: AB 1171 Hearing Date: 6/16/2015 ----------------------------------------------------------------- |Author: |Linder | |----------+------------------------------------------------------| |Version: |4/21/2015 | ----------------------------------------------------------------- ----------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ----------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Eric Thronson | |: | | ----------------------------------------------------------------- SUBJECT: Construction Manager/General Contractor method: regional transportation agencies: projects on expressways DIGEST: This bill authorizes all regional transportation agencies to utilize the construction manager/general contractor (CM/GC) procurement method to design and construct projects under certain limited circumstances. ANALYSIS: Traditionally, state and local entities develop and construct transportation projects with a process known as the design-bid-build (DBB) 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. DBB procurement results in 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 unanticipated construction issues arise. Unlike traditional DBB 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 can ultimately lead 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 AB 1171 (Linder) Page 2 of ? construction manager becomes the general contractor. Studies suggest CM/GC often leads to less costly or more expediently delivered projects because of the construction manager's involvement in the design process. In 2012, the Legislature passed and the governor signed SB 1549 (Vargas, Chapter 767), which authorized the San Diego Association of Governments (SANDAG) to utilize other alternative project-delivery methods for transit projects within its jurisdiction, including CM/GC. That same year, the Legislature passed and the governor signed AB 2498 (Gordon, Chapter 752), which authorized the California Department of Transportation (Caltrans) to utilize CM/GC on a pilot basis. In 2013, legislation authorized both Santa Clara Valley Transportation Authority (VTA) and the San Mateo County Transit District to use CM/GC for transit projects. Before electing to use CM/GC, existing law requires that SANDAG, VTA, and San Mateo County make a written finding declaring that the CM/GC project delivery method will either reduce costs, expedite completion, or provide features not achievable through DBB. In addition, to determine the benefits of CM/GC, existing law requires SANDAG, VTA, and San Mateo County 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 website. This bill: 1)Authorizes all regional transportation agencies to utilize the CM/GC procurement method to design and construct projects if the projects are developed in accordance with a voter-approved expenditure plan, as long as: a) The expenditure plan was approved prior to January 1, 2014. b) The project is the construction of an expressway that is not on the state highway system. 1)Defines CM/GC as a project-delivery method in which a construction manager is procured to provide preconstruction services during the design phase and construction services during the construction phase of the project. AB 1171 (Linder) Page 3 of ? 2)Defines preconstruction services as advice during the design phase of a project in order to assist the regional transportation agency to design a more constructible project. 3)Requires regional transportation agencies to follow the same process, procedures, and requirements laid out in Caltrans' CM/GC authorizing statutes. 4)Specifies that the entity responsible for the maintenance of the local streets and roads within the jurisdiction of the project is responsible for the maintenance of the project upon completion. COMMENTS: 1)Purpose. According to the author, this bill will provide an innovative project delivery method for regional transportation agencies to use on expressway projects contained in local measure expenditure plans. Supporters state that the CM/GC method has been identified by several entities, including the Federal Highway Administration, to be an innovative way to reduce time and cost of project delivery. 2)Why pursue alternative project delivery approaches? For decades, state and local agencies have relied on the DBB procurement method for transportation projects. DBB reduces the risk for the construction contractor because the state or local agency 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 DBB can include longer completion times, constructability challenges unforeseen by the designers, and increasing costs over time due to change orders and claims. The CM/GC process is meant to provide 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 AB 1171 (Linder) Page 4 of ? contractor for the project. Furthermore, CM/GC promises to save project delivery time, provide earlier cost certainty, transfer some 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. 3)Pre-selection determination and reporting requirements. While generally successful nationwide, CM/GC has not been utilized much in this state, and therefore it is unclear whether it will lead to better outcomes than traditional DBB. As stated previously, existing law requires SANDAG and others to present an evaluation comparing CM/GC and other project delivery alternatives before choosing to utilize the CM/GC method. In addition, existing law requires each of these regional transportation entities to present a report on its experience with this alternative procurement method to its governing board, as well as post the report on its website. It seems reasonable to require other entities to similarly utilize a pre-selection determination and provide a report on their experiences in order for their boards and the Legislature to evaluate the effectiveness of CM/GC. To that end, the committee may wish to amend the bill to include similar pre-selection determinations and reporting requirements to those in existing law that apply to SANDAG and other's use of CM/GC. Related Legislation: AB 1724 (Frazier, 2014) - would have granted regional transportation agencies broad authority to use CM/GC. This bill was held in the Senate Transportation and Housing Committee. AB 2498 (Gordon, Chapter 752, Statutes of 2012) - authorized Caltrans to use CM/GC on no more than six projects, at least five of which must have construction costs greater than $10 million. SB 1549 (Vargas, Chapter 767, Statutes of 2012) - authorized SANDAG to use CMGC contracting on transit projects. AB 797 (Gordon, Chapter 320, Statutes of 2013) - authorized the VTA and the San Mateo County Transit District to use CMGC contracting on transit projects. AB 1171 (Linder) Page 5 of ? Assembly Votes: Floor: 78-0 Appr: 17-0 Trans: 16-0 FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes POSITIONS: (Communicated to the committee before noon on Wednesday, June 10, 2015.) SUPPORT: Associated General Contractors Capital SouthEast Connector JPA El Dorado Hills Chamber of Commerce Riverside County Transportation Commission Sacramento Metropolitan Chamber of Commerce OPPOSITION: None received -- END --