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   
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          |Author:   |Linder                                                |
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          |Version:  |4/21/2015                                             |
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          |Urgency:  |No                     |Fiscal:      |Yes             |
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          |Consultant|Eric Thronson                                         |
          |:         |                                                      |
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          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  







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          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  








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            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.








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          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 --