BILL ANALYSIS Ó
SENATE COMMITTEE ON APPROPRIATIONS
Senator Ricardo Lara, Chair
2015 - 2016 Regular Session
AB 1171 (Linder) - Construction Manager/General Contractor
method: regional transportation agencies: projects on
expressways
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|Version: June 19, 2015 |Policy Vote: T. & H. 11 - 0 |
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|Urgency: No |Mandate: Yes |
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|Hearing Date: July 6, 2015 |Consultant: Mark McKenzie |
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This bill does not meet the criteria for referral to the
Suspense File.
Bill
Summary: AB 1171 would authorize regional transportation
agencies to use the Construction Manager/General Contractor
(CMGC) procurement method to design and construct expressways
not on the state highway system in specified circumstances.
Fiscal
Impact: Unknown local expressway project costs or savings (primarily
local funds). Since a contract for preconstruction and
construction services for CMGC is a negotiated process with the
most qualified construction manager, rather than a traditional
AB 1171 (Linder) Page 1 of
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"lowest responsible bidder" process, it is difficult to
determine whether the negotiated price would be lower or higher
than project delivery costs through a traditional
design-bid-build process. It is expected that use of the CMGC
method would minimize change orders, which is currently a
significant factor in unexpected cost escalation on
transportation projects.
Staff notes that the projects authorized for use of CMGC by this
bill would be funded solely with non-state funds in nearly all
circumstances, but could involve some state funds in rare
circumstances (State Highway Account, bond funds).
Background: The traditional project delivery process is the
design-bid-build method, whereby complete plans and
specifications are prepared prior to the advertising, bidding,
and awarding of any construction contracts. The agency awards
the contract to the lowest, responsible bidder. Although this
method is structured to ensure a project is built for the lowest
cost, oftentimes project costs escalate dramatically as change
orders are necessary to address unforeseen problems encountered
during the construction phase. In addition, the bulk of project
risk remains with the sponsoring agency.
Existing law also allows public agencies to use alternative
project delivery methods. The most widely used alternative
project delivery technique is design-build, which allows both
design and construction services to be performed by a single
entity before the development of completed plans and
specifications. Design-build contracts may be awarded on the
basis of "best value" or "lowest responsible bidder," as
specified in existing law. Design-build is structured to shift
risk associated with the adequacy of plans to the contractor and
expedite project delivery by allowing construction to begin
before design is complete.
The Construction Manager/General Contractor (CMGC) project
delivery method allows an agency to engage a construction
manager during the design process to provide assistance to the
design team, including advice regarding scheduling, pricing,
phasing, and other input that helps the owner design a more
constructible project. The agency selects the construction
manager on the basis of qualifications, past experience, or a
AB 1171 (Linder) Page 2 of
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best-value basis. 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, a contract is executed for construction services, and
the construction manager becomes the general contractor. The
benefits of this procurement method is that the public agency
does not sacrifice control over the design of the project and
during the construction phase the contractor is very familiar
with the project design resulting in fewer disputes over design
issues.
The Legislature has authorized the Department of Transportation
(Caltrans) to use the CMGC method on a pilot basis to construct
up to six projects (AB 2498, Gordon, Ch. 752/2012). In
addition, the San Diego Association of Governments (SANDAG), the
Santa Clara County Valley Transportation Authority (VTA) and the
San Mateo County Transit District (SamTrans) have been provided
with general authority to use CMGC for public transit projects
(SB 1549, Vargas, Ch. 767/2012, and AB 797, Gordon, Ch.
320/2013). Before electing to use the CMGC method, existing law
requires SANDAG, VTA, and SamTrans to make a written finding
declaring that use of CMGC will reduce costs, expedite
completion, or provide features not achievable through the
design-bid-build method. In addition, to determine the benefits
of CMGC, agency staff must present a report to its governing
body on its experience upon completion of a CMGC project and to
post the report on its internet web site.
Proposed Law:
AB 1171 would authorize regional transportation agencies, as
defined, to utilize the CMCG procurement method to design and
construct expressway projects not on the state highway system
that are developed in accordance with an expenditure plan
approved by voters. Prior to entering into a CMCG contract, the
agency must evaluate the traditional design-bid-build and CMCG
methods and affirmatively adopt the procurement strategy in a
public hearing. The bill requires regional transportation
agencies to follow the same process, procedures, and
requirements specified in existing law for Caltrans' use of
CMCG, and specifies that the entity responsible for local
streets and roads in the jurisdiction of the expressway project
is responsible for future maintenance of the expressway. The
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bill also requires the agency to prepare a progress report for
its governing body with specified information regarding the use
of CMCG, including outcomes and recommendations, and post the
report on its website.
Staff
Comments: Before using the CMGC method, the transportation
agency must evaluate both the traditional design-bid-build and
CMCG methods and affirmatively adopt the procurement strategy in
a public hearing. However, the bill does not require the agency
to make a finding that the alternative method would reduce
project costs, expedite project delivery, expedite project
completion, or provide features not achievable through
design-bid-build (the findings that public transit project
sponsors must make before using CMCG). The Committee may wish
to consider whether the public adoption of the use of CMCG
should also include a public finding of the expected comparable
benefits over traditional procurement methods.
Regardless of the impact that utilizing CMCG has on overall
project costs, the bill is not expected to result in an
increased allocation of state funds to regional transportation
agencies for local expressway projects.
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