BILL ANALYSIS Ó AB 1171 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1171 (Linder) As Amended June 19, 2015 Majority vote -------------------------------------------------------------------- |ASSEMBLY: | 78-0 | (May 14, |SENATE: | 38-0 | (July 16, 2015) | | | |2015) | | | | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: TRANS. SUMMARY: Authorizes regional transportation agencies (RTAs) to use an alternative procurement method referred to as construction manager/general contractor (CMGC) contracts, under limited circumstances. The Senate amendments: 1)Define "regional transportation agency." 2)Require a regional transportation agency to evaluate the CMGC contract method against the traditional design-bid-build contract method prior to proceeding with a CMGC contract. 3)Require regional transportation agencies to prepare progress AB 1171 Page 2 reports on CMGC projects. AS PASSED BY THE ASSEMBLY, this bill: 1)Authorized a regional transportation agency to use the CMGC project delivery method to design and construct projects on expressways that are not on the state highway system if the projects are developed in accordance with an expenditure plan approved by the voters as of January 1, 2014. 2)Provided that the entity responsible for maintenance of local streets and roads within the same jurisdiction of the expressway shall be responsible for the maintenance of the expressway. 3)Set forth provisions governing the process for procuring CMGC services. FISCAL EFFECT: According to the Senate Appropriations Committee, 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 "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). COMMENTS: This bill provides limited authority for regional AB 1171 Page 3 transportation agencies to use CMGC, an emerging project delivery method that potentially combines the best of both design-bid-build and design-build, similar to authority already granted to the Department of Transportation (Caltrans), the Santa Clara County Valley Transportation Authority, the San Mateo County Transit District, and the San Diego Association of Governments. Using CMGC, regional transportation agencies will be able to engage a design and construction management consultant (construction manager) to act as its consultant during the pre-construction 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, each agency 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 CMGC process provides 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 contractor for the project. Furthermore, CMGC promises to save project delivery time, provide earlier cost certainty, transfer risks from the regional transportation agency to the contractor, and ensure project constructability. Additionally, CMGC allows each agency to have greater control of design decisions. It also allows each agency to design the project to compliment the CMGC's strengths and capabilities, thereby avoiding the need to over-design the project to provide maximum competitiveness in a low-bid procurement. There are potential drawbacks of using CMGC contracts. According to guidance published by the City of Seattle, CMGC contracts carry risks, including: AB 1171 Page 4 1)They are difficult and complex. 2)The procurement process takes longer and consumes greater project staff time than traditional design-bid-build contracts. 3)Project teams face steep learning curves. 4)Successful construction cost negotiations require experienced staff. Other literature on the use of CMGC contracts is generally consistent with Seattle's guidance regarding concerns for risks associated with CMGC contracts and cautions that CMGC is not appropriate for every project. However, the same literature suggests that, if carefully implemented, CMGC has the potential to significantly improve project delivery. This bill provides limited authority for regional transportation agencies to use CMGC on expressway projects that are not on the state highway system, similar to authority already granted to Caltrans, Santa Clara County Valley Transportation Authority, the San Mateo County Transit District, and the San Diego Association of Governments to use CMGC for transit projects. These other entities have not yet completed any projects using CMGC so their overall experience with this procurement method is not yet known. Supporters of this bill suggest that early collaboration and coordination between the designer and the construction contractor should lead to innovations that reduce costs, increase efficiency, or accelerate project delivery, particularly on large and complex projects. One of the projects for which CMGC would be used if this bill is successful is the Capital Southeast Connector project in Sacramento County. AB 1171 Page 5 There is no opposition on file. Analysis Prepared by: Janet Dawson / TRANS. / (916) 319-2093 FN: 0001147