BILL ANALYSIS                                                                                                                                                                                                    Ó



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          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          1171 (Linder)


          As Amended  June 19, 2015


          Majority vote


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          |ASSEMBLY:  | 78-0 | (May 14,      |SENATE: | 38-0 | (July 16, 2015) |
          |           |      |2015)          |        |      |                 |
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          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  








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            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  








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          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:








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          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. 









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          There is no opposition on file.


          Analysis Prepared by:                     Janet Dawson / TRANS.  
          / (916) 319-2093                                    FN: 0001147