BILL ANALYSIS Ó
AB 2126
Page 1
Date of Hearing: April 27, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2126 (Mullin) - As Introduced February 17, 2016
-----------------------------------------------------------------
|Policy |Transportation |Vote:|16 - 0 |
|Committee: | | | |
| | | | |
| | | | |
|-------------+-------------------------------+-----+-------------|
| | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill expands from 6 to 12 the number of projects for which
the Caltrans is authorized to use the Construction
Manager/General Contractor (CM/GC) procurement method. Of the 12
projects, at least 10 projects must have construction costs
greater than $10 million and at least 8 projects must use
Caltrans employees or Caltrans consultants to provide project
design and engineering services.
AB 2126
Page 2
FISCAL EFFECT:
Based on Caltrans experience to date, potential significant
savings could be realized from additional CM/GC projects.
Caltrans indicates that a project manager has been procured for
the six currently authorized CM/CG projects, which range in
value from $50 million to $600 million. According to Caltrans,
use of this method has allowed the department to partner with
contractors to identify risks and in many cases eliminate those
risks when designing the projects. To date, comments from the
industry have been very positive and supportive of the pilot
program, and Caltrans is currently estimating project savings of
10% from using CM/GC.
COMMENTS:
1)Background and Purpose. The traditional public works
contracting method is known as design-bid-build, whereby
project design is done under contract by an
architectural/engineering firm (or in Caltrans' case, mainly
in-house), then upon completion of the design phase, the
construction phase is put out to bid and the contract is
awarded to the lowest responsible bidder.
In the last 15 years, the state has selectively used an
alternative contracting method known as design/build, whereby
entities with both design and construction management
capabilities compete for a single contract for both project
phases, typically for a fixed price. The intent of the
design/build alternative is to reduce the contracting agency's
risk with regard to project costs and schedule, expedite
project completion, and minimize change orders and claims.
AB 2126
Page 3
Design/build has some drawbacks, however, including that the
contracting agency relinquishes significant control the
details of project design. In addition, at the point when the
design/build entity bids on a project, there are still many
unknowns, and thus a degree of risk, which are factored into
their bids. Therefore, even though the contracting agency is
transferring risk, they are still paying for it in some
manner.
Use of CM/GC seeks to achieve the best of both worlds, i.e
maintaining design control while minimizing overall risk.
Under CM/GC, Caltrans performs the design in-house, thus
maintaining control, but rather than designing in a vacuum,
this work is done in partnership with the construction firm
that has the right of first refusal to construct the project,
assuming a mutually agreed upon price can be negotiated. The
design progresses to a significant stage of completion prior
to negotiating a final price, so that rather than just
transferring risk, which Caltrans still pays for in the bid,
CM/GC can actually mitigate much of the risk from the eventual
project cost.
2)Purpose. AB 2498 (Gordon), Chapter 752, Statutes of 2012,
authorized Caltrans to use CMGC on no more than six projects,
at least five of which must have construction costs greater
than $10 million. AB 2126 increases the number of projects for
which Caltrans can use CMGC from 6 to 12. The author seeks to
increase the opportunities to reduce costs and expedite
highway congestion relief projects in the state.
3)Related Legislation. The Administration is proposing trailer
bill language that would increase from 6 to 12 the number of
contracts for which Caltrans can use CMGC. As implementation
of the budget is not dependent on enacting such a change,
consideration of this policy is more appropriate through AB
2126 and the legislative bill process.
AB 2126
Page 4
Analysis Prepared by:Chuck Nicol / APPR. / (916)
319-2081