BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2126


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          Date of Hearing:  April 27, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          2126 (Mullin) - As Introduced February 17, 2016


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          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


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          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.  








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            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


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          Analysis Prepared by:Chuck Nicol / APPR. / (916)  
          319-2081