BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2126


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          ASSEMBLY THIRD READING


          AB  
          2126 (Mullin)


          As Introduced  February 17, 2016


          Majority vote


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Transportation  |16-0 |Frazier, Linder,      |                    |
          |                |     |Baker, Bloom, Brown,  |                    |
          |                |     |Chu, Daly, Dodd,      |                    |
          |                |     |Eduardo Garcia,       |                    |
          |                |     |Gomez, Kim, Mathis,   |                    |
          |                |     |Medina, Melendez,     |                    |
          |                |     |Nazarian, O'Donnell   |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |19-0 |Gonzalez, Bigelow,    |                    |
          |                |     |Bloom, Bonilla,       |                    |
          |                |     |Bonta, Calderon,      |                    |
          |                |     |Chang, Daly, Eggman,  |                    |
          |                |     |Gallagher, Eduardo    |                    |
          |                |     |Garcia, Holden,       |                    |
          |                |     |Jones, Obernolte,     |                    |
          |                |     |Quirk, Santiago,      |                    |
          |                |     |Wagner, Weber, Wood   |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |








                                                                    AB 2126


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          SUMMARY:  Expands from six to 12 the number of projects for  
          which the California Department of Transportation (Caltrans) is  
          authorized to use the Construction Manager/General Contractor  
          (CMGC) procurement method.  Of the 12 projects, at least 10  
          projects have to have construction costs greater than $10  
          million and at least eight projects have to use Caltrans  
          employees or Caltrans consultants.


          FISCAL EFFECT:  According to the Assembly Appropriations  
          Committee, based on Caltrans experience to date, potential  
          significant savings could be realized from additional CMGC  
          projects.


          COMMENTS:  For decades, the traditional process for procuring  
          public works projects has been the design-bid-build process.   
          This process relies on the project owner:  1) preparing, or  
          causing to be prepared, complete project design specifications  
          and estimates; 2) putting the complete package out to bid for  
          construction; and 3) awarding the construction contract to the  
          lowest responsible bidder.  The design-bid-build process was  
          developed to protect taxpayers from extravagance, corruption,  
          and other improper practices by public officials as well as to  
          secure a fair and reasonable price for public works construction  
          by injecting competition amongst bidders into the process.  


          In the early 1990s, public works agencies grew frustrated with  
          design-bid-build and began experimenting with more innovative  
          project delivery methods, namely design-build.  Design-build is  
          an alternate method for procuring design and construction  
          services that provides for the delivery of public works projects  
          from a single entity.  Design-build combines project design,  
          permit, and construction schedules in order to streamline the  
          traditional design-bid-build environment.  








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          The CMGC process, as provided for in this bill, is yet another  
          method of contracting that 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  
          department to the contractor, and ensure project  
          constructability.  Additionally, CMGC allows Caltrans to have  
          greater control of design decisions.  It also allows the  
          department 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:


          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  








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          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 increases the number of projects for which Caltrans  
          can use CMGC from 6 to 12.  The author introduced the bill to  
          increase the opportunities to reduce costs and expedite highway  
          congestion relief projects in the state.


          Committee comments:  As a part of the authority granted in AB  
          2498 (Gordon), Chapter 752, Statutes of 2012, Caltrans is  
          required to report each year on the progress of its CMGC  
          contracts.  Last year, Caltrans reported that, although it was  
          still early in the process, it appears that the department will  
          realize substantial savings through the use of CMGC on these  
          projects.  These early indications are consistent with those  
          reported by other transportation agencies that have been granted  
          statutory authority to use CMGC in recent years.  Consequently,  
          modestly increasing the number of projects for which Caltrans  
          can gain additional experience with the use of CMGC seems  
          reasonable and prudent.


          Please see the policy committee analysis for full discussion of  
          this bill.




          Analysis Prepared by:                                             
                          Janet Dawson / TRANS. / (916) 319-2093  FN:  
          0002824











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