BILL ANALYSIS Ó AB 2126 Page 1 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 Page 2 ------------------------------------------------------------------ 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. AB 2126 Page 3 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 AB 2126 Page 4 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 AB 2126 Page 5