BILL ANALYSIS Ó
AB 2374
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Date of Hearing: April 4, 2016
ASSEMBLY COMMITTEE ON TRANSPORTATION
Jim Frazier, Chair
AB 2374
(Chiu) - As Introduced February 18, 2016
SUBJECT: Construction Manager/General Contractor method:
regional transportation agencies: ramps
SUMMARY: Extends existing authority for regional transportation
agencies (RTAs) to use the Construction Manager/General
Contractor (CMGC) procurement method to include ramp projects
that are not on the state highway system; removes the limitation
that a CMGC project is in a sales tax measure expenditure plan.
EXISTING LAW:
1)Sets forth provisions governing public works contracting.
These provisions generally prohibit public agencies from
contracting with the same firm for both the design and the
construction phases of a project.
2)Generally requires public works construction contracts to be
awarded to the lowest responsible bidder.
3)Describes the CMGC procurement method and makes legislative
findings and declarations regarding benefits related to risk
transfer and project phasing using CMGC.
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4)Authorizes the California Department of Transportation
(Caltrans) to use CMGC on no more than six projects, at least
five of which must have construction costs greater than $10
million.
5)Authorizes the 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.
6)Authorizes a RTA 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.
7)Defines key terms as follows relative to authority granted to
regional transportation agencies to use CMGC:
a) "Construction manager/general contractor method" to mean
a project delivery method in which a construction manager
is procured to provide preconstruction services during the
design phase of the project and construction services
during the construction phase of the project. Contracts
for preconstruction services and construction services can
be, but need not be, entered into at the same time and the
design and construction phases of a project may be carried
out sequentially or concurrently;
b) "Preconstruction services" to mean advice given during
the design phase of a project related to, for example,
scheduling, pricing, and phasing;
c) "Project" to mean the construction of an expressway that
is not on the state highway system; and,
d) "Regional transportation agency" to broadly include,
among other entities, regional transportation planning
agencies, county transportation commission, joint powers
authorities, and local transportation authorities.
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8)Provides 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.
9)Sets forth provisions governing the process for procuring CMGC
services.
FISCAL EFFECT: Unknown, this bill is keyed non-fiscal by the
Legislative Counsel.
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.
Although design-bid-build generally results in the lowest cost
construction contract, it is not without its drawbacks,
including:
1)Projects generally take longer to complete because designs
must be entirely completed, permits obtained, and right-of-way
acquired before the construction contract can be bid and
awarded.
2)Designs prepared for a competitive low-bid procurement are
developed to allow for a broad range of construction
approaches. As a result, low-bid designs do not always equate
to the most efficient designs possible, depending on a
particular contractor's strengths or capabilities.
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3)Because the project designer does not have the benefit of
consulting with the entity that will ultimately be responsible
for construction of the project, there may be significant
issues that the designer does not anticipate, particularly
constructability issues. This can result in change orders
that ultimately drive up the price of the contract.
4)Low-bid is not always the least expensive option, once change
orders and contractor claims are factored into the overall
project costs.
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.
Design-build differs from design-bid-build in some key areas,
including:
1)Overall elapsed project delivery times are shorter because
construction can begin before final design is complete.
2)Project costs and schedule risks are more heavily borne by the
design-build contractor.
3)Construction claims and change orders are minimized.
4)Designs can be developed to take advantage of a particular
contractor's strengths and abilities, thereby reducing the
need to "over-design" for generic use as in design-bid-build.
5)Project specifications are typically based on definitive
performance criteria (which may or may not be well established
by the project owner) rather than established specifications.
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6)Contracts are awarded based on best-value analyses rather than
low-bid.
Design-build contracts are not without their drawbacks as well.
For example, with a design-build project, the project owner must
give up a good deal of control over the details of the project
design. Additionally, design-build contractors are typically
selected using qualifications-based selection criteria or best
value analysis. These approaches are more subjective than a
low-bid approach, potentially subjecting the public works owner
to greater contract challenges and higher costs.
Last session, the Legislature passed and the Governor signed AB
1171 (Linder), Chapter 413, Statutes of 2015, to provide limited
authority for RTAs to use CMGC on expressway projects that are
not on the state highway system. AB 2374 extends that authority
also to include ramp projects, so long as the project is not on
the state highway system. AB 2374 also removes the restriction
that projects have to be in a local sales tax measure
expenditure plan.
CMGC is an emerging project delivery method that potentially
combines the best of both design-bid-build and design-build.
Using CMGC, RTAs 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
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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 RTA 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:
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.
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The author introduced AB 2374 to assist the San Francisco County
Transportation Authority (SFCTA) to complete its Yerba Buena
Island West-Side Bridges Retrofit project. This $66 million
project will retrofit or replace eight locally-owned bridge
structures that connect Treasure Island to the San
Francisco-Oakland Bay Bridge. According to the author, this
project is a complicated public safety project that involves
unique topographical, environmental, and construction staging
issues. SFCTA has analyzed the potential use of CMGC for this
project and estimates that this procurement method could reduce
construction time by an estimated six months, reduce costs by
between 10% and 15%, and reduce project risk.
Regarding current CMGC projects underway since the initial CMGC
authority was granted in 2012 (see "previous legislation"
below), none of the projects have yet been completed.
Consequently, a more thorough examination of advantages and
disadvantages of CMGC contracting in California is still
pending. However, those agencies that have initiated projects
using CMGC report that early indications suggest CMGC will have
positive project delivery outcomes.
Previous legislation: AB 1171 (Linder), Chapter 413, Statutes
of 2015, provided limited authority for RTAs to use CMGC on
expressway projects that are not on the state highway system but
are in sales tax measure expenditure plans.
AB 797 (Gordon), Chapter 320, Statutes of 2013, authorized the
Santa Clara Valley Transportation Authority and the San Mateo
County Transit District to use CMGC contracting on transit
projects.
AB 1724 (Frazier) of 2014, would have granted RTAs broad
authority to use CMGC. AB 1724 passed the Assembly but was held
in Senate Transportation and Housing Committee.
AB 2498 (Gordon), Chapter 752, Statutes of 2012, authorized
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Caltrans to use CMGC on no more than six projects, at least five
of which must have construction costs greater than $10 million.
SB 1549 (Vargas), Chapter 767, Statutes of 2012, authorized the
San Diego Association of Governments to use CMGC contracting on
transit projects.
REGISTERED SUPPORT / OPPOSITION:
Support
California Transportation Commission
Santa Clara Valley Transportation Authority
Opposition
None on file
Analysis Prepared by:Janet Dawson / TRANS. / (916) 319-2093
AB 2374
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