BILL ANALYSIS Ó AB 2374 Page 1 ASSEMBLY THIRD READING AB 2374 (Chiu) As Introduced February 18, 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 | | | | | | | | | | | | ------------------------------------------------------------------ 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: AB 2374 Page 2 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. Public works construction contracts are generally to be awarded to the lowest responsible bidder. 2)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. FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel. COMMENTS: 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. This bill 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 AB 2374 Page 3 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 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: they are difficult and complex; the procurement process takes longer and consumes greater project staff time than traditional design-bid-build contracts; project teams face steep learning curves; and 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. The author introduced this bill to assist the San Francisco County Transportation Authority (SFCTA) to complete its Yerba AB 2374 Page 4 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, 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. Please see the policy committee analysis for full discussion of this bill. Analysis Prepared by: Janet Dawson / TRANS. / (916) 319-2093 FN: 0002695 AB 2374 Page 5