BILL ANALYSIS Ó
AB 2551
Page 1
Date of Hearing: May 18, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2551 (Gallagher) - As Amended April 27, 2016
-----------------------------------------------------------------
|Policy |Water, Parks and Wildlife |Vote:|13 - 1 |
|Committee: | | | |
| | | | |
| | | | |
-----------------------------------------------------------------
Urgency: No State Mandated Local Program: YesReimbursable:
No
SUMMARY:
This bill authorizes alternative contracting methods for surface
storage projects that receive Proposition 1 funding and
conditions the use of alternative project delivery methods on
meeting specific solicitation, qualification, and selection
requirements. Specifically, this bill:
1)Authorizes the use of construction management at-risk (CMAR),
design-build, or design-build-operate (DBO) project delivery
methods for Proposition 1 funded surface storage projects.
AB 2551
Page 2
2)Specifies the process by which a local agency will solicit
bids on a project.
3)Prohibits a bidder to prequalify unless they use a skilled and
trained workforce, as defined.
4)Requires the local agency to make a list of prequalified
bidders available to the public.
5)Specifies the bid selection process to be made from the pool
of prequalified bidders.
FISCAL EFFECT:
Unknown future costs or savings depending on the outcomes of the
projects selected for alternative project delivery, as opposed
to other procurement methods that might have been used on those
projects. Any cost or benefit of a specific contracting method
will depend on each individual project. Given that these are
likely to be large, complex projects, the costs or savings could
be significant.
COMMENTS:
1)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, 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.
AB 2551
Page 3
Increasing use of alternative project delivery methods have
been occurring in the public sector over the last 15 years.
Research on alternative project delivery methods have shown
these methods can lead to greater flexibility and
accountability, higher quality, faster completion and lower
overall project costs.
This bill authorizes the use of three alternative methods of
project delivery for surface storage projects that receive
Proposition 1 funding. The bill does not alter the
requirements currently required under Proposition 1. It lays
out the specific process by which a project could utilize the
alternative methods. Only after meeting the requirements of
Proposition 1, receiving Proposition 1 funding, and meeting
the solicitation and evaluation requirements in this bill,
will a surface storage project be able to utilize alternative
project delivery methods.
2)Background on alternative project delivery. Design-build has
become a more widely used alterative to the traditional
design-bid-build model. Under design-build, the public agency
enters into a single contract with an entity responsible for
both project design and construction. In 2014, state law
enacted uniform provisions for the Department of General
Services, the California Department of Corrections and
Rehabilitation, and specified local agencies using the
design-build method.
Design-build-operate (DBO) grants a single contract agreement
to a private entity that is chosen to design, construct and
operate the project while the municipality retains ownership.
AB 2551
Page 4
In a DBO, the private entity must focus on both short-term and
long-term cost savings and efficiencies because the company
will ultimately be responsible for the project over the next
10 to 20 years.
Construction Management At-Risk (CMAR) is a delivery method
where the construction manager acts as the consultant in the
development and design phases and acts as the equivalent of a
general contractor during the construction phase. Under CMAR,
the construction manager commits to deliver the project within
a Guaranteed Maximum Price (GMP). The CMAR must manage and
control construction costs because any costs exceeding the GMP
that are not change orders are the financial liability of the
CMAR.
3)Background on surface storage projects. AB 1471 (Rendon),
Chapter 188, Statutes of 2014, placed Proposition 1, a $7.545
billion general obligation bond for water-related projects and
programs on the November 4, 2014, ballot where it passed with
67% of the vote.
Proposition 1 continuously appropriates $2.7 billion to the
California Water Commission (CWC) to pay up to half of the
cost of new water storage projects, including dams and
projects that replenish groundwater. This funding can only be
used to cover costs related to the "public benefits"
associated with water storage projects, including restoring
habitats, improving water quality, reducing damage from
floods, responding to emergencies, and improving recreation.
Local governments and other entities that rely on the water
AB 2551
Page 5
storage project would be responsible for paying the remaining
project costs. These costs would generally be associated with
private benefits (such as water provided to their customers).
The CWC is currently developing guidelines and investment
strategies for the water storage funds.
4)Opposition. The Professional Engineers in California
Government (PECG) are opposed to this bill. According to PECG,
water storage projects are particularly complex, expensive
projects. The potential failure of a large storage project
could have catastrophic public safety and economic
consequences. PECG is concerned the bill eliminates
competitive bidding, allows the private contractor or
consortium to inspect and sign off on their own work, and
greatly increases project delivery costs in many
circumstances. PECG states these are risky alternative
procurement methodologies and are not appropriate for water
storage projects.
Analysis Prepared by:Misty Feusahrens / APPR. / (916)
319-2081