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