BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 2551


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          Date of Hearing:  May 18, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          2551 (Gallagher) - As Amended April 27, 2016


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          |Policy       |Water, Parks and Wildlife      |Vote:|13 - 1       |
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          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.









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          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. 









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            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.  








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            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  








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            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