BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 732
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: Jeffries
VERSION: 2/26/09
Analysis by: Jennifer Gress FISCAL: yes
Hearing date: June 9, 2009
SUBJECT:
Design-sequencing
DESCRIPTION:
This bill extends the sunset date, from January 1, 2010 to
January 1, 2012, on the authority to allow the California
Department of Transportation (Caltrans) to use the
design-sequencing method of procurement for transportation
projects.
BACKGROUND AND ANALYSIS:
Design-sequencing is a method of contracting that enables the
sequencing of design activities to permit each construction
phase to commence when design for that phase is complete,
instead of requiring design for the entire project to be
completed before commencing construction, as is the case with
the traditional design-bid-build method of contracting.
Design-sequencing is different from design-build, the latter of
which entails the contracting of both the design and
construction to a single entity. With design-sequencing, the
transportation agency, in this case Caltrans, retains
responsibility for design but is able to award a construction
contract prior to completing the design for the entire project.
Under current law, a transportation agency may award a
construction contract when the design is at least 30 percent
complete.
AB 405 (Knox), Chapter 378, Statutes of 1999, established the
Design-Sequencing Demonstration and Evaluation Program, which
authorized Caltrans to use design-sequencing for no more than
AB 732 (JEFFRIES) Page 2
six transportation projects. One year later, AB 2607 (Knox),
Chapter 340, Statutes of 2000, was enacted to increase the
number of projects to 12. This demonstration program was
repealed on January 1, 2005.
In 2004, SB 1210 (Torlakson), Chapter 795, established Phase 2
of the demonstration program, authorizing 12 more projects.
This authority is set to expire on January 1, 2010.
This bill extends by two years, from January 1, 2010 to January
1, 2012, the sunset date on Phase 2 of the Design-Sequencing
Demonstration and Evaluation Program.
COMMENTS:
1.Purpose . To date, Caltrans, the sponsor of this measure, has
awarded design-sequencing contracts for only 6 of the 12
projects permitted under Phase 2 of the demonstration program.
Caltrans is seeking to extend the sunset date by two years in
order to enable it to award contracts on the remaining six
projects allowed under existing law. Because Caltrans can
award a contract earlier with design-sequencing than with the
traditional design-bid-build method of procurement, it
believes that, when used appropriately, design-sequencing can
be a valuable tool to accelerate project delivery.
Caltrans argues that it learned a great deal about both the
benefits and limitations of design-sequencing during the first
phase of the demonstration program. It has not used all 12
slots available under current law because, based on the
results of Phase 1, Caltrans has refined and made more
selective the process by which it chooses projects for this
method of contracting. Two projects identified by Caltrans as
strong candidates for design-sequencing are scheduled to award
contracts near the end of the year, just as the existing
authority expires. Caltrans is concerned that if the award
dates were to shift by only a few weeks, it would be forced to
convert the projects to traditional design-bid-build, which
Caltrans argues would cost significant time and money.
Extending the authority by two years would ensure that these
two projects could move forward without delay and allow
Caltrans to utilize the remaining four slots available under
existing law.
AB 732 (JEFFRIES) Page 3
2.Phase 1 Interim Report . Existing law requires Caltrans to
establish a peer review committee once projects under Phase 1
have been completed in order to evaluate the advantages and
disadvantages of design-sequencing. Caltrans established this
committee prior in advance of project completion so that it
could better evaluate the program and make adjustments as
necessary. It released an interim report in March 2008.
Under Phase 1, Caltrans awarded design-sequencing contracts
for 10 of the available 12 slots. The interim report included
6 of those 10 projects and represented 12 percent of the total
value of design-sequencing contracts awarded under Phase 1.
The evaluation examined 14 criteria in 4 performance areas
including schedule, cost, contract administration, and
stakeholder satisfaction. Caltrans compared the results of
these factors for the six design-sequencing projects to nine
"shadow projects," which Caltrans had identified as similar
types of projects. What follows is a brief summary of some of
the major findings regarding cost and schedule.
Capital cost: Comparing the bid amount to the final
construction cost, Caltrans found that the cost for
design-sequencing projects increased by 30 percent on average
per project, compared to an average increase of 12 percent for
the shadow projects.
Support cost: The total support costs for design-sequencing
projects is 46 percent of their construction allotment
compared to 32 percent for the shadow projects.
Change orders: On average, the design-sequencing projects
generated 50 contract changes per project compared to 49 for
the shadow projects.
Impact of change orders on cost growth: The change orders
increased the construction capital cost an average of 37
percent for design-sequencing projects and 12 percent for the
shadow projects.
Time savings: Time savings for each of the design-sequencing
projects was measured by calculating the difference between
the estimated contract acceptance date had the project been
built using design-bid-build and the actual design-sequencing
contract acceptance date. The time savings on the six
design-sequencing projects ranged from 2 to 18 months, with an
AB 732 (JEFFRIES) Page 4
average time savings of 4 months.
Caltrans acknowledges that results from the evaluation are
mixed. It notes, however, that design-sequencing is a new
contracting method and that Caltrans is the first agency in
the United States to use it. Neither Caltrans nor the
construction community understood initially what types of
projects would be most appropriate for this contracting method
or how best to implement it. Caltrans further argues that the
lessons learned from these Phase 1 projects has helped it to
refine its selection process and improve its procedures, and
it has implemented numerous changes that it believes will
yield more positive results in Phase 2. Furthermore, Caltrans
believes that more needs to be learned in order to develop the
appropriate procedures, engineering mindset, and agency
culture to effectively implement this approach. Extension of
the sunset date and the authority to utilize the remaining six
slots would enable Caltrans to continue improving this
contracting method.
3.Interim report may underestimate problems . The interim report
did not include four projects, including the three largest of
all Phase 1 projects, either because construction had not been
completed on the project or because the contractor had claims
against Caltrans for cost increases. Since the report was
released, all four projects have been completed and all four
involved claims. One project not included in the report was a
very controversial project involving the realignment and
widening of I-215, SR 60, and SR 91 at the point where they
come together in Riverside County. The project was
substantially delayed, experienced significant cost over-runs,
and generated substantial discontent in the region. For this
reason, the final results from all Phase 1 projects may
indicate that design-sequencing was more problematic than was
presented here.
4.Alternatives to extending the sunset date . Extending the
sunset date effectively expands the authority to use
design-sequencing. The questions before the committee concern
whether it is prudent to expand the authority at this time,
and if so, what is the most appropriate way to do so.
Design-sequencing is a new contracting method and results from
the Phase 1 projects have been mixed. As an alternative to
simply extending the sunset date, the committee may wish to
consider allowing Caltrans to move forward with the two
projects it has identified as good candidates for
AB 732 (JEFFRIES) Page 5
design-sequencing by extending the sunset date by six months
while also limiting the number of projects from 12 to 8. Once
Caltrans completes its final evaluations of Phase 1 and Phase
2 projects, both Caltrans and the Legislature may re-evaluate
whether to expand authority for the contracting method.
Assembly Votes:
Floor: 78-0
Appr: 16-0
Trans: 10-0
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
June 3, 2009)
SUPPORT: Caltrans (sponsor)
Automobile Club of Southern California
California Association of Councils of Governments
OPPOSED: None received.