BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
732 (Jeffries)
Hearing Date: 08/27/2009 Amended: 06/16/2009
Consultant: Mark McKenzie Policy Vote: T&H 11-0
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BILL SUMMARY: AB 732 would extend the sunset date for a pilot
project that allows the Department of Transportation (Caltrans)
to use the design-sequencing method of procurement for
transportation projects to July 1, 2010, and would limit the
total number of projects for which design-sequencing may be used
from 12 to 9.
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Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
Project delivery impactunknown costs related to using
design-Special*
sequencing rather than design-bid-build,
potentially offset by savings from
accelerated
schedule (see staff comments)
Rebidding of projects potential avoided costs related to
rebidding Special*
projects that may not be awarded before
current sunset date (see staff comments)
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*State Highway Account
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STAFF COMMENTS: SUSPENSE FILE.
The vast majority of Caltrans-administered projects are
implemented using the traditional design-bid-build approach,
whereby complete plans and specifications are prepared prior to
the advertising, bidding, and awarding of any construction
contracts. Design-sequencing enables the staging of design
activities to permit each construction phase to commence when
design for that phase is complete, instead of requiring the
entire project design to be complete before construction starts.
The contract for the entire project is awarded to one
contractor with a minimum of 30 percent complete plans. The
remainder of the design is delivered to the contractor by
predetermined dates after start of construction.
Design-sequencing is intended to provide an opportunity for
efficiencies by allowing collaboration between the contractor
and designers to improve and expedite project delivery.
Current law has authorized Caltrans to undertake a two-phase
design-sequencing pilot program. Phase I of the program
authorized 12 projects, but ultimately included 10 projects, and
SB 1210 (Torlakson), Chapter 795 of 2004, established Phase II
of the pilot program, authorizing 12 additional projects until
January 1, 2010. To date only six contracts have been award
under the Phase II pilot program. Caltrans indicates that two
more projects are scheduled to be awarded by the end of the
year. If the contract award dates are delayed even a few weeks,
however, Caltrans would be required to convert the projects to
traditional design-bid-build.
Page 2
AB 732 (Jeffries)
AB 732 would extend the sunset of phase II of the
design-sequencing program from January 1, 2010 to July 1, 2010
and reduce the total number of authorized projects from 12 to
nine to allow Caltrans to use this procurement method for
several more projects.
Based on Caltrans' March 2008 interim report on the pilot
program, results thus far have been mixed in terms of the impact
on project schedules, construction and support cost, and change
orders. The interim report only analyzes 12 percent of the
total estimated contract costs of the Phase I pilot program.
While this amount of data is insufficient to fully assess the
success of the pilot program, the report includes the following
findings, based on the sample of projects analyzed compared to
shadow projects delivered using design-bid-build:
The impact on completion times ranged from 2 months delay to
18 months saved with an average time savings of 4 months.
Support cost is about 13% greater on design-sequencing
projects.
Design-Sequencing has not resulted in an increase in capital
construction costs when compared to traditional delivery
methods.
Design-sequencing projects produced an average of 50
change-orders per project, at an average cost of $88,654 each,
compared to 49 change-orders, at an average cost of $34,203
each, for the shadow projects. Total change-order costs were
$4.4 million per project (30 percent average cost escalation)
for design-sequencing, and $1.7 million (12 percent average
cost escalation) for a shadow project.
The low bid on design-sequencing projects is on average 19%
lower that the Engineer's Estimate compared to 11% lower for
the shadow projects.
Staff notes that some of the larger and more complicated
projects that were not evaluated in this report experienced
significant delays, cost over-runs, and have outstanding
contractor claims. Therefore, the data in the report is
insufficient to determine whether design-sequencing is
ultimately more economical as a delivery method than
design-bid-build. Caltrans acknowledges the mixed results of
the pilot program to date, including cost escalations, but
indicates that the time savings alone can result in cost savings
as a result of construction cost escalation avoidance.
Furthermore, Caltrans argues that the lessons learned from Phase
I have resulted in the adoption of procedures to assess which
projects are best suited for design-sequencing, and the
implementation of numerous changes that will yield more positive
results in Phase II. This bill would allow the following
projects to be evaluated as part of Phase II of the pilot
program: (1) realignment and expansion of SR 76 in San Diego
County; (2) rehabilitation of approximately 11 miles of SR 101
in San Luis Obispo County; and (3) interchange improvements at
I-805 connection to new roadway on SR 905 near the Otay Mesa
Port of Entry in San Diego County.
Two of these projects may be awarded by the end of this year,
just as the existing authority to use design-sequencing expires.
By extending the sunset for six months, this bill would ensure
that Caltrans can use design-sequencing on these projects,
resulting in potential cost avoidance related to re-packaging
these projects for bid using the design-bid-build procurement
method.