BILL ANALYSIS
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1760
SENATOR ALAN LOWENTHAL, CHAIRMAN AUTHOR: blumenfield
VERSION: 4/19/10
Analysis by: Jennifer Gress FISCAL: yes
Hearing date: June 22, 1010
SUBJECT:
Design-sequencing
DESCRIPTION:
This bill authorizes the California Department of Transportation
(Caltrans) to use the design-sequencing method of contracting
until January 1, 2016.
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
six transportation projects. One year later, AB 2607 (Knox),
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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repealed on January 1, 2005.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 expired on January
1, 2010.
Under these bills, Caltrans is required to provide to the
Legislature annual status reports that include information on
the procedures, costs, and delivery schedules of the projects
for which it used design-sequencing. In addition, Caltrans is
required to establish a peer review committee to evaluate the
outcomes of design-sequencing projects for both Phase 1 and
Phase 2 of the demonstration program. The peer review committee
is required to prepare a report for submittal to the Legislature
that presents its findings and discusses the advantages and
disadvantages of the contracting method more fully after all of
the projects are completed.
This bill authorizes Caltrans to use, until January 1, 2016, the
design-sequencing method of contracting for an unlimited number
of projects, subject to the following conditions:
Caltrans must advertise design-sequencing projects by special
public notice to contractors.
Caltrans must require contractors to provide prequalification
information establishing appropriate licensure and successful
past history with the proposed type of work.
Caltrans must provide annual status reports to the Legislature
on the procedures, costs, and delivery schedules of projects
for which it using design-sequencing.
Caltrans may use employees or consultants for
design-sequencing contracts.
COMMENTS:
1.Purpose . According to the author, the most current
design-sequencing indicators have provided generally good
assessments of the program, especially in the second phase.
Due to the January 1, 2010 sunset, however, Caltrans is no
longer authorized to use this contracting method. As Caltrans
gains further experience with design-sequencing, greater time-
and cost-savings may be realized on future projects. By
AB 1760 (BLUMENFIELD) Page 3
reauthorizing design-sequencing, this bill will give Caltrans
an additional contracting option it may use to expedite
project delivery.
2.Status of Phase 1 . Under Phase 1, Caltrans awarded
design-sequencing contracts for 10 of the available 12 slots
by January 1, 2005. All ten have completed construction, but
one remains to be closed out due to an outstanding claim.
Recent data are difficult to interpret, but it appears that
most projects achieved some time savings.
In March 2008, Caltrans released an interim report evaluating
the design-sequencing contracting method for projects awarded
under Phase 1. The interim report included six of the 10
projects, which represented 12 percent of the total value of
design-sequencing contracts awarded.
The evaluation examined 14 criteria in four 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
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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
average time savings of 4 months.
It should be noted that the interim report did not include
four projects, including the three largest of all Phase 1
projects, either because construction had not been completed
or because the contractor had claims against Caltrans for cost
increases. Since the interim report was released, all four
projects have been completed and all four involved claims.
3.Status of Phase 2 . There are fewer data available for Phase 2
projects. To date, Caltrans has awarded eight
design-sequencing projects, one of which has been completed.
It achieved a time savings of one month.
4.Premature ? The data available are insufficient to conclude
whether or not design-sequencing expedites project delivery.
The final report for Phase 1 of the demonstration program is
not expected to be complete until sometime in 2011 and there
are few data available for Phase 2 projects. The author and
sponsor argue that waiting until the completion of Phase 2
projects (2015 or 2016) to reauthorize design-sequencing would
deprive Caltrans of an alternative to design-build on projects
for which it wishes to expedite delivery.
Furthermore, last year when Caltrans sponsored AB 732
(Jeffries) to extend the sunset date for design-sequencing, it
noted that design-sequencing was a new contracting method and
that it was 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. In
support of this measure, the Professional Engineers in
California Government argues that the lessons learned from
these Phase 1 projects has helped Caltrans to refine its
selection process and improve its procedures, and Caltrans has
implemented numerous changes that it believes will yield more
positive results in Phase 2.
If the bill moves forward, the committee may wish to consider
amendments to reduce the scope of the bill. Some options for
narrowing the scope include:
AB 1760 (BLUMENFIELD) Page 5
Limiting the authority to projects that Caltrans
projects to cost less than a specified dollar amount, such
as $20 million.
Limiting the number of design-sequencing projects to
five.
Establishing an earlier sunset date, for example,
January 1, 2013, which would provide two years of
design-sequencing authority.
5.Related legislation . Last year Caltrans sponsored
legislation, AB 732 (Jeffries), to extend by two years, from
January 1, 2010 to January 1, 2012, the sunset date on Phase 2
of its design-sequencing authority. Because Caltrans had not
yet issued its report on Phase 1 of the demonstration program,
let alone its report on Phase 2, the bill was amended in this
committee to extend the program by six months, but reduce the
overall number of projects that Caltrans may undertake from 12
to 9. After passing this committee, that bill died in the
Senate Appropriations Committee.
Assembly Votes:
Floor: 74-0
Appr: 15-0
Trans: 10-0
POSITIONS: (Communicated to the Committee before noon on
Wednesday,
June 16, 2010)
SUPPORT: Professional Engineers in California Government
(sponsor)
OPPOSED: None received.