BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1760 (Blumenfield)
Hearing Date: 08/02/2010 Amended: 07/15/2010
Consultant: Mark McKenzie Policy Vote: T&H 7-0
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BILL SUMMARY: AB 1760 would authorize the Department of
Transportation (Caltrans) to use the design-sequencing method of
procurement for up to five transportation projects until January
1, 2014.
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Fiscal Impact (in thousands)
Major Provisions 2010-11 2011-12 2012-13 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)
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*State Highway Account
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STAFF COMMENTS: This bill meets the criteria for referral to the
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.
Previous legislation authorized Caltrans to undertake a
two-phase design-sequencing pilot program. Phase I of the
program, authorized by AB 405 (Knox), Chapter 378 of 1999 and AB
2607 (Knox), Chapter 340 of 2000, included 12 projects, 10 of
which were awarded. SB 1210 (Torlakson), Chapter 795 of 2004,
established Phase II of the pilot program, authorizing 12
additional projects until January 1, 2010. Eight contracts were
awarded under the Phase II pilot program.
AB 1760 would re-enact the design-sequencing program by
authorizing Caltrans to use the procurement method for up to
five additional projects until January 1, 2014. The bill would
also require Caltrans to compile specified project data on any
contracts awarded as a result of this authority and include the
information in any annual status reports required as a part of
the design-sequencing pilot program.
Page 2
AB 1760 (Blumenfield)
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 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. Staff notes
that due to increased competition in the construction markets as
a result in the economic downturn, construction costs have been
lower than expected in recent years, so there would be no
near-term cost escalation avoidance benefits achieved by shorter
project delivery times. Caltrans believes, however, that
design-sequencing provides the benefit of advertising bids at
30% plan completion which would allow the department to take
advantage of the current lower construction costs by soliciting
bids sooner than traditional design-bid-build.
This bill would re-authorize the use of design-sequencing for a
limited period and number of projects to provide Caltrans with
the ability to continue using this procurement method until
final reports are issued that provide a full assessment of the
pilot program. Caltrans estimates that the final report on
Phase I projects will be completed during the 2010-11 fiscal
year. To date, only one project from Phase II has been
completed, and a final report won't be issued until at least
2013-14. The Committee may wish to consider re-authorizing the
program until final reports have been issued so that a more
complete evaluation of the program may be performed.