BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 294 (Portantino)
Hearing Date: 07/11/2011 Amended: 05/27/2011
Consultant: Mark McKenzie Policy Vote: T&H 7-0
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BILL SUMMARY: AB 294 would authorize the Department of
Transportation (Caltrans) to use the design-sequencing method of
procurement for up to five transportation projects until January
1, 2015.
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Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 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
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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. Final reports have
yet to be issued on either Phase I or Phase II of the pilot
program.
AB 294 would re-enact the design-sequencing program by
authorizing Caltrans to use the procurement method for up to
five additional projects until January 1, 2015. 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.
Based on Caltrans' tenth annual interim report on the pilot
program, reflecting activities through March 31, 2010, results
thus far have been relatively mixed. A preliminary analysis of
all completed projects in Phase I, representing $872 million in
capital construction costs, indicates the following results thus
far:
The impact on completion times ranged from 14 months delay to
18 months saved with an average minimal time savings of less
than one month. Some of the delays cannot be attributable to
the use of design-sequencing.
Two of the ten projects experienced significant cost growth of
51% and 70% respectively.
There was no significant increase or decrease in support costs
on closed out design-sequencing projects.
Staff notes that a final analysis of whether design-sequencing
costs more or less than traditional delivery methods will not be
available until the final project of Phase I is closed out and
final capital costs are analyzed and compared to initial
estimates, a control set of projects, and program wide data.
Only one of the eight projects selected for Phase II of the
pilot program has been completed to date, with a time savings of
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one month. While the project was originally projected to
achieve 12 months in time savings, the project experienced
delays that were unrelated to the design-sequencing method.
Caltrans acknowledges the relatively mixed results of the pilot
program to date, including cost escalations on some projects,
but indicates that the time savings alone can result in cost
savings as a result of construction cost escalation avoidance.
Furthermore, Caltrans indicates that 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 greater time
savings 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 this 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 whether the program should be re-authorized prior to
the issuance of final reports that fully evaluate any benefits
and shortcomings related to design-sequencing.
Staff notes that this bill is nearly identical to AB 1760
(Blumenfield), which was vetoed by Governor Schwarzenegger last
year with the following message:
I am not convinced of the overall effectiveness of the
design-sequencing contracting method. Upon the completion
of previously authorized design-sequencing contracts, the
California Department of Transportation will analyze this
contracting method and produce a final report on the
effectiveness of this method. I believe any further
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authorizations of this contracting method should wait until
this report has been released and the effectiveness
determined.