BILL ANALYSIS �
AB 2498
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Date of Hearing: April 23, 2012
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
AB 2498 (Gordon) - As Introduced: February 24, 2012
SUBJECT : Department of Transportation: Construction
Manager/General Contractor
SUMMARY : Authorizes the California Department of Transportation
(Caltrans) to use an alternative procurement method referred to
as Construction Manager/General Contractor (CM/GC).
Specifically, this bill :
1)Declares the intent of the Legislature to authorize the use of
CM/GC as a cost-effective option for constructing
transportation projects.
2)Authorizes Caltrans to use CM/GC, including, for example, when
it anticipates that doing so will result in reduced project
costs or expedite project completion.
3)Defines key terms, namely:
a) "Construction manager/general contractor" to mean a
partnership, corporation, or other entity that is able to
provide licensed contracting and engineering services;
b) "Construction manager/general contractor method" to mean
a project delivery method in which a construction manager
is procured to provide preconstruction services during the
design phase of the project and construction services
during the construction phase of the of the project.
Contracts for preconstruction services and construction
services can be, but need not be, entered into at the same
time and the design and construction phases of a project
may be carried out sequentially or concurrently; and,
c) "Project" to mean the construction of a highway, bridge,
or tunnel.
4)Sets forth provisions governing the process for procuring
CM/GC services, as follows:
a) Caltrans will identify procedures for the evaluation and
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selection of a construction manager, for one or more
projects, through a request for qualifications (RFQ), to
include, at a minimum, prescribed requirements.
b) The department will then generate a final list of
qualified persons or firms.
c) The department will enter into negotiations with the
most qualified person or firm, including consideration of
compensation and other terms.
d) If Caltrans is unable to negotiate a satisfactory
contract with the highest qualified person or firm, it will
formally terminate negotiations and enter into negotiations
with the next most qualified person or firm.
e) Caltrans may enter into contracts for preconstruction
services separately or at the same time it enters into
contracts the construction services. A preconstruction
services contract will involve Caltrans paying for
construction manager a fee for preconstruction services for
a mutually agreed to price. Caltrans may not request or
obtain from the construction manager a fixed price or a
guaranteed maximum price for a construction contract nor
enter into a construction contract with the construction
manager until after it has entered into a preconstruction
services contract.
f) A contract for construction services will be awarded
after the design plans have been sufficiently developed.
Construction services contracts may be for a fixed price or
a guaranteed maximum price.
g) Caltrans is not required to award the construction
services contract if, for example, mutually agreed to
contract terms are not successfully negotiated.
h) Construction work may not commence until the contactor
and Caltrans come to written terms. The construction
manager must perform at least 30% of the work covered by
the fixed price or guaranteed maximum prices.
i) The construction manager must possess sufficient bonding
to cover the construction contract amount as well as risk
and liability insurance, as required.
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j) All work not performed by the construction manager must
be performed by subcontractors. Contracts for
subcontractors must be competitively bid and must comply
with the Subletting and Subcontracting Fair Practices Act
that, among other things, protects subcontractors and the
public from the practices of bid shopping and bid peddling
in connection with public works projects.
5)Explicitly authorizes Caltrans to retain the services of a
design professional or construction project manager, or both,
throughout the course of the project to ensure compliance with
the bill's provisions.
6)Stipulates that contracts awarded pursuant to this chapter are
valid for the life of the project.
7)Declares that nothing in this bill is intended to affect,
expand, alter, or limit any other rights or remedies available
in law.
EXISTING LAW:
1)Sets forth provisions governing public works contracting.
These provisions generally prohibit public agencies from
contracting with the same firm for both the design and the
construction phases of a project.
2)Generally requires public works construction contracts to be
awarded to the lowest responsible bidder.
3)Provides for a limited number of design-build contracts for
transportation; sets forth criteria and procedures governing
their procurement.
4)Defines "design-build" to mean a procurement process in which
both the design and construction of a project are procured
from a single entity.
FISCAL EFFECT : Unknown
COMMENTS : For decades, the traditional process for procuring
public works projects has been the design-bid-build process.
This process relies on: 1) a design entity preparing complete
project design specifications and estimates; 2) the project
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owner putting the complete package out to bid for construction;
and 3) awarding the construction contract to the lowest
responsible bidder. The design-bid-build process was developed
to protect taxpayers from extravagance, corruption, and other
improper practices by public officials as well as to secure a
fair and reasonable price for public works construction by
injecting competition amongst bidders into the process.
Although design-bid-build generally results in the lowest cost
construction contract, it is not without its drawbacks,
including:
1)Projects generally take longer to complete because designs
must be entirely completed, permits obtained, and right-of-way
acquired before the construction contract can be bid and
awarded.
2)Designs prepared for a competitive low-bid procurement are
developed to allow for a broad range of construction
approaches. As a result, low-bid designs do not always equate
to the most efficient design possible, depending on a
particular contractor's particular strengths or capabilities.
3)Because the project designer does not have the benefit of
consulting with the entity that will ultimately be responsible
for construction of the project, there may be significant
issues that the designer does not anticipate, particularly
constructability issues. This can result in change orders
that ultimately drive up the price of the contract.
4)Low-bid is not always the least expensive option, once change
orders and contractor claims are factored into the overall
project costs.
In the early 1990s, public works agencies grew frustrated with
design-bid-build and began experimenting with more innovative
project delivery methods, namely design-build. Design-build is
an alternate method for procuring design and construction
services that provides for the delivery of public works projects
from a single entity. Design-build combines project design,
permit, and construction schedules in order to streamline the
traditional design-bid-build environment.
Design-build differs from design-bid-build in some key areas,
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including:
1)Shorter overall elapsed project delivery time because
construction can begin before final design is complete.
2)Project costs and schedule risks are more heavily borne by the
design-build contractor.
3)Construction claims and change orders are minimized.
4)Designs can be developed to take advantage of particular
contractor's strengths and abilities, thereby reducing the
need to "over-design" for generic use as in design-bid-build.
5)Project specifications are typically based on definitive
performance criteria (which may or may not be well established
by the project owner) rather than established specifications.
6)Contracts are awarded based on best-value analyses rather than
low-bid.
Design-build contracts are not without their drawbacks as well.
For example, with a design-build project, the project owner must
give up a good deal of control over the details of the project
design. Additionally, design-build contractors are typically
selected using qualifications-based selection criteria or best
value analysis. These approaches are more subjective than a
low-bid approach, potentially subjecting the public works owner
to greater contract challenges and higher costs.
This bill authorizes Caltrans to use CM/GC, an emerging project
delivery method that potentially combines the best of both
design-bid-build and design-build. Using CM/GC, Caltrans will
be able to engage a design and construction management
consultant (construction manager) to act as the department's
consultant during the pre-construction phase and as the general
contractor during construction. During the design phase, the
construction manager acts in an advisory role, providing
constructability reviews, value engineering suggestions,
construction estimates, and other construction-related
recommendations. Later, Caltrans and the construction manager
can agree that the project design has progressed to a sufficient
enough point that construction may begin. The two parties then
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work out mutually agreeable terms and conditions for the
construction contract, and, if all goes well, the construction
manager becomes the general contractor and construction on the
project commences, well before design is entirely complete.
The CM/CG process is meant to provide continuity and
collaboration between the design and construction phases of the
project. Construction managers have an incentive to provide
input during the design phase that will enhance constructability
of the project later because they know that they will have the
opportunity to become the general contractor for the project.
Furthermore, CM/CG promises to save project delivery time,
provide earlier cost certainty, transfer risks from Caltrans to
the contractor, and ensure project constructability.
Additionally, CM/CG allows Caltrans to have greater control of
design decisions. It also allows Caltrans to design the project
to compliment the CM/CG's strengths and capabilities, thereby
avoiding the need to over-design the project to provide maximum
competitiveness in a low-bid procurement.
Committee concerns:
Although other states have successfully used CM/CG procurements,
this innovative approach should be tested, documented, and
evaluated prior to the Legislature granting unbridled authority
to use it.
The bill should limit the number of projects for which Caltrans
can initially use CM/CG to, for example, 4 or 6 projects and
Caltrans should be required to evaluate this procurement method
and report its findings to the Legislature.
Related legislation:
SB 1549 (Vargas) establishes a demonstration program that
authorizes the San Diego Association of Governments to use the
construction manager/general contractor (CM/GC) project delivery
method and authorizes Caltrans to use the CM/GC or the
design-sequencing methods of project delivery. That bill is
currently in the Senate Transportation and Housing Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
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None on file
Opposition
None on file
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093