BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: SB 1549
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: vargas
VERSION: 2/24/12
Analysis by: Art Bauer FISCAL: yes
Hearing date: April 17, 2012
SUBJECT:
Project delivery for San Diego
DESCRIPTION:
This bill establishes a demonstration program that authorizes
the San Diego Association of Governments (SANDAG) to use the
construction manager/general contractor (CMGC) project delivery
method and authorizes the California Department of
Transportation (Caltrans) to use the CMGC or the
design-sequencing methods of project delivery.
ANALYSIS:
Existing law establishes the Design-build Demonstration Program,
which authorizes local entities to use the design-build method
of procurement for up to five projects and Caltrans to use IT
for up to ten projects, subject to the California Transportation
Commission (CTC) approval. The design-build projects must be in
one of the following: State Transportation Improvement Program,
Traffic Congestion Relief Program, Proposition 1B, and the State
Highway Operations and Protection Program (SHOPP). In addition,
regional transportation planning agencies and Caltrans may enter
into an unlimited number of public private partnerships for
transportation projects until January 1, 2017. Finally, state
law allows use of the best value selection method for procuring
design-build services.
This bill :
1. Defines a CMGC method of procurement as a project
delivery method using best value procurement practices in
which the procuring entity selects the construction manager
to provide preconstruction services during the design phase
of a project and construction services when the project is
built.
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2. Defines design-sequencing as a method of project
delivery where the project owner designs 30 percent of the
project, then selects a contractor using the
design-bid-build contracting method. Once construction
begins, the owner completes the design on the remainder of
the project.
3. Authorizes up to 20 projects in San Diego County,
SANDAG's area of jurisdiction, to be designed and
constructed using design-sequencing or CMGC.
4. Permits SANDAG, if authorized by the CTC, to use
design-sequencing or CMGC procurement for local street and
road, bridge, tunnel, and public transit projects.
5. Permits Caltrans in San Diego only, if authorized by the
CTC, to use design-sequencing or CMGC procurement for state
highway, bridge, or tunnel projects.
6. Requires SANDAG to award all CMGC projects according to
the procedures authorized in existing law for procuring and
awarding design-build contracts. This includes using the
best value selection methodology.
7. Requires SANDAG, when it enters into a CMGC contract
that includes preconstruction services by the construction
manager, to draft a contract that:
a. Sets a fee for preconstruction services.
b. Does not set a fixed price or a guaranteed
maximum price for construction with the construction
manager until after SANDAG has entered into a services
contract with the construction manager.
c. Provides for the subsequent negotiation for
construction services for all phases or a specific
phase of a project.
d. Permits SANDAG to negotiate and award, after
the plans have been sufficiently developed (usually at
the 30 percent design), either a fixed price or a
guaranteed maximum price construction services.
8. Authorizes SANDAG to use another procurement method for
which it has authorization, if unable to negotiate a fixed
SB 1549 (VARGAS) Page 3
price or guaranteed maximum price contract.
9. Clarifies that when projects are constructed on state
highways, Caltrans is responsible for pre-construction
services, including project development, preliminary
engineering, preparation of environmental documents,
determining design characteristics and standards, and other
preconstruction services.
10. Requires SANDAG to reimburse the Department of
Industrial Relations (DIR) for service related to
monitoring prevailing wage requirements and other
requirements. Alternatively, SANDAG may itself operate a
labor compliance program that is approved by DIR.
11. Requires that by June 30 of each year, after the
award of a CMGC contract or the initiation of a
design-sequencing project, SANDAG or Caltrans submit a
report to the CTC on the projects. The report shall
include several components, including the cost of the
awarded contracts, estimated schedule for completing the
project, a discussion of any difficulties in soliciting or
awarding contracts, an assessment of the labor compliance
program, construction issues, and other related issues.
12. Requires CTC shall submit an annual report to the
Legislature based on the report it receives from SANDAG and
Caltrans.
COMMENTS:
1. Purpose . SANDAG is the regional transportation planning
agency under state for San Diego County and under federal
law is the metropolitan planning organization for the
region. SANDAG also manages a local, voter approved
half-percent transportation sales tax. SANDAG has a broad
scope of authority. Central to all its activities is the
$214 billion regional transportation plan that it intends
to implement between now and 2050. SANDAG believes that
the authorization provided will provide it with additional
tools for constructing transportation projects in San Diego
County.
SB 1549 (VARGAS) Page 4
2. Alternative project delivery methods . The traditional
project delivery process is the design-bid-build. This
method requires the public agency to design a project and
put the plans out to bid to general contractors. The
agency awards the contract to the lowest, responsible
bidder. Design-bid-build procurement results in project
risks being largely borne by the agency that designs the
project. If plans are inadequate or there are
unanticipated construction issues, the agency bears the
financial burden through the issuance of change orders or
having to resolve construction claims by contractors.
In the last several years, public agencies have been
adopting alternative project delivery methods. The
principle reason for this is the desire to shift
construction risk from the agency/owner to the project
contractor. The most widely used alternative project
delivery technique is design-build. This method requires
the public agency to prepare plans to 30 percent completion
and then put them out to bid to teams of engineers and
general contractors. The teams bid a fixed cost for the
project. The bids are evaluated using the best value
methodology, which includes evaluating a bid on the basis
of qualifications of the firm, proposed approach to design,
experience, and other factors. The design-contractor team
completes the project and commences construction. Because
the team finishes the design work, it carries most of the
risk associated with the adequacy of plans. Often
construction can commence on a phase of the project before
the entire project is designed, reducing the construction
time.
3. Design-sequencing . Design-sequencing is a method of
contracting that enables the sequencing of design
activities to permit each project construction phase to
commence when design for that phase is complete, rather
than requiring design for the entire project to be
completed before commencing construction. When the
contractor bids, the first phase of the project is
completed and the remaining phases must be at 30 percent
completion according to Caltrans guidelines. The award is
made to the lowest, responsible bidder. There is little
risk transfer from the public agency to the contractor
because the public agency is responsible for design. The
benefit of design-sequencing is assumed to be time savings.
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State law has authorized design-sequencing but Caltrans'
authority lapsed in 2010. This bill authorizes Caltrans to
resume design-sequencing procurement for projects in San
Diego County.
4. The Construction Manager/General Contractor . The CMGC
project delivery method allows an agency to engage a
construction manager during the design process to provide
assistance to the design team, including advice regarding
scheduling, pricing, phasing, and other input that helps
the owner design a more constructible project. The agency
selects the construction manager on the basis of
qualifications, past experience, or a best-value basis.
According to the Federal Highway Administration, when
design reaches approximately 60 to 90 percent completion,
the agency and the construction manager negotiate a
guaranteed maximum price for the construction of the
project based on the defined scope and schedule. If this
price is acceptable to both parties, a contract is executed
for construction services, and the construction manager
becomes the general contractor. The benefits of this
procurement method is that the public agency does not
sacrifice control over the design of the project and during
the construction phase the contractor is very familiar with
the project design resulting in less disputes over design
issues.
5. Proposed amendments .
a. There is a need to harmonize the project
delivery methodology between SANDAG and Caltrans. In
the past, state law has authorized Caltrans to perform
design-sequencing on a limited number of projects
statewide. AB 294 (Portantino), which is on the
Senate Inactive File, reauthorizes Caltrans to use
design-sequencing by Caltrans statewide. This bill
authorizes Caltrans to employ design-sequencing in one
district, District 12, which includes San Diego
County. This possibly begins the fragmentation of the
Caltrans' project delivery processes, resulting in
each of the 12 districts having its own procurement
options. It would likely impede Caltrans' ability to
effectively and efficiently manage the project
delivery process for the state highway system.
Similarly, this bill would authorize District 12 to
exclusively have CMGC procurement authority. Again,
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this would set a precedent of creating different
project procurement authority for a Caltrans district.
The committee may wish to amend this bill to delete
this authority to ensure that Caltrans has consistent
statewide procurement authority.
b. Because SANDAG has authority to design and
construct rail transit projects, SANDAG would like to
have the authority to use design-sequencing and CMGC
procurement, at its discretion, for the development of
its local rail transit system. The committee may wish
to amend this bill to permit SANDAG this authority and
to add a definition for design-sequencing consistent
with existing law.
c. Existing law typically places a limit on the
number of projects that can be procured through the
design-build process or the design-sequencing project
when the project involves the state highway system.
If the above amendment is adopted, the use of
design-sequencing and CMGC would be limited to local
transit projects. The committee may wish to delete
any limit to the number of transit project that SANDAG
may use for either procurement method.
d. This bill does not require SANDAG's board to
make a finding that using design-sequencing or CMGC is
in the agency's best interest. Existing law requires
transit districts to make a finding that it is
beneficial for an agency to use a specific procurement
strategy. The purpose of this amendment is to ensure
transparency in the procurement process. The
committee may wish to amend this bill to require
SANDAG to make such a finding.
e. This bill allows Caltrans to use to
design-sequencing and CMGC only in San Diego, the
requirements for the CTC to approve and report on such
procurement practices is no longer necessary. The
committee may wish to remove the reporting
requirements.
f. The bill consistently refers to SANDAG as a
transportation entity. This is a generic term used
frequently in law pertaining to regional
transportation agencies. For purposes of clarity, the
committee may wish to amend this bill to delete
SB 1549 (VARGAS) Page 7
transportation entity and insert San Diego Association
of Governments.
SANDAG agrees with the amendments.
6. RELATED LEGISLATION: AB 294 (Portantino) authorizes
Caltrans to undertake five design-sequencing projects on
the state highway system. This authority sunsets on
January 1, 2015. This bill is currently on the Senate's
Inactive File. AB 2498 (Gordon), a Caltrans sponsored bill,
authorizes Caltrans to CMGC procurement for highway,
bridge, and tunnel projects on the state highway. This
bill has no sunset date and is waiting to be heard in the
Assembly Transportation Committee.
POSITIONS: (Communicated to the committee before noon on
Wednesday,
April 11, 2012)
SUPPORT: San Diego Association of Governments (sponsor)
OPPOSED: None received.