BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1549 (Vargas) - Transportation projects: alternative project
delivery methods.
Amended: April 30, 2012 Policy Vote: T&H 9-0
Urgency: No Mandate: Yes
Hearing Date: May 24, 2012 Consultant: Mark McKenzie
SUSPENSE FILE.
Bill Summary: SB 1549 would authorize the San Diego Association
of Governments (SANDAG) to use specified alternative project
delivery methods for an unlimited number of transit projects.
Fiscal Impact: Potential for increased transit project costs
(Public Transportation Account, State Transit Assistance
Account, or Local Funds) to the extent that the alternative
project delivery method chosen by SANDAG results in a higher
overall project cost than the traditional design-bid-build
method. If an alternative delivery method is chosen, SANDAG
must make a written finding in a public meeting that the
alternative method would provide a benefit that may be deemed to
have a greater value than project cost alone, such as expedited
project delivery or other features not achievable through
design-bid-build. The overall value of a project may be
measured by criteria other than cost.
Background: The traditional project delivery process is the
design-bid-build method, whereby complete plans and
specifications are prepared prior to the advertising, bidding,
and awarding of any construction contracts. The agency awards
the contract to the lowest, responsible bidder.
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 and to expedite project
completion. The most widely used alternative project delivery
technique is design-build. This method requires the public
agency to prepare plans to 30 percent completion before
advertising for bids. The bids are submitted with a fixed cost
for both design and construction services, and they are
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evaluated using the best value methodology, which includes
factors such as the design-build firm's qualifications, proposed
approach to design, experience, and other factors. The winning
bidder completes the design work 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.
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 a complete design 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 Department of
Transportation (Caltrans) guidelines. The award is made to the
lowest, responsible bidder. The benefit of design-sequencing is
assumed to be time savings. Caltrans' authority to use
design-sequencing expired in 2010, and final reports on its use
on state projects are pending.
The construction manager/general contractor (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.
SANDAG is the regional transportation planning agency under
state law for San Diego County and under federal law is the
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metropolitan planning organization for the region. SANDAG also
manages a local, voter approved half-percent transportation
sales tax. Central to all its activities is the $214 billion
regional transportation plan that it intends to implement
between now and 2050. This bill would provide SANDAG with
additional tools for constructing transit projects.
Proposed Law: SB 1549 would authorize SANDAG to use the CMGC or
the design-sequencing project delivery methods for public
transit projects in its jurisdiction. Specifically, this bill
would:
Authorize the use of an alternative project delivery
method if SANDAG makes a written finding in a public
meeting that use of the alternative method would reduce
project costs, expedite project completion, or provide
features not achievable through design-bid-build.
Require SANDAG to reimburse the Department of Industrial
Relations (DIR) for service related to prevailing wage
monitoring and enforcement. Alternatively, SANDAG may
operate a labor compliance program that is approved by DIR.
Require SANDAG to award all CMGC projects according to
the procedures authorized in existing law for design-build
contracts, including awarding contracts using the best
value selection methodology. Design-sequencing projects
would be awarded pursuant to existing requirements in the
Public Contract Code, including awarding contracts to the
lowest responsible bidder.
Require SANDAG, when using the CMGC method, to enter
into a contract with a construction manager for
preconstruction services that includes a fee for those
services but may not include provisions for payment for
construction services. The contract would provide for
subsequent negotiation for construction.
Require a CMGC construction services to be awarded after
plans are sufficiently developed and either a fixed price
or guaranteed maximum price, as specified. If this cannot
be negotiated, SANDAG is free to contract for construction
using any procurement method authorized by law.
Clarify that Caltrans is responsible for
pre-construction project development services and
construction inspection services when projects are
constructed on state highways.
Require SANDAG, upon completion of projects using an
alternative delivery method, to prepare a progress report
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for its governing body that includes specified information,
including estimated and actual costs and project completion
schedules. This report would also be posted on its
website.
Staff Comments: SB 1549 would authorize SANDAG to use two new
project delivery methods for transit projects. The Legislature
has generally taken a measured approach to authorizing the use
of new project delivery methods. This usually involves some
limited authorization initially, either through a fixed number
of projects or period of time, which provides the opportunity
for evaluation through data collection and analysis. The
Legislature authorized Caltrans to use design-sequencing for a
total of 24 projects over two phases, and evaluations are
ongoing. Initial reports for design-sequencing have been mixed,
with some projects achieving moderate time savings while others
experienced significant cost overruns. On balance, Caltrans'
ability to target which projects might benefit from
design-sequencing as they gained experience, so they expect to
show improved results for more recent Phase II projects.
Initially, however, whenever the state authorizes a new project
delivery method, actual costs tend to exceed estimated costs in
the early stages. The Legislature has never authorized the use
of the CMGC project delivery methodology. Staff notes that this
bill would authorize SANDAG to use both design-sequencing and
CMGC for an unlimited amount of transit projects. The bill
initially had a limit of 20 projects, but the alternative
procurement methods could be used for local streets and roads,
bridges, and tunnel projects. The bill was amended in policy
committee to eliminate the cap on the number of projects, but
limit the authority to local transit projects.
SB 1549 would require SANDAG to adopt a finding at a public
meeting prior to authorizing the use of an alternative delivery
method only after evaluating the traditional design-bid-build
methodology and making a determination that use of the
alternative methodology would provide lower costs, accelerated
project schedule, or provide features that are not achievable
through traditional project delivery. Staff notes that
"features not achievable through the design-bid-build method" is
a subjective and very broad term to describe a benefit of using
an alternative delivery method. It is assumed that SANDAG would
make a determination that the alternative method would provide
some public benefit that may be a local priority, but could
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result in a higher cost than design-bid-build.