BILL ANALYSIS �
SB 1549
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Date of Hearing: June 27, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 1549 (Vargas) - As Amended: June 20, 2012
SENATE VOTE : 38-0
SUBJECT : Transportation projects: alternative project delivery
methods.
SUMMARY : Authorizes the San Diego Association of Governments
(SANDAG) to use specified alternative project delivery methods
for an unlimited number of transit projects. Specifically, this
bill :
1)Authorizes SANDAG to use alternative project delivery methods,
specifically design-sequencing and the Construction
Manager/General Contractor (CMGC) method, as defined, for
public transit projects within its jurisdiction.
2)Requires SANDAG, if it desires to enter into an alternative
project delivery method contract, to first evaluate the
traditional design-bid-build process of construction and the
alternative project delivery method in a public meeting, and
make a written finding that use of the alternative project
delivery method on the specific project under consideration
will accomplish one or more of the following objectives:
reduce project costs, expedite the project's completion, or
provide features not achievable through the design-bid-build
method.
3)Requires SANDAG to do the following:
a) Subject all CMGC contracts to a provision of the Public
Utilities Code related to procurement method requirements
for professional services contracts for a consolidated
agency, as specified; and,
b) Subject all design-sequencing contracts to provisions of
the Government Code related to public contracts for
architectural, engineering, land surveying and construction
project management services, and also subject to the
provisions of the Public Contract Code governing
contracting by state and local agencies, as specified.
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4)Requires 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 or
enter into a construction contract before entering into a
services contract.
5)Requires any preconstruction CMGC contract to provide for the
subsequent negotiation for construction of all or any discrete
phase or phases of the project, and further provides for
ownership by SANDAG of the design plans and other
preconstruction services work product.
6)Requires a CMGC contract for construction services to be
awarded after plans are sufficiently developed and either a
fixed price or guaranteed maximum price has been negotiated,
although SANDAG may award the contract utilizing any other
permitted procurement method if negotiations are not
successfully concluded.
7)Requires a construction manager to perform not less than 30%
of the work covered by the negotiated price of a CMGC
contract, with the remainder being performed by subcontractors
pursuant to existing law.
8)Requires all subcontractors bidding on contracts pursuant to
this bill to be afforded the protections of the Subletting and
Subcontracting Fair Practices Act within the Public Contract
Code.
9)Clarifies that, where projects constructed pursuant to this
bill will be on a state-owned right of way, Caltrans shall be
responsible for the performance of project development
services, including performance specifications, preliminary
engineering, prebid services, the preparation of project
reports and environmental documents, and construction
inspection services, and will otherwise be deemed the
responsible agency for the preparation of documents.
10)Authorizes Caltrans to use department employees or
consultants to perform the services required where projects
are on a state-owned right of way, as specified, and further
requires that Caltrans resources, including personnel
requirements, necessary for the performance of those services
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shall be included in the department's capital outlay support
program for workload purposes in the annual Budget Act.
11)Requires SANDAG, upon completion of projects using an
alternative delivery method, to prepare a progress report for
its governing body that shall include a description of the
project, the entity awarded the contract, the estimated and
actual costs of the project, the estimated and actual schedule
for project completion, a description of any written protests,
an assessment of the prequalification process, a description
of the bid evaluation method, a description of challenges or
unexpected problems, and recommendations.
12)Requires SANDAG to post completed progress reports on its
website.
13)Provides that nothing in this bill affects, expands, alters,
or limits any rights or remedies otherwise available at law.
14)Defines the following key terms:
a) "Alternative project delivery method" means "either
Construction Manager/General Contractor method or design
sequencing";
b) "Construction Manager/General Contractor method" or
"CMGC" means "a project delivery method using a best value
procurement process 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 project. The
execution of the design and the construction of the project
may be in sequential phases or concurrent phases";
c) "Construction manager" means "a partnership,
corporation, or other legal entity that is able to provide
appropriately licensed contracting and engineering services
as needed pursuant to a CMGC contract"; and,
d) "Design sequencing" means "a method of project delivery
that enables the sequencing of design activities to permit
each construction phase to commence when the design for
that phase is complete, instead of requiring design for the
entire project to be completed before commencing
construction."
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15)Declares that the provisions of this bill are severable.
16)Makes findings and declarations relative to the need for and
benefits of alternative project delivery methods, specifically
design sequencing and the �CMGC] methodology, and further
declares that the bill espouses no preference over other
methods.
17)Makes findings and declarations that a special law is
necessary because of the unique need for alternative
contracting authority for local public transportation projects
under the jurisdiction of SANDAG.
18)Declares that no reimbursement is required because the only
costs that may be incurred by a local agency or school
district will be because this bill creates, eliminates, or
changes the penalty or definition of, a crime.
EXISTING LAW :
1)Provides requirements for the solicitation and evaluation of
bids and the awarding of contracts by state agencies for
projects, as specified, and for local agencies for public
works contracts, as specified.
2)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, or
the State Highway Operations and Protection Program (SHOPP).
3)Authorizes the use of the best value selection method for
procuring design-build services.
4)Permits regional transportation planning agencies and Caltrans
to enter into an unlimited number of public private
partnerships for transportation projects until January 1,
2017.
FISCAL EFFECT : According to the Senate Appropriations
Committee, this bill has the "�p]otential for increased transit
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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."
COMMENTS :
1)This bill would authorize SANDAG to use two new project
delivery methods for transit projects: design-sequencing and
CMGC. That authorization requires, as a prerequisite, that
SANDAG evaluate in a public meeting the proposed alternative
method against the traditional construction process and adopt
written findings that the use of an alternative delivery
method would provide lower costs, an accelerated project
schedule, or features that not achievable through traditional
project delivery. Each completed project must be followed by
a progress report to be posted on SANDAG's website. There is
no limit on the number of such projects SANDAG may undertake,
nor any sunset date on the authority. The measure is sponsored
by SANDAG.
2)SANDAG is the regional transportation planning agency for San
Diego County under state and federal law, and is the
metropolitan planning organization for the region. SANDAG has
a broad scope of authority, and manages a local voter approved
% transportation sales tax. Central to its activities is a
$214 billion regional transportation plan that it intends to
implement between now and 2050. SANDAG contends that the
authorization provided by this bill provides it with new tools
for constructing transportation projects in San Diego County.
In sponsoring this measure, SANDAG notes that it "has an
ambitious Capital Improvement Program (CIP), comprising more
than $850 million of our FY 2012 Program Budget. We have
actively advanced our local TransNet transportation sales tax
measure - accelerating infrastructure projects during a low
construction cost environment, and providing mobility and
economic benefits to the region. SB 1549 will provide SANDAG
with additional project delivery tools for our TransNet Early
Action Program as well as the transit CIP projects that we
implement on behalf of our two public transit operators."
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3)The traditional transit project delivery method is
"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 then 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",
which California uses in a variety of capacities. This method
requires the public agency to prepare plans to 30% 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 then evaluated using the "best value" methodology,
which looks at criteria beyond cost, including qualifications
of the bidders, proposed approach to design, experience, and
other factors. The winning design-contractor team completes
the project and commences construction. Because the team
finishes the design work, it carries more of the risk
associated with the adequacy of plans. Construction time can
theoretically be reduced, because the coordinated team can
commence construction on a phase of the project before the
entire project is designed.
4)This bill authorizes the use of two alternative project
delivery methods: design-sequencing and CMGC.
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. As previously
used by Caltrans, when the contractor bids, the first phase of
the project is completed and the remaining phases must be at
30% completion. The award is then made to the lowest,
responsible bidder. There is little risk transfer from the
public agency to the contractor because the public agency
remains responsible for design. The benefit of
design-sequencing is assumed to be time savings. State law
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previously authorized design-sequencing for Caltrans, but the
authority lapsed in 2010. Final reports on its use on state
projects are pending.
5)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
agency design a more easily constructible project. The agency
then selects a construction manager on a best-value basis. As
the design approaches completion but before construction
begins, the agency and the construction manager negotiate a
fixed price or 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 are that the public agency does not
sacrifice control over the design of the project, and the
contractor is very familiar with the project design during the
construction phase, resulting in fewer disputes over design
issues.
The Legislature has previously authorized Caltrans to use
design-sequencing on a variety of projects (see comment #8 on
related legislation below), and evaluations are ongoing. The
Legislature has never authorized the use of the CMGC project
delivery methodology, although a bill that would do so �AB
2498 (Gordon)] is currently pending in the Senate.
6)The Professional Engineers in California Government (PECG)
oppose this measure unless amended, stating "PECG does not
believe it is appropriate to provide region-specific
authorization on the State Highway System. Instead, PECG
believes there should be a statewide authorization for
design-sequencing?.As for the �CMGC] project delivery method
?PECG suggests limiting this new untested procurement
methodology to four projects statewide with a sunset of
January 1, 2018?PECG is opposed to using the �CMGC] project
delivery method on local streets and roads."
The American Council of Engineering Companies of California
(ACEC CA), also has an 'oppose unless amended' position.
Regarding the provisions in Section 6956 of this bill that
relate to projects on state-owned rights of way and Caltrans'
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role as the responsible agency, ACEC agrees with PECG that
"the terms and obligations assigning �Caltrans] as the
'responsible agency' are not fulfilled unless �Caltrans] is
the one actually performing the work" - a matter now in
question due to litigation related to the Doyle Drive/Presidio
Parkway project in San Francisco. As a result, "PECG �and
ACEC] insist that work must be done by �Caltrans] personnel,
and that the local agency in charge of the project is not
entitled
to lead or oversee the mix of resources it deems appropriate to
accomplish its authorized projects." ACEC requests that the
entirety of the current Section 6956 be deleted.
ACEC also questions whether this bill's provisions for projects
on state-owned rights-of-way would even be affected by this
bill, given that the language of the bill restricts its
operation to the jurisdiction of SANDAG only.
7)This bill is double referred to the Assembly Committee on
Transportation, which will hear the measure should it be
approved by this Committee.
8)Current and previous related legislation include the following
measures:
a) AB 2498 (Gordon, 2012) authorizes Caltrans to use CMGC
as an alternative procurement method for up to four
projects. The bill is scheduled to be heard in the Senate
Committee on Transportation and Housing on June 26, 2012;
b) AB 294 (Portantino, 2011) authorizes Caltrans to enter
into design-sequencing contracts until January 1, 2015.
The bill was ordered to the Senate Floor inactive file in
September 2011;
c) AB 1266 (Niello, 2005) would have allowed Caltrans to
add four transportation projects to a 12-project pilot
program testing the cost effectiveness and timeliness of
using design-sequencing contracts to complete
transportation projects, and would have extended to January
1, 2012, the sunset on the pilot program. This bill was
held by the Assembly Committee on Appropriations in 2005;
d) AB 2607 (Knox and Torlakson), Chapter 340, Statutes of
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2000, authorized Caltrans to conduct a pilot program to use
design-sequencing contracts for the design and construction
of no more than 12 transportation projects, and extended
the authorization sunset date to 2005; and,
e) AB 405 (Knox and Torlakson), Chapter 378, Statutes of
1999, authorized Caltrans to conduct a pilot program for
the completion of up to six transportation projects using a
specified design-sequencing process, and required
Caltrans to evaluate and report on the results of the
program when completed.
9)Support arguments : The California Transit Association
contends that "�t]he design sequencing and �CMGC] project
delivery methods rely on existing design-bid-build and
design-build procurement methods, respectively, and have been
successfully used by both public and private sector entities
in California and other states for over a decade on projects
that require a quick startup as they allow construction to
begin before the design plans are complete for the entire
project. Both methods also have the benefit of allowing for
earlier collaboration between the project owner and
construction contractor. We believe this authorization will
help SANDAG reduce cost, time, and achieve other benefits in
completing public transit projects using alternative project
delivery methods."
Opposition arguments : According to PECG, the bill should be
amended to require statewide authorization for any
design-sequencing authority, limit any CMGC authority to four
projects statewide with a 2018 sunset date, and prohibit the
use of CMGC on local streets and roads.
REGISTERED SUPPORT / OPPOSITION :
Support
San Diego Association of Governments (SANDAG) �SPONSOR]
California Transit Association
Metropolitan Transit System (San Diego)
North County Transit District
Riverside County Transportation Commission
Opposition
American Council of Engineering Companies (unless amended) (5/1)
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Professional Engineers in California Government (unless amended)
(4/12)
Analysis Prepared by : Hank Dempsey / L. GOV. / (916) 319-3958