BILL ANALYSIS �
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Date of Hearing: August 16, 2012
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
SB 1549 (Vargas) - As Amended: August 13, 2012
Policy Committee: Local
GovernmentVote: 9-0
Transportation 12-0
Urgency: No State Mandated Local Program:
Yes Reimbursable: No
SUMMARY
This bill authorizes the San Diego Association of Governments
(SANDAG) to use alternative contracting methods for public
transit projects. Specifically, this bill:
1)Authorizes SANDAG to use one of two alternative contracting
methods, each consisting of specified procedures, and referred
to respectively as "design-sequencing," whereby each phase of
a project can commence construction when the design of that
phase is complete, and "construction manager/general
contractor" (CM/GC), whereby a construction manager is
procured to provide preconstruction services during a
project's design phase and construction services during the
construction phase.
2)Requires SANDAG, in order to use an alternative project
delivery method, to make a written finding that its use in
lieu of the traditional design-bid-build contracting method
will reduce project costs, expedite completion, or provide
other benefits otherwise not achievable.
3)Requires SANDAG, on projects using one of the alternative
contracting methods, to comply with existing prevailing wage
monitoring and enforcement requirements, including providing
reimbursement to the Department of Industrial Relations, or
alternatively authorizes SANDAG to enter into a project labor
agreement that includes a mechanism for resolving disputes
regarding payment of wages.
4)Requires SANDAG, upon completion of a project using an
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alternative delivery method, to prepare a specified project
report and post that report on its website.
FISCAL EFFECT
Costs for SANDAG to administer and report on the alternative
contracting method, including prevailing wage monitoring and
enforcement, will be absorbable and are not state reimbursable.
To the extent the use of either of these alternative methods is
successful, there should be significant savings on those
projects selected by SANDAG.
COMMENTS
1)Background and Purpose . The traditional public works
contracting method is known as design-bid-build, whereby
project design is done under contract by an
architectural/engineering firm, then upon completion of the
design phase, the construction phase is put out to bid and the
contract is awarded to the lowest responsible bidder.
In the last 10-15 years, the state has selectively used an
alternative contracting method known as design/build, whereby
entities with both design and construction management
capabilities compete for a single contract for both project
phases, typically for a fixed price. The intent of the
design/build alternative is to reduce the contracting agency's
risk with regard to project costs and schedule, expedite
project completion, and minimize change orders and claims.
Design/build has some drawbacks, however, including that the
contracting agency relinquishes significant control over the
details of project design. In addition, at the point when the
design/build entity bids on a project, there are still many
unknowns, and thus a degree of risk, which are factored into
their bids. Therefore, even though the contracting agency is
transferring risk, they are still paying for it in some
manner.
The use of CM/GC seeks to achieve the best of both worlds, i.e
maintaining design control while minimizing overall risk.
Under CM/GC, SANDAG would engage a design and construction
management consultant to act as its consultant during the
preconstruction phase and as the general contractor during
construction. During the design phase, the construction
manager acts in an advisory role, providing constructability
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reviews, value engineering suggestions, construction
estimates, and other construction-related recommendations.
Later, SANDAG 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 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.
Design-sequencing was first authorized in 1999, which
established the original design-sequencing pilot program
within Caltrans for up to six projects. Under the traditional
means, construction of any portion of the project cannot
commence until after plans and specifications for the entire
project are completed and the construction contract is placed
out for bid and then awarded to the lowest responsible bidder.
Design-sequencing is intended to expedite project completion
by allowing construction on one phase of the project to be
started while other phases of the project were still under
design.
2)Opposition. Professional Engineers in California Government
(PECG) believes that if design-sequencing authorization is
provided for the State Highway System it should be done on a
statewide basis and not limited to SANDAG. PECG also suggests
that the use of CM/CG, an "untested procurement methodology,"
should be limited to a trial of no more than four projects. It
should be noted that the scope of this bill has been
significantly narrowed and now applies only to public transit
projects under SANDAG's jurisdiction.
The Associated Buildings and Contractors opposes the provision
regarding project labor agreements. It should be noted that
this provision is permissive.
3)Related Legislation . AB 2498 (Gordon), pending in Senate
Appropriations, authorizes Caltrans to use CM/GC for up to
four projects, using a process similar to that prescribed in
this bill.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081
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