BILL ANALYSIS �
AB 797
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Date of Hearing: April 22, 2013
ASSEMBLY COMMITTEE ON TRANSPORTATION
Bonnie Lowenthal, Chair
AB 797 (Gordon) - As Amended: April 15, 2013
SUBJECT : Santa Clara Valley Transportation Authority
SUMMARY : Authorizes the Santa Clara Valley Transportation
Authority (VTA) and the San Mateo County Transit District
(SMCTD) to each use an alternative procurement method referred
to as Construction Manager/General Contractor (CMGC) for public
transit projects within their jurisdictions. Specifically, this
bill :
1)Defines "construction manager/general contractor" and
"construction manager" by reference to existing law to mean,
the following:
a) "Construction manager/general contractor" to mean 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; and,
b) "Construction manager" to mean 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.
2)Specifically authorizes VTA to use the CMGC project delivery
method for public transit projects within its jurisdictions,
under the condition that after evaluating the traditional
design-bid-build process as well as the CMGC process in a
public meeting, VTA makes a written finding that use of the
CMGC process on a particular project will result in one or
more of the following objectives:
a) Reduce project costs;
b) Expedite the project's completion; or,
c) Provide features not achievable through a
design-bid-build process.
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3)Requires VTA to comply with prevailing wages laws on projects
for which CMGC is used or, alternatively, to enter into a
collective bargaining contract that will bind all contractors
on a project and that includes provisions governing the
resolution of disputes about wage payments.
4)If VTA enters into a CMGC contract that includes
preconstruction services by the construction manager, requires
VTA to pay a fee for preconstruction services for a mutually
agreed to price. VTA 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.
The preconstruction services contract is to provide for
subsequent negotiation for the construction phase of the
project.
5)Authorizes VTA to enter into a contract for construction
services after a project has been sufficiently developed and
either a fixed price or guaranteed maximum price has been
successfully negotiated. Should VTA not be able to come to
terms for the construction services phases, then it may award
the contract using any other procurement method authorized by
law.
6)Requires the construction manager to perform at least 30% of
the work covered by the construction services contract.
7)Requires any work not performed by the construction manager to
be bid to subcontractors pursuant to the Subletting and
Subcontracting Fair Practices Act.
8)Requires VTA to prepare a progress report to its governing
body, with specified elements, and to make the report
available on its Internet web site.
9)Provides that the provisions of the bill are severable and
that contracts awarded pursuant to the provisions of this bill
are valid until the project is completed.
10)Duplicates all of these provisions to apply to SMCTD as well.
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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)Establishes VTA as congestion management agency in Santa Clara
County and vests it with responsibility for countywide
transportation planning, congestion management, and design and
construction of specific highway, pedestrian, and bicycle
improvement projects. It is governed by a 12-member board,
including: 2 members of the board of supervisors, 5 San Jose
city council members, and 5 city council members from other
cities within the county.
4)Also establishes SMCTD to be responsible for providing public
transit and transportation programs in San Mateo County. It
is governed by a 9-member board of directors, including: 3
members of the board of supervisors, 3 city council members;
and 3 appointed members.
FISCAL EFFECT : In last year's analyses of bills that included
similar authorization to use CMGCs, the Assembly Appropriations
Committee noted that costs to administer and report on the new
contracting method will be minor and absorbable. To the extent
the CMGC process is successful there may be significant savings
on those projects.
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
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
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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,
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.
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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 VTA and SMCTD each to use CMGC, an emerging
project delivery method that potentially combines the best of
both design-bid-build and design-build.
Using CMGC, each agency each will be able to engage a design and
construction management consultant (construction manager) to act
as its 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, each agency 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 CMGC process is meant to provide continuity and
collaboration between the design and construction phases of the
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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, CMGC promises to save project delivery time,
provide earlier cost certainty, transfer risks from VTA to the
contractor, and ensure project constructability. Additionally,
CMGC allows each agency to have greater control of design
decisions. It also allows each agency to design the project to
compliment the CMGC's strengths and capabilities, thereby
avoiding the need to over-design the project to provide maximum
competitiveness in a low-bid procurement.
CMGC authority was authorized in legislation just last year to
Caltrans for up to six projects and to the San Diego Association
of Governments for public transit projects.
The author has introduced AB 797 to provide VTA and SMCTD each
with "critical flexibility" to deliver ambitious new transit
projects in a manner that makes the most efficient use of
limited transit funding.
Writing in support of the bill, VTA cites numerous benefits it
hopes to realize using CMGC, including continuity and
collaboration between the design and construction phases of the
project, greater project constructability, and earlier cost
certainty. Moreover, VTA asserts that "under CMGS, the public
agency does not sacrifice control over the design of the project
and, during the construction phase, the general contractor is
very familiar with the project design resulting in fewer
disputes over design issues."
Previous legislation: AB 2498 (Gordon), Chapter 752, Statutes
of 2012, authorizes the California Department of Transportation
to use CMGC on a pilot project basis.
SB 1549 (Vargas), Chapter 767, Statutes of 2012, authorizes the
San Diego Association of Governments to utilize CMGC for public
transit projects within its jurisdiction.
REGISTERED SUPPORT / OPPOSITION :
Support
Santa Clara Valley Transportation Authority (sponsor)
AB 797
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Opposition
Air Conditioning Trade Association
Plumbing-Heating-Cooling Contractions Association of California
Western Electrical Contractors Association
Analysis Prepared by : Janet Dawson / TRANS. / (916) 319-2093