BILL ANALYSIS �
AB 1724
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Date of Hearing: May 7, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1724 (Frazier) - As Amended: March 28, 2014
Policy Committee:
TransportationVote:13-0
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill authorizes regional transportation agencies to use an
alternative contracting method, consisting of specified
procedures, referred to as 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.
Specifically, this bill requires agencies:
1)In order to use CM/GC, 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.
2)On projects using CM/GC, to comply with existing prevailing
wage monitoring and enforcement requirements, including
providing reimbursement to the Department of Industrial
Relations, or alternatively to enter into a collective
bargaining agreement that includes a mechanism for resolving
disputes regarding payment of wages.
3)Upon completion of a project using CM/GC, to prepare a
specified project report and post that report on the agency's
website.
FISCAL EFFECT
Costs to administer and report on the CM/GC contracting,
including prevailing wage monitoring and enforcement, will be
absorbable and are not state reimbursable. To the extent the use
of this alternative method is successful, there should be
AB 1724
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significant savings on those projects selected by the
transportation agencies.
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, contracting agencies have 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, an agency 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
reviews, value engineering suggestions, construction
estimates, and other construction-related recommendations.
Later, the agencies 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.
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The CM/CG process is meant to provide continuity and
collaboration between the design and construction phases of
the project.
According to the Federal Highway Administration, projects best
suited for the CM/GC process are those for which the owner
needs contractor feedback during the design phase. These
projects include complex components that require innovation
and are typically located in urban, more congested areas.
Other projects that are a good fit entail extensive public
involvement or include right-of-way or utility issues that
affect the overall schedule. According to guidance published
by the City of Seattle, CM/GC contracts carry risks,
including:
a) Difficulty and complexity.
b) A longer procurement process consuming greater project
staff time than traditional contracts.
c) The project teams face steep learning curves.
d) Successful construction cost negotiations require
experienced staff.
2)Prior Legislation .
a) AB 797 (Gordon)/Statutes of 2013, authorized the Santa
Clara Valley Transportation Authority and the San Mateo
County Transit District to use CMGC contracting on transit
projects.
b) SB 1549 (Vargas)/Statutes of 2012, authorized the San
Diego Association of Governments to use CMGC contracting on
transit projects.
c) AB 2498 (Gordon)/Statutes of 2012, authorized Caltrans
to use CMGC on no more than six projects, at least five of
which must have construction costs greater than
$10,000,000.
Analysis Prepared by : Chuck Nicol / APPR. / (916) 319-2081