BILL ANALYSIS �
SENATE TRANSPORTATION & HOUSING COMMITTEE BILL NO: AB 1724
SENATOR MARK DESAULNIER, CHAIRMAN AUTHOR: frazier
VERSION: 6/10/14
Analysis by: Eric Thronson FISCAL: yes
Hearing date: June 24, 2014
SUBJECT:
Construction manager/general contractor procurement method
DESCRIPTION:
This bill authorizes a regional transportation agency to utilize
the construction manager/general contractor procurement method
to develop and construct transportation projects.
ANALYSIS:
Traditionally, state and local entities develop and construct
transportation projects with a process known as the
design-bid-build (DBB) delivery method. This method requires
the public agency to fully design a project and then ask general
contractors to bid on the construction contract based on the
agency's design. DBB procurement results in project risks being
largely borne by the agency that designs the project, because
the agency bears the financial burden if the plans are
inadequate or unanticipated construction issues arise.
Unlike traditional DBB procurement, the construction
manager/general contractor (CM/GC) project-delivery method
allows an agency to engage a construction manager during the
design process to provide assistance to the design team, which
ultimately leads to a more constructible project. When design
is nearly complete, 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, they execute a contract for
construction services, and the construction manager becomes the
general contractor. Studies suggest CM/GC often leads to less
costly or more expediently delivered projects because of the
construction manager's involvement in the design process.
In 2012, the Legislature passed and the governor signed SB 1549
(Vargas), Chapter 767, which authorized the San Diego
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Association of Governments (SANDAG) to utilize other alternative
project-delivery methods for transit projects within its
jurisdiction, including CM/GC. That same year, the Legislature
passed and the governor signed AB 2498 (Gordon), Chapter 752,
which authorized the California Department of Transportation
(Caltrans) to utilize CM/GC on a pilot basis.
Before electing to use CM/GC, SB 1549 requires that SANDAG make
a written finding declaring that the CM/GC project delivery
method will either reduce costs, expedite completion, or provide
features not achievable through DBB. In addition, to determine
the benefits of CM/GC, SB 1549 requires SANDAG staff to present
a report to the agency's governing body on its experience upon
completion of a CM/GC project and to post the report on its
Internet website.
This bill :
Authorizes any regional transportation agency to utilize CM/GC
if the agency makes a written finding that this method is
superior to DBB in either cost, schedule, or some other
feature not achievable through DBB.
Describes the procedure a regional transportation agency must
follow to evaluate and select, through a request for
qualifications, a construction manager similar to existing law
applicable to other CM/GC enabling statutes.
COMMENTS:
1.Purpose . The author believes that regional transportation
agencies would benefit from the additional contract
flexibility of CM/GC because it will enable them to deliver
ambitious transportation projects in a manner that makes the
most efficient use of limited funding. The CM/GC method
maintains full public agency control over the design of the
project, but by allowing for contractor input during the
design phase, it allows for the development of reliable cost
estimates of different design alternatives. The author
contends that this can reduce design costs and accelerate
construction timelines, leading to overall cost savings.
According to the author, public agencies across the country
have utilized CM/GC since the early 1980s. At least 15 states
have authorized their transportation departments to use CM/GC.
In 2010, the Federal Highway Administration introduced its
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"Every Day Counts" initiative to promote innovations that
reduce the time and cost of project delivery, and included
CM/GC as one of its initial strategies. The author believes
experience suggests authorizing regional transportation
agencies to use CM/GC is a reasonable step for the state to
take.
2.Why pursue alternative project delivery approaches ? For
decades, state and local agencies have relied on the DBB
procurement method for transportation projects. DBB reduces
the risk for the construction contractor because the state or
local agency has a completed design, procured right-of-way,
and achieved environmental clearance before letting the
contract. Agencies using this traditional method generally
receive the lowest initial-cost construction contracts for a
given project, because contractors are competitively bidding
on a relatively risk-free project. Drawbacks to DBB can
include longer completion times, constructability challenges
unforeseen by the designers, and increasing costs over time
due to change orders and claims.
The CM/GC process is meant to provide continuity and
collaboration between the design and construction phases of
the 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, CM/GC promises to
save project delivery time, provide earlier cost certainty,
transfer some risks from the public agency to the contractor,
and ensure project constructability. Finally, it allows each
agency to design the project to complement the general
contractor's strengths and capabilities, thereby providing
maximum competitiveness in a low-bid procurement.
3.Who should conduct the construction inspection services ?
Writing in opposition to the bill, the Professional Engineers
in California Government (PECG) argues that it is appropriate
for Caltrans to inspect projects delivered through CM/GC to
ensure that they are safe and meet critical state design and
construction standards. Existing law assigns Caltrans the
responsibility for maintaining and ensuring the safety of
users upon the state highway system. In addition, existing
law makes Caltrans liable for any losses or damages incurred
due to unsafe conditions within the state highway
right-of-way. PECG argues that, given the state's exposure,
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it seems reasonable for Caltrans to perform the construction
inspection on projects within the state highway system -
particularly when agencies are utilizing new alternative
procurement methods.
Contra Costa Transportation Authority, the sponsor of this
bill, argues that Caltrans already holds significant oversight
responsibilities for projects administered by local agencies
and that agencies must adhere to strict state requirements,
including adopting Caltrans standards, developing quality
management plans, and providing certified inspections and
materials testing certifications. Further, Caltrans is
involved throughout the project development and delivery
process and retains oversight responsibility with its
independent quality-assurance role. In all locally
administered projects on the state highway system, independent
quality assurance consists of reviews at a number of steps in
the project development process, including:
When design is 90 percent complete, Caltrans personnel
perform a separate safety and maintenance review.
Before contract award, Caltrans discusses with the local
agency the findings of Caltrans' independent safety and
maintenance review as well as the contractor's final
project review.
Throughout development and construction, the local
agency submits all required contract, technical, and
administrative documents, including plans, change orders,
and project history.
The bill's sponsor believes this is adequate state oversight
for projects on the state highway system, and does not believe
it is necessary for Caltrans to also do construction
inspection for these projects.
In 2013, the Legislature passed and the governor signed AB 401
(Daly), Chapter 586, which authorized regional transportation
agencies to utilize another alternative procurement method
called design-build. When hearing AB 401, this committee
heard both sides of this debate, and after much deliberation,
determined that it was reasonable to assign to Caltrans all
construction inspection services for projects on the state
highway system in order to ensure the state's interests are
protected. To remain consistent with the committee's and the
Legislature's past position on the matter, the committee may
wish to amend this bill to assign to Caltrans all construction
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inspection services similar to the language adopted in AB 401.
1.Reporting requirement . While generally successful nationwide,
CM/GC has not been utilized much in this state, and therefore
it is unclear whether it will lead to better outcomes than
traditional DBB. As stated previously, existing law requires
SANDAG to present a report on its experience with this
alternative procurement method to its governing board, as well
as post the report on its website. It seems reasonable to
require other entities to similarly provide a report on their
experiences in order for their boards and the Legislature to
evaluate the effectiveness of CM/GC. To that end, the
committee may wish to amend the bill to include similar
reporting requirements to those in existing law that apply to
SANDAG's use of CM/GC.
2.Technical amendments .
On page 3, line 23, strike "expressway."
On page 3, line 30, add:
(3) A joint exercise of powers authority established
pursuant to Chapter 5 (commencing with Section 6500) of
Division 7 of Title 1 of the Government Code, with the
consent of a transportation planning agency or a county
transportation commission for the jurisdiction in which the
transportation project will be developed.
On page 4, line 24, replace subdivision (c) with:
(c) In lieu of complying with subdivision (b), the regional
transportation agency may either (1) elect to continue
operating an existing previously approved labor compliance
program to monitor and enforce prevailing wage requirements
on the project if it has not contracted with a third party
to conduct its labor compliance program and requests and
receives approval from the department to continue its
existing program or (2) enter into a collective bargaining
agreement that binds all of the contractors performing work
on the project and that includes a mechanism for resolving
disputes about the payment of wages.
Assembly Votes:
Floor: 58-19
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Appr: 13-4
Trans: 13-0
POSITIONS: (Communicated to the committee before noon on
Wednesday, June 18,
2014.)
SUPPORT: Contra Costa Transportation Authority (sponsor)
Associated General Contractors
California Transit Association
Orange County Transportation Authority
San Francisco County Transportation Authority
Santa Clara Valley Transportation Authority
Self Help Counties Coalition
Transportation Authority of Marin
Transportation California
United Contractors
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OPPOSED: Air Conditioning Trade Association
Associated Builders and Contractors of California
Associated Builders and Contractors of California
- San Diego Chapter
California School Employees Association
National Right to Work Committee of California
Plumbing-Heating-Cooling Contractors Association
of California
Professional Engineers in California Government
Western Electrical Contractors Association