BILL ANALYSIS �
SB 328
Page 1
Date of Hearing: June 19, 2013
ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW
Jim Frazier, Chair
SB 328 (Knight) - As Amended: April 9, 2013
SENATE VOTE : 37-0
SUBJECT : Counties: public works contracts.
SUMMARY : Allows counties, until January 1, 2021, to use
construction manager at-risk (CMR) construction contracts for
county-owned or leased building projects in excess of $1
million. Specifically, this bill :
1)Authorizes a county, with approval of the board of
supervisors, to use CMR construction contracts to erect,
construct, alter, repair, or improve any building owned or
leased by the county.
2)Specifies that the CMR construction contract may only be used
for projects in excess of $1 million and may be awarded using
either the lowest responsible bidder or best value method.
3)Requires subcontractors that were not listed by a CMR
contractor as partners, general partners, or association
members in a partnership, limited partnership, or association
in the contractor's CMR bid submission to be awarded by the
CMR entity in accordance with the process established by the
county.
4)Requires all subcontractors bidding on contracts pursuant to
this bill to be afforded the protections contained in existing
law that establishes the Subletting and Subcontracting Fair
Practices Act.
5)Requires the CMR contractor to do both of the following:
a) Provide public notice of the availability of work to be
subcontracted in accordance with the publication
requirements applicable to the competitive bidding process
of the county; and,
b) Provide a fixed date and time on which the subcontracted
work will be awarded in accordance with the procedure
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established pursuant to this bill.
6)Requires a county that elects to proceed under this bill and
uses a CMR contract for a building project to submit a copy of
the contract, in electronic format, to the office of the State
Controller.
7)Requires the State Controller to make copies of contracts it
receives pursuant to this bill available for public inspection
on its website.
8)Repeals the provisions of this bill on January 1, 2021, unless
a later enacted statute deletes or extends that date.
9)Defines the following terms for purposes of this bill:
a) "Best value" means a value determined by objective
criteria related to the experience
of the entity and project personnel, project plan, financial
strength of the entity, safety record of the entity, and
price; and,
b) "CMR contract" means a competitively procured contract
by a county with an individual, partnership, joint venture,
corporation, or other recognized legal entity, that is
appropriately licensed in this state and that guarantees
the cost of a project and furnishes construction management
services, including, but not limited to, preparation and
coordination of bid packages, scheduling, cost control,
value engineering, evaluation, preconstruction services,
and construction administration.
EXISTING LAW :
1)Establishes the Local Agency Public Construction Act, which
requires local officials to invite bids for construction
projects and then award contracts to the lowest responsible
bidder under the traditional design-bid-build (DBB) project
delivery system.
2)Permits counties, until July 1, 2014, to use the design-build
(DB) method (in which one party is responsible for both design
and construction) for projects costing more than $2.5 million
and to award the project using either the lowest responsible
bidder or by best value.
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3)Requires counties that use DB contracting to submit a report
with specified information to the Legislative Analyst's Office
(LAO) by September 1, 2013, and requires the LAO to report to
the Legislature by January 1, 2014, on counties' use of DB, as
specified.
4)Allows state and local agencies and the University of
California (UC) to contract for construction project
management services on state or university construction
projects, as specified.
5)Authorizes the California Department of Transportation
(Caltrans) to use CMR, also known as the Construction
Manager/General Contractor method, for at least five projects
that have construction costs greater than $10 million each.
FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : The author states that this bill is intended to
"equip counties with an additional construction delivery method
in furtherance of good stewardship of public funds." The
sponsor, San Bernardino County, adds that the provisions in this
bill that impose a sunset and require copies of contracts
involving CMR to be posted on the State Controller's website
will provide additional layers of transparency to ensure
counties operate in a fiscally responsible and ethical manner.
According to an April 2008 Alternative Procurement Guide
developed for Caltrans, CMR is a project delivery method through
which a project owner (i.e. a department, agency, or, as
permitted under this bill, a county) selects a Construction
Manager (CM) to perform both pre-construction and construction
management services. During the design phase, the CM acts in an
advisory role, providing constructability reviews, value
engineering suggestions, construction estimates, and other
construction-related recommendations. At a point when the
design is somewhere between 50% and 100% complete, the CM and
the project owner negotiate a guaranteed maximum price (GMP),
which is typically based on a partially completed design and
includes the CM's estimate of the cost for the remaining design
features.
The GMP is a negotiated amount that includes the contractor's
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fee, pre-construction phase fee, construction phase fee, and a
contingency. After the GMP is established, the CM begins
construction and assumes the role of CMR Contractor for the
duration of the construction phase. The CMR Contractor holds
the construction contract and the risk for any construction
costs that exceed the GMP.
The GMP is the key element that distinguishes the CMR project
delivery approach from the more traditional DBB method. Under
DBB, the project owner designs the project, solicits bids, and
awards the construction contract to the lowest responsible
bidder. Under CMR, the CMR Contractor promises, subject to the
conditions of the contract, to complete the contract work for an
amount that does not exceed the agreed-upon GMP.
CMR projects allow the project owner to maintain full control of
the design while obtaining early involvement of the construction
contractor through its pre-construction services contract. CMR
is a delivery method that lends itself well to both phased and
fast-track projects because there is only one construction
procurement cycle. As a result, it relieves the project owner
of legal and functional responsibility to coordinate the
activities of multiple prime contractors on a given project.
The pre-construction services often allow the CMR Contractor to
award supply work packages and subcontractor work packages
before design is 100% complete. This locks in critical
construction costs at the earliest opportunity and enhances
construction cost certainty. Additionally, the formal
contingencies established for both the project owner and the CMR
Contractor provide more flexibility in dealing with unexpected
changes to the scope of work without the need to initiate change
orders.
According to Every Day Counts (EDC), a state-based initiative of
the Federal Highway Administration, projects that are best
suited for the CMR method include those where the project owner
needs contractor feedback during the design phase. EDC notes
that while CMR is widely accepted in the building construction
industry, its use in the transportation sector is just beginning
to be realized.
CMR has been used by the California Administrative Office of the
Courts, the UC, the California State University system, school
districts, and some cities. This bill would permit counties to
utilize CMR for public works projects that exceed $1 million and
SB 328
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allow the county to award the CMR construction contract using
either the lowest responsible bidder or best value method.
PRIOR LEGISLATION : AB 2498 (Gordon), Chapter 752, Statutes of
2012, permits Caltrans to utilize the CMR method for at least
five projects having a construction value greater than $10
million each in order to expedite project delivery.
DOUBLE REFERRAL : This bill is double-referred. It passed out
of the Assembly Local Government Committee on June 12, 2013,
with a vote of 9-0.
REGISTERED SUPPORT / OPPOSITION :
Support
San Bernardino County Board of Supervisors (sponsor)
California State Association of Counties
Rural Counties Representatives of California
Sacramento County Board of Supervisors
Stanislaus County Board of Supervisors
Urban Counties Caucus
Opposition
None on file
Analysis Prepared by : Cassie Royce / A. & A.R. / (916)
319-3600