BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Kevin de Le�n, Chair
SB 918 (Gaines) - Department of Transportation.
Amended: May 7, 2014 Policy Vote: T&H 11-0
Urgency: No Mandate: No
Hearing Date: May 19, 2014 Consultant: Mark McKenzie
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 918 would place new asset management, records
retention, and preconstruction requirements on the Department of
Transportation (Caltrans). The bill would also require Caltrans
to include detailed information about outstanding contractor
claims with annual proposed budgets and include reserve funding
in an amount necessary to pay all outstanding construction
claims in each budget.
Fiscal Impact:
Significant to major impacts, likely in the tens of
millions annually, related to provisions that require
Caltrans to hold funds in reserve sufficient to pay
outstanding and accumulated claims for all construction
projects. This requirement would result in the diversion of
funds that would otherwise be available for funding new
capital projects. (State Highway Account, bond funds)
Unknown additional Caltrans staffing costs annually to
track, budget, and report outstanding claims information on
a project level. (State Highway Account)
Unknown costs for Caltrans to develop and implement an
asset management program that consolidates asset tracking
and management. Staff estimates Caltrans staffing costs in
the range of $100,000 to $200,000 in 2014-15 and every five
years thereafter. (State Highway Account)
Potential increased costs to manage the physical and
electronic storage of additional project documents, and to
perform physical surveys for small or maintenance projects
prior to design. (State Highway Account)
Background: Existing law, the State Records Management Act,
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requires state agencies to establish and maintain an active,
continuing program for economical and efficient management of
records and information through a retention schedule. In
addition, the State Administrative Manual requires agencies to
perform an inventory of records every five years and prepare an
update retention schedule that reflects the inventory. Existing
law prohibits the destruction or disposal of records by any
state agency unless it is determined that the record has no
further administrative, legal, or fiscal value.
Existing law, the State Contract Act, requires state contracting
agencies to prepare full, complete, and accurate plans and
specifications, including estimates of costs, before entering
into any competitively bid public works contract.
Existing law requires Caltrans to annually prepare and submit a
proposed budget to the Governor, and to develop budgeting,
accounting, fiscal control and management information systems to
support the proposed budget.
Proposed Law: SB 918 would require Caltrans to do the following:
Develop and implement an asset management plan by February 1,
2015 to catalog assets and ensure their most efficient usage
and maintenance. The plan must be updated at least once every
5 years.
Retain all documents of a construction project's file that are
related to the design, construction, and administration of the
project, and require retention of those documents until final
closeout and payment is completed, including resolution of all
outstanding claims. The bill also makes Caltrans liable for
any loss or damage to any party related to failure to retain a
document, and subjects the department to a $500 civil penalty
for each occurrence of a missing document.
Obtain full, complete, and accurate survey information of
field conditions prior to commencing project design, and
ensure plans match existing conditions.
Use "state-of-the-art" design software that does not
automatically fix design errors, as specified.
Engage in a joint postbid constructability review with a
contractor upon award of a contract to identify and attempt to
resolve remaining issues.
Include detailed financial information about all outstanding
contractor claims in each proposed budget, and require each
budget to contain reserves sufficient to pay outstanding
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accumulated claims for all construction projects, as
specified. Funding reserves for each claim must remain in
each subsequent budget until final resolution of the claim.
Staff Comments: The bill requires Caltrans to develop and
implement an asset management program by February 15, 2015. If
the bill is enacted, these provisions would not go into effect
until January 1, 2015, providing only six weeks for Caltrans to
complete this task. Currently, the department tracks assets in
multiple formats across its divisions. It would likely require
a redirection of staff from existing duties in the current
fiscal year to assess its current asset management practices,
and develop and implement a new program that maximizes the
efficient management, use, and maintenance of assets. Staffing
costs are currently unknown, but likely in the range of $100,000
to $200,000. It is unlikely that this could be accomplished by
the specified deadline.
SB 918 requires Caltrans to retain additional project related
documents, beyond what is currently required under the State
Records Management Act, which prohibits the destruction or
disposal of records by any state agency unless it is determined
that the record has no further administrative, legal, or fiscal
value. In addition to the requirements in existing law and
documents that would normally be retained as part of a
construction file, this bill requires the retention of emails
and associated attachments, text messages, and handwritten notes
of any kind, such as diaries, measurement and inspection notes,
calculations, and meeting minutes. The bill also makes Caltrans
liable for any loss or damage to any party resulting from a
failure to retain any of these documents. In addition to
exposure to additional liability related to this new cause of
action, the bill would impose direct costs on Caltrans to
develop new procedures for record retention, to train staff, and
to store additional physical and electronic records. Costs are
unknown at this time, but could be significant.
The bill also requires Caltrans to use "state-of-the-art design
software?that does not automatically fix errors in the design
but rather requires the project designer to correct errors on an
individualized, contemplative basis." This prescriptive
requirement seems unnecessary as Caltrans currently uses
industry standard programs that do not automatically fix design
errors. In addition, Caltrans is currently in its second year
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of implementing new roadway design software to replace its aging
design programs, and as of July 1, 2014 all new projects will be
designed using the new software platform.
SB 918 requires Caltrans to include detailed financial
information about all outstanding claims submitted by
contractors in the annual budget, and to reserve funding
sufficient to pay all outstanding accumulated claims for all
construction projects. Caltrans' current practice is to include
a contingency of 10-15 percent for potential contractor claims
in a project's budget. If there are cost overruns and the
contingency is insufficient to pay adjudicated contractor
claims, Caltrans must seek additional funding from the
California Transportation Commission. The department routinely
pays interest on claims in arbitration. The costs of approved
contractor claims are included in the final accounting of a
project. This bill would require Caltrans to track all pending
and approved contractor claims on a project level and build
those potential costs into a reserve in each annual budget. In
addition to increased workload for budget development, the
reserve requirements would be considered a commitment of
resources in the annual capital outlay fund estimates. Any
funding set aside for contractor claim reserves would reduce the
amount of funding available for other capital projects. The
magnitude of this reserve requirement is unknown, but likely in
the tens of millions annually.