Existing law authorizes regional transportation agencies, as defined, to use the Construction Manager/General Contractor project delivery method, as specified, to design and construct certain expressways that are not on the state highway system if: (1) the expressways are developed in accordance with an expenditure plan approved by voters, (2) there is an evaluation of the traditional design-bid-build method of construction and of the Construction Manager/General Contractor method, and (3) the board of the regional transportation agency adopts the method in a public meeting.

This bill would authorize the use of the Construction Manager/General Contractor method for the construction of 2 specified bridges that are not on the state highway system. For the purposes only of this authorization, the bill would include the County of Placer within the definition of a regional transportation agency. The bill would also remove the requirement that a project be developed in accordance with an expenditure plan approved by voters.

This bill would make legislative findings and declarations as to the necessity of a special statute for bridges located in the County of Placer and the City and County of San Francisco.

Existing law authorizes regional transportation agencies, as defined, to use the Construction Manager/General Contractor project delivery method, as specified, to design and construct certain expressways that are not on the state highway system if: (1) the expressways are developed in accordance with an expenditure plan approved by voters, (2) there is an evaluation of the traditional design-bid-build method of construction and of the Construction Manager/General Contractor method, and (3) the board of the regional transportation agency adopts the method in a public meeting.

This bill would authorize the use of the Construction Manager/General Contractor method for the construction of 2 specified bridges that are not on the state highway system. For the purposes only of this authorization, the bill would include the County of Placer within the definition of a regional transportation agency. The bill would also remove the requirement that a project be developed in accordance with an expenditure plan approved by voters.

This bill would make legislative findings and declarations as to the necessity of a special statute for bridges located in the County of Placer and the City and County of San Francisco.

Existing law authorizes regional transportation agencies, as defined, to use the Construction Manager/General Contractor project delivery method, as specified, to design and construct certain expressways that are not on the state highway system if: (1) the expressways are developed in accordance with an expenditure plan approved by voters, (2) there is an evaluation of the traditional design-bid-build method of construction and of the Construction Manager/General Contractor method, and (3) the board of the regional transportation agency adopts the method in a public meeting.

This bill would authorize regional transportation agencies also to use this authority on ramps that are not on the state highway system, as specified. the use of the Construction Manager/General Contractor method for the construction of 2 specified bridges that are not on the state highway system. For the purposes only of this authorization, the bill would include the County of Placer within the definition of a regional transportation agency. The bill would also remove the requirement that the a project be developed in accordance with an expenditure plan approved by voters.

Existing law authorizes regional transportation agencies, as defined, to use the Construction Manager/General Contractor project delivery method, as specified, to design and construct certain expressways that are not on the state highway system if: (1) the expressways are developed in accordance with an expenditure plan approved by voters, (2) there is an evaluation of the traditional design-bid-build method of construction and of the Construction Manager/General Contractor method, and (3) the board of the regional transportation agency adopts the method in a public meeting.

This bill would authorize regional transportation agencies also to use this authority on ramps that are not on the state highway system, as specified. The bill would also remove the requirement that the project be developed in accordance with an expenditure plan approved by voters.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2374

Author:(Chiu)

As Amended Ver:August 17, 2016

Majority vote

Original Committee Reference: TRANS.

SUMMARY: Extends existing authority for regional transportation agencies (RTAs) to use the Construction Manager/General Contractor (CMGC) procurement method to include two specific bridge projects that are not on the state highway system; removes the limitation that a CMGC project is in a sales tax measure expenditure plan.

The Senate amendments extend CMGC authority to the County of Placer for a specific bridge project in the county.

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. Public works construction contracts are generally to be awarded to the lowest responsible bidder.
2. Authorizes a RTA to use the CMGC project delivery method to design and construct projects on expressways that are not on the state highway system if the projects are developed in accordance with an expenditure plan approved by the voters.

FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS: Last session, the Legislature passed and the Governor signed AB 1171 (Linder), Chapter 413, Statutes of 2015, to provide limited authority for RTAs to use CMGC on expressway projects that are not on the state highway system. This bill extends that authority also to include ramp projects, so long as the project is not on the state highway system. This bill also removes the restriction that projects have to be in a local sales tax measure expenditure plan.

CMGC is an emerging project delivery method that potentially combines the best of both design-bid-build and design-build. Using CMGC, RTAs 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 provides 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, CMGC promises to save project delivery time, provide earlier cost certainty, transfer risks from the RTA 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.

There are potential drawbacks of using CMGC contracts. According to guidance published by the City of Seattle, CMGC contracts carry risks, including: they are difficult and complex; the procurement process takes longer and consumes greater project staff time than traditional design-bid-build contracts; project teams face steep learning curves; and successful construction cost negotiations require experienced staff. Other literature on the use of CMGC contracts is generally consistent with Seattle's guidance regarding concerns for risks associated with CMGC contracts and cautions that CMGC is not appropriate for every project. However, the same literature suggests that, if carefully implemented, CMGC has the potential to significantly improve project delivery.

The author introduced this bill to assist the San Francisco County Transportation Authority (SFCTA) to complete its Yerba Buena Island West-Side Bridges Retrofit project. This

$66 million project will retrofit or replace eight locally-owned bridge structures that connect Treasure Island to the San Francisco-Oakland Bay Bridge. According to the author, this project is a complicated public safety project that involves unique topographical, environmental, and construction staging issues. SFCTA has analyzed the potential use of CMGC for this project and estimates that this procurement method could reduce construction time by an estimated six months, reduce costs by between 10% and 15%, and reduce project risk. This bill further extends CMGC authority to the County of Placer for the Yankee Jims Road Bridge Project.

Regarding current CMGC projects underway since the initial CMGC authority was granted in 2012, none of the projects have yet been completed. Consequently, a more thorough examination of advantages and disadvantages of CMGC contracting in California is still pending. However, those agencies that have initiated projects using CMGC report that early indications suggest CMGC will have positive project delivery outcomes.

Please see the policy committee analysis for full discussion of this bill.

Analysis Prepared by: Janet Dawson / TRANS. / (916) 319-2093 FN: 0004682

 THIRD READING  

Bill No: AB 2374

Author:

: in Senate

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 11-0, 6/21/16

AYES: Beall, Cannella, Allen, Bates, Gaines, Galgiani, Leyva, McGuire, Mendoza, Roth, Wieckowski

ASSEMBLY FLOOR: 77-0, 4/11/16 - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill authorizes the use of the Construction Manager/General Contractor (CM/GC) method for two projects not on the state highway system, as specified.

Senate Floor Amendments of 8/17/16 authorize Placer County to use CM/GC on the Yankee Jims Road Bridge Project and provide legislative findings and declarations related to Placer County’s ability to use CM/GC on this specific bridge project.

ANALYSIS:

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. Requires, generally, public works construction contracts to be awarded to the lowest responsible bidder.
3. Describes the CM/GC procurement method and makes legislative findings and declarations regarding benefits related to risk transfer and project phasing using CM/GC.
4. Authorizes the California Department of Transportation (Caltrans) to use CM/GC on no more than six projects, at least five of which must have construction costs greater than $10 million.
5. Authorizes the Santa Clara County Valley Transportation Authority, the San Mateo County Transit District, and the San Diego Association of Governments to use CM/GC for transit projects.
6. Authorizes a Regional Transportation Agency (RTA) to use the CM/GC project delivery method to design and construct projects on expressways that are not on the state highway system if the projects are developed in accordance with an expenditure plan approved by the voters.
7. Defines key terms relative to the authority granted to RTAs to use CM/GC, as specified.
8. Provides that the entity responsible for maintenance of local streets and roads within the same jurisdiction of the expressway shall be responsible for the maintenance of the expressway.
9. Sets forth provisions governing the process for procuring CM/GC services.

This bill authorizes the use of the CM/GC method for two projects not on the state highway system: the Yerba Buena Island (YBI) West Side Bridges Seismic Retrofit and the Yankee Jims Road Bridge projects in San Francisco and Placer County respectively. This bill further removes the limitation that an authorized CM/GC project must be included in a sales tax measure expenditure plan.

Comments

1. Purpose. The author notes that this bill will extend CM/GC authorization to several projects that are not on the state highway system and remove the requirement that authorized projects be included in a voter-approved expenditure plan. As a result, this bill authorizes the San Francisco County Transportation Authority to utilize CM/GC for the YBI West-Side Bridges Retrofit project, which is a seismic safety project on a locally owned and operated road facility, and the Yankee Jims Road Bridge project in Placer County.
2. Major transportation projects. YBI West-Side Bridges Retrofit project includes two major components:
3. On the east side of Treasure Island, the YBI I-80 ramps project will construct new westbound on and off ramps to the new eastern span of the Bay Bridge.
4. On the west side of the island, the YBI West-Side Bridges Retrofit project will seismically retrofit the existing bridge structures — critical components of island traffic circulation between the islands and the Bay Bridge.

Specifically, the $66 million YBI West-Side Bridges Retrofit project will seismically retrofit or replace eight locally owned bridge structures that connect Treasure Island to the San Francisco Bay Bridge. The facility is locally owned and not a part of the state highway system, and partially funded with state transportation revenues. This project has been identified by the San Francisco Transportation Authority as a “complicated public safety project, dealing with unique topographical, environmental, and construction staging issues.”

Yankee Jims Road Bridge project in Placer County is to replace a one-lane suspension bridge that was constructed in 1930. According to Placer County, this bridge has the lowest score of any in-service bridge in the state as rated by Caltrans. Moreover, the bridge has qualified for funding under the federal Highway Bridge Program with the federal government recommending CM/GC as the preferred project delivery method due to the project’s remote location, poor access, and crossing of the North Fork of the American River.

1. Traditional project delivery. 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.
2. What is CM/GC? The 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 can ultimately lead 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.
3. 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.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/17/16)

Automobile Club of Southern California

California Transportation Commission

San Francisco County Transportation Authority

Santa Clara Valley Transportation Authority

OPPOSITION: (Verified 8/17/16)

None received

ASSEMBLY FLOOR: 77-0, 4/11/16

AYES: Achadjian, Alejo, Travis Allen, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood

NO VOTE RECORDED: Gonzalez, Rendon

Prepared by:

8/18/16 16:57:30

**** END ****

 CONSENT  

Bill No: AB 2374

Author:

:

Vote:

SENATE TRANS. & HOUSING COMMITTEE: 11-0, 6/21/16

AYES: Beall, Cannella, Allen, Bates, Gaines, Galgiani, Leyva, McGuire, Mendoza, Roth, Wieckowski

ASSEMBLY FLOOR: 77-0, 4/11/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill extends existing authority for regional transportation agencies (RTAs) to use the Construction Manager/General Contractor (CM/GC), as specified.

ANALYSIS:

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. Requires, generally, public works construction contracts to be awarded to the lowest responsible bidder.
3. Describes the CM/GC procurement method and makes legislative findings and declarations regarding benefits related to risk transfer and project phasing using CM/GC.
4. Authorizes the California Department of Transportation (Caltrans) to use CM/GC on no more than six projects, at least five of which must have construction costs greater than $10 million.
5. Authorizes the Santa Clara County Valley Transportation Authority, the San Mateo County Transit District, and the San Diego Association of Governments to use CM/GC for transit projects.
6. Authorizes an RTA to use the CM/GC project delivery method to design and construct projects on expressways that are not on the state highway system if the projects are developed in accordance with an expenditure plan approved by the voters.
7. Defines key terms relative to the authority granted to RTAs to use CM/GC, as specified.
8. Provides that the entity responsible for maintenance of local streets and roads within the same jurisdiction of the expressway shall be responsible for the maintenance of the expressway.
9. Sets forth provisions governing the process for procuring CM/GC services.

This bill extends existing authority for RTAs to use the CM/GC procurement method for ramp projects that are not on the state highway system, and additionally removes the limitation that an authorized CM/GC project must be included in a sales tax measure expenditure plan.

Comments

1. Purpose. The author notes that this bill will extend CM/GC authorization to ramps that are not on the state highway system and remove the requirement that authorized projects be included in a voter-approved expenditure plan. As a result, this bill authorizes the San Francisco County Transportation Authority to utilize CM/GC for the Yerba Buena Island (YBI) West-Side Bridges Retrofit project — which is a seismic safety project on a locally owned and operated road facility.
2. Major transportation project. YBI West-Side Bridges Interchange Improvement Project includes two major components:
3. On the east side of Treasure Island, the YBI I-80 Ramps project will construct new westbound on and off ramps to the new Eastern Span of the Bay Bridge.
4. On the west side of the island, the YBI West-Side Bridges Retrofit project will seismically retrofit the existing bridge structures—critical components of island traffic circulation between the islands and the Bay Bridge.

Specifically, the $66 million YBI West-Side Bridges Retrofit project will seismically retrofit or replace eight locally owned bridge structures that connect Treasure Island to the San Francisco Bay Bridge. The facility is locally owned and not a part of the state highway system, and partially funded with state transportation revenues. This project has been identified by the San Francisco Transportation Authority as a “complicated public safety project, dealing with unique topographical, environmental, and construction staging issues.”

1. Traditional project delivery. 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.
2. What is CM/GC? The 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 can ultimately lead 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.
3. 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.

1. Current status. Regarding current CMGC projects underway, while none of the projects have yet been completed, no significant problems have been reported. In fact, the San Francisco County Transportation Authority has analyzed the potential use of CM/GC for this project and estimates that this procurement method could reduce construction time by an estimated six months, reduce costs by between 10% and 15%, and reduce project risk.

As these projects move toward completion, a more thorough examination of the advantages and disadvantages of CM/GC contracting will be required. However, as the pros and cons continue to be evaluated, utilizing CM/GC for other types of projects may be beneficial for evaluation purposes.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 6/23/16)

Automobile Club of Southern California

California Transportation Commission

San Francisco County Transportation Authority

Santa Clara Valley Transportation Authority

OPPOSITION: (Verified 6/23/16)

None received

ASSEMBLY FLOOR: 77-0, 4/11/16

AYES: Achadjian, Alejo, Travis Allen, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood

NO VOTE RECORDED: Gonzalez, Rendon

Prepared by:

6/24/16 14:33:43

**** END ****

SENATE COMMITTEE ON TRANSPORTATION AND HOUSING

Senator Jim Beall, Chair

2015 - 2016 Regular

Bill No: Hearing Date: 6/21/2016

SUBJECT:

DIGEST: This bill extends existing authority for regional transportation agencies (RTAs) to use the Construction Manager/General Contractor (CM/GC), as specified.

ANALYSIS:

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. Describes the CM/GC procurement method and makes legislative findings and declarations regarding benefits related to risk transfer and project phasing using CM/GC.
4. Authorizes the California Department of Transportation (Caltrans) to use CM/GC on no more than six projects, at least five of which must have construction costs greater than $10 million.
5. Authorizes the Santa Clara County Valley Transportation Authority, the San Mateo County Transit District, and the San Diego Association of Governments to use CM/GC for transit projects.
6. Authorizes an RTA to use the CM/GC project delivery method to design and construct projects on expressways that are not on the state highway system if the projects are developed in accordance with an expenditure plan approved by the voters.
7. Defines key terms relative to the authority granted to RTA’s to use CM/GC, as specified.
8. Provides that the entity responsible for maintenance of local streets and roads within the same jurisdiction of the expressway shall be responsible for the maintenance of the expressway.
9. Sets forth provisions governing the process for procuring CM/GC services.

This bill extends existing authority for RTAs to use CM/GC procurement method for ramp projects that are not on the state highway system, and additionally removes the limitation that an authorized CM/GC project must be included in a sales tax measure expenditure plan.

COMMENTS:

Purpose. The author notes that this bill will extend CM/GC authorization to ramps that are not on the state highway system and remove the requirement that authorized projects be included in a voter-approved expenditure plan. As a result, this bill authorizes the San Francisco County Transportation Authority to utilize CM/GC for the Yerba Buena Island West-Side Bridges Retrofit project — which is a seismic safety project on a locally owned and operated road facility.

Major transportation project: The Yerba Buena Island (YBI) West-Side Bridges Interchange Improvement Project includes two major components:

1. On the east side of Treasure Island, the YBI I-80 Ramps project will construct new westbound on and off ramps to the new Eastern Span of the Bay Bridge.
2. On the west side of the island, the YBI West-Side Bridges Retrofit project will seismically retrofit the existing bridge structures—critical components of island traffic circulation between the islands and the Bay Bridge.

Specifically, the $66 million Yerba Buena Island West-Side Bridges Retrofit project will seismically retrofit or replace eight locally owned bridge structures that connect Treasure Island to the San Francisco Bay Bridge. The facility is locally owned and not a part of the state highway system, and partially funded with state transportation revenues. This project has been identified by the San Francisco Transportation Authority as a “complicated public safety project, dealing with unique topographical, environmental, and construction staging issues.”

Traditional project delivery: 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.

What is CM/GC? The 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 can ultimately lead 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.

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.

Current status. Regarding current CMGC projects underway, while none of the projects have yet been completed, no significant problems have been reported. In fact, the San Francisco Transportation Authority has analyzed the potential use of CM/GC for this project and estimates that this procurement method could reduce construction time by an estimated six months, reduce costs by between 10% and 15%, and reduce project risk.

As these projects move toward completion, a more thorough examination of the advantages and disadvantages of CM/GC contracting will be required. However, as the pros and cons continue to be evaluated; utilizing CM/GC for other types of projects may be beneficial for evaluation purposes.

Related Legislation:

AB 2126 (Mullin) — increases the number of authorized Construction Manager/General Contractor (CM/GC) projects from six projects to twelve, as specified. AB 2126 will be heard by this Committee at the same hearing as AB 2374.

AB 1171 (Linder, Chapter 413, Statutes of 2015) — provided limited authority for RTAs to use CM/GC on expressway projects that are not on the state highway system but are in sales tax measure expenditure plans.

AB 1724 (Frazier, 2014) — would have granted regional transportation agencies broad authority to use CM/GC. This bill was held in this committee.

AB 2498 (Gordon, Chapter 752, Statutes of 2012) — authorized Caltrans to use CM/GC on no more than six projects, at least five of which must have construction costs greater than $10 million.

SB 1549 (Vargas, Chapter 767, Statutes of 2012) — authorized San Diego Association of Governments (SANDAG) to use CM/GC contracting on transit projects.

AB 797 (Gordon, Chapter 320, Statutes of 2013) — authorized the Santa Clara Valley Transportation Authority (VTA) and the San Mateo County Transit District to use CM/GC contracting on transit projects.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

Assembly Votes:

Floor: 77-0

Trans: 16-0

POSITIONS: (Communicated to the committee before noon on Wednesday,

June 15, 2016.)

SUPPORT:

Automobile Club of Southern California

California Transportation Commission

San Francisco County Transportation Authority

Santa Clara Valley Transportation Authority

OPPOSITION:

None received

-- END --

ASSEMBLY THIRD READING

ATR Bill Id:AB 2374

Author:(Chiu)

As Introduced Ver:February 18, 2016

Majority vote

SUMMARY: Extends existing authority for regional transportation agencies (RTAs) to use the Construction Manager/General Contractor (CMGC) procurement method to include ramp projects that are not on the state highway system; removes the limitation that a CMGC project is in a sales tax measure expenditure plan.

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. Public works construction contracts are generally to be awarded to the lowest responsible bidder.
2. Authorizes a RTA to use the CMGC project delivery method to design and construct projects on expressways that are not on the state highway system if the projects are developed in accordance with an expenditure plan approved by the voters.

FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS: Last session, the Legislature passed and the Governor signed AB 1171 (Linder), Chapter 413, Statutes of 2015, to provide limited authority for RTAs to use CMGC on expressway projects that are not on the state highway system. AB 2374 extends that authority also to include ramp projects, so long as the project is not on the state highway system. This bill also removes the restriction that projects have to be in a local sales tax measure expenditure plan.

CMGC is an emerging project delivery method that potentially combines the best of both design-bid-build and design-build. Using CMGC, RTAs 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 provides 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, CMGC promises to save project delivery time, provide earlier cost certainty, transfer risks from the RTA 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.

There are potential drawbacks of using CMGC contracts. According to guidance published by the City of Seattle, CMGC contracts carry risks, including: they are difficult and complex; the procurement process takes longer and consumes greater project staff time than traditional design-bid-build contracts; project teams face steep learning curves; and successful construction cost negotiations require experienced staff. Other literature on the use of CMGC contracts is generally consistent with Seattle's guidance regarding concerns for risks associated with CMGC contracts and cautions that CMGC is not appropriate for every project. However, the same literature suggests that, if carefully implemented, CMGC has the potential to significantly improve project delivery.

The author introduced this bill to assist the San Francisco County Transportation Authority (SFCTA) to complete its Yerba Buena Island West-Side Bridges Retrofit project. This

$66 million project will retrofit or replace eight locally-owned bridge structures that connect Treasure Island to the San Francisco-Oakland Bay Bridge. According to the author, this project is a complicated public safety project that involves unique topographical, environmental, and construction staging issues. SFCTA has analyzed the potential use of CMGC for this project and estimates that this procurement method could reduce construction time by an estimated six months, reduce costs by between 10% and 15%, and reduce project risk.

Regarding current CMGC projects underway since the initial CMGC authority was granted in 2012, none of the projects have yet been completed. Consequently, a more thorough examination of advantages and disadvantages of CMGC contracting in California is still pending. However, those agencies that have initiated projects using CMGC report that early indications suggest CMGC will have positive project delivery outcomes.

Please see the policy committee analysis for full discussion of this bill.

Analysis Prepared by: Janet Dawson / TRANS. / (916) 319-2093 FN: 0002695

Date of Hearing: April 4, 2016

ASSEMBLY COMMITTEE ON TRANSPORTATION

Jim Frazier, Chair

ABPCA Bill Id:AB 2374 (

Author:Chiu) – As Introduced Ver:February 18, 2016

SUBJECT: Construction Manager/General Contractor method: regional transportation agencies: ramps

SUMMARY: Extends existing authority for regional transportation agencies (RTAs) to use the Construction Manager/General Contractor (CMGC) procurement method to include ramp projects that are not on the state highway system; removes the limitation that a CMGC project is in a sales tax measure expenditure plan.

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. Describes the CMGC procurement method and makes legislative findings and declarations regarding benefits related to risk transfer and project phasing using CMGC.
4. Authorizes the California Department of Transportation (Caltrans) to use CMGC on no more than six projects, at least five of which must have construction costs greater than $10 million.
5. Authorizes the Santa Clara County Valley Transportation Authority, the San Mateo County Transit District, and the San Diego Association of Governments to use CMGC for transit projects.
6. Authorizes a RTA to use the CMGC project delivery method to design and construct projects on expressways that are not on the state highway system if the projects are developed in accordance with an expenditure plan approved by the voters.
7. Defines key terms as follows relative to authority granted to regional transportation agencies to use CMGC:
   1. "Construction manager/general contractor method" to mean a project delivery method 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. Contracts for preconstruction services and construction services can be, but need not be, entered into at the same time and the design and construction phases of a project may be carried out sequentially or concurrently;
   2. "Preconstruction services" to mean advice given during the design phase of a project related to, for example, scheduling, pricing, and phasing;
   3. "Project" to mean the construction of an expressway that is not on the state highway system; and,
   4. "Regional transportation agency" to broadly include, among other entities, regional transportation planning agencies, county transportation commission, joint powers authorities, and local transportation authorities.
8. Provides that the entity responsible for maintenance of local streets and roads within the same jurisdiction of the expressway shall be responsible for the maintenance of the expressway.
9. Sets forth provisions governing the process for procuring CMGC services.

FISCAL EFFECT: Unknown, this bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS: For decades, the traditional process for procuring public works projects has been the design-bid-build process. This process relies on the project owner: 1) preparing, or causing to be prepared, complete project design specifications and estimates; 2) 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 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 designs possible, depending on a particular contractor's 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. Overall elapsed project delivery times are shorter 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.
4. Designs can be developed to take advantage of a 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.

Last session, the Legislature passed and the Governor signed AB 1171 (Linder), Chapter 413, Statutes of 2015, to provide limited authority for RTAs to use CMGC on expressway projects that are not on the state highway system. AB 2374 extends that authority also to include ramp projects, so long as the project is not on the state highway system. AB 2374 also removes the restriction that projects have to be in a local sales tax measure expenditure plan.

CMGC is an emerging project delivery method that potentially combines the best of both design-bid-build and design-build. Using CMGC, RTAs 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 provides 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, CMGC promises to save project delivery time, provide earlier cost certainty, transfer risks from the RTA 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.

There are potential drawbacks of using CMGC contracts. According to guidance published by the City of Seattle, CMGC contracts carry risks, including:

1. They are difficult and complex.
2. The procurement process takes longer and consumes greater project staff time than traditional design-bid-build contracts.
3. Project teams face steep learning curves.
4. Successful construction cost negotiations require experienced staff.

Other literature on the use of CMGC contracts is generally consistent with Seattle's guidance regarding concerns for risks associated with CMGC contracts and cautions that CMGC is not appropriate for every project. However, the same literature suggests that, if carefully implemented, CMGC has the potential to significantly improve project delivery.

The author introduced AB 2374 to assist the San Francisco County Transportation Authority (SFCTA) to complete its Yerba Buena Island West-Side Bridges Retrofit project. This $66 million project will retrofit or replace eight locally-owned bridge structures that connect Treasure Island to the San Francisco-Oakland Bay Bridge. According to the author, this project is a complicated public safety project that involves unique topographical, environmental, and construction staging issues. SFCTA has analyzed the potential use of CMGC for this project and estimates that this procurement method could reduce construction time by an estimated six months, reduce costs by between 10% and 15%, and reduce project risk.

Regarding current CMGC projects underway since the initial CMGC authority was granted in 2012 (see "previous legislation" below), none of the projects have yet been completed. Consequently, a more thorough examination of advantages and disadvantages of CMGC contracting in California is still pending. However, those agencies that have initiated projects using CMGC report that early indications suggest CMGC will have positive project delivery outcomes.

Previous legislation: AB 1171 (Linder), Chapter 413, Statutes of 2015, provided limited authority for RTAs to use CMGC on expressway projects that are not on the state highway system but are in sales tax measure expenditure plans.

AB 797 (Gordon), Chapter 320, Statutes of 2013, authorized the Santa Clara Valley Transportation Authority and the San Mateo County Transit District to use CMGC contracting on transit projects.

AB 1724 (Frazier) of 2014, would have granted RTAs broad authority to use CMGC. AB 1724 passed the Assembly but was held in Senate Transportation and Housing Committee.

AB 2498 (Gordon), Chapter 752, 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 million.

SB 1549 (Vargas), Chapter 767, Statutes of 2012, authorized the San Diego Association of Governments to use CMGC contracting on transit projects.

REGISTERED SUPPORT / OPPOSITION:

Support

California Transportation Commission

Santa Clara Valley Transportation Authority

Opposition

None on file

Analysis Prepared by: Janet Dawson / TRANS. / (916) 319-2093