California Infrastructure Projects: Legal Aspects of Building in the Golden State

Copyright © 2020 Ernest C. Brown, Esq., PE.

All rights reserved. No part of this book may be used or reproduced by any means, graphic, electronic, or mechanical, including photocopying, recording, taping or by any information storage retrieval system without the written permission of the author except in the case of brief quotations embodied in critical articles and reviews.

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Any people depicted in stock imagery provided by Getty Images are models, and such images are being used for illustrative purposes only.

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The cover of this book is a photograph of the Oakland Airport Connector (OAC).

The Author was project counsel for the Flatiron/Parsons Joint Venture that was the design/builder for the project. The major subcontractors were Turner Construction (stations) and Doppelmayr Seilbahnen, GmbH (track structure and rails, cars, power systems and controls.) The project was a Design Build Plus job, as Doppelmayr also had a separate contract to operate and maintain the system for twenty years.

The OAC project is a 3.2 mile skyline between San Francisco’s Bay Area Rapid Transit’s (BART’s) Coliseum Airport Station and the new terminus station at Oakland International Airport. The project will uses right-of-way elevated Automated Guideway Transit (AGT) system to avoid the congested traffic on Hegenberger Avenue. There are two elevated stations (Coliseum and Airport) and a mid-point structure that serves as the operations center, maintenance shop and traction power station.

Construction on the project began in 2011 and the train system became operational in 2015. The estimated cost of the project is $484m. The automated train system replaced the previous AirBART bus system that operated on city streets between Coliseum Station and the Oakland International Airport.

ISBN: 978-1-5320-9004-2 (sc)

ISBN: 978-1-5320-9005-9 (e)

Library of Congress Control Number: 2020903121

iUniverse rev. date: 02/21/2020

Inhalt

Chapter 1 California Projects & Delivery Systems

1.1 Dreams to Reality

1.2 The California Market

1.3 The Mission Statement

1.4 Project Delivery Pathways

1.4.1 Contracting Strategies & Methods

1.4.1(a) Design-Bid-Construct

1.4.1(b) Project Management (PM)

1.4.1(c) The Design-Build Process

1.4.1(d) Multiple Prime Contracting

1.4.1(e) Fast Track Projects

1.4.1(f) Turnkey Projects

1.4.1(g) Performance-Based Contracting

1.4.1(h) Design-Build-Operate-Transfer (DBOT)

1.4.1(i) Partnering and Team Building

1.4.2 Pricing Methods

1.5 Project Relationships

1.5.1 Usual Parties

1.5.2 Project Organization

1.5.2(a) The Design Relationship (Architect or Engineer)

1.5.2(b) General Contractor

1.5.2(c) Construction Manager

Chapter 2 Project Evaluation

2.1 Community Priorities

2.2 The Project Concept

2.3 Development of the Project Team

2.4 Evaluating the Likely Benefits

2.5 Estimating True Project Costs

2.6 Evaluation of Project Risk

2.7 Environmental Impact & Mitigation

2.8 Military Base Reuse & Conversion

2.9 The California Environmental Quality Act (CEQA)

2.10 Federal and State Environmental Assessment of Lands

2.11 Agencies with Permit Jurisdiction

2.12 Green Building & Sustainability

Chapter 3 Project Risk

3.1 Evaluating Project Risk

3.2 Risk Identification

3.2.1 Ownership

3.2.2 Building Type

3.2.3 Location of Project

3.2.4 Contract Provisions

3.2.5 Investigate the Parties

3.2.6 Public Financing Method

3.3 Risk Mitigation Strategies

3.4 Project Risk Checklist

Chapter 4 Project Finance

4.1 Lump Sum Funding (Pay As You Go)

4.2 Grants

4.3 Renting and Leasing

4.4 State Bonds

4.5 Municipal Bonds

4.6 Certificates of Participation

4.7 Traditional Revenue Bonds

4.8 Local Option Sales Taxes

4.9 Mello-Roos Bonds

4.10 Redevelopment Agencies and Bonds

4.11 Subdivision Development Bonds

4.12 Arbitrage of Project Funds

4.13 Selection of Bond Counsel and Financial Advisors

4.13.1 Municipal Bond Issuers

4.13.2 Underwriter’s Counsel

4.13.3 Trustee’s Counsel

4.13.4 Disclosure Counsel

4.13.5 Trustee

4.13.6 Underwriter

4.13.7 Municipal Bond Insurer

4.13.8 Rating Agency

4.13.9 Investment Community

Chapter 5 Public-Private Partnerships

5.1 Private Investment Market

5.2 Traditional Barriers

5.3 Statutory Authorization

5.4 P3 Case Studies

5.5 Cutting Edge Issues

Chapter 6 Project Management Agreements

6.1 Types of Project Management (PM) Services

6.2 Selection of Project Manager

6.3 Substitution of Key Personnel

6.4 Key Clauses in Project Management Agreements

Chapter 7 Design Agreements

7.1 Selection of Design Professionals

7.2 Key Clauses in Design Agreements

7.2.1 Project Description and Scope of Work

7.2.2 Basic Services Versus Additional Services

7.2.3 Standard of Care

7.2.4 Schedule of Performance

7.2.5 Redesign Without Cost

7.2.6 Adherence to Codes

7.2.7 Licensure and Payment

7.2.8 Construction/Site Services–Shop Drawing & Submittal Review

7.2.9 Construction Services–Change Order Evaluation and Approval

7.2.10 Construction Services–Substitutions

7.2.11 Construction Services–Supervision and Site Safety

7.2.12 Construction Services-Site Visits & Observation of Construction

7.2.13 Construction Services-Certification of Progress Payments

7.2.14 Construction Services-Authority to Reject Work

7.2.15 Construction Services-Substantial Completion & Final Payment

7.2.16 Construction Services-Arbiter of Disputes

7.2.17 Cost Estimates

7.2.18 Ownership, Use and Reuse of Drawings

7.2.19 Copyrights and Patents

7.2.20 Indemnification

7.2.21 Insurance

7.2.22 Payment Bonds and Retention

7.2.23 Suspension or Termination of A/E

7.3 A/E Statutes of Limitation & Certificates of Merit

Chapter 8 Construction Agreements

8.1 Key Concepts

8.2 Standard Agreements

8.3 Key Clauses in Prime Contracts

8.4 Project Execution

8.5 Design-Build Agreements

8.6 Home Improvement Contracts

8.7 New Single Family Homes

Chapter 9 California Public Works Law

9.1 Agency Authority

9.2 California Public Contract Code

9.2.1 Administrative Provisions

9.2.2 Contracting by State Agencies

9.2.2(a) Minority Business Enterprise (MBE)/Women’s Business Enterprise (WBE)/Disabled-Veteran Business Enterprise (DV BE)

9.2.2(b) Award to Lowest Responsible Bidder

9.2.2(c) Bid Advertisement

9.2.2(d) Bidding Requirements

9.2.2(e) Contract Award

9.2.2(f) Resolution of Claims and Arbitration

9.2.2(g) Changes and Extra Work

9.2.2(h) University Rules

9.2.3 Contracting by Local Agencies

9.2.3(a) School Districts

9.2.3(b) Contracting by Community College Districts

9.2.3(c) General Law Counties and Cities

9.2.3(d) Transit, Utility, and Special Districts

9.2.4 Chartered Cities and Counties

9.2.5 Other Applicable California Codes

9.3 Regulated Contract Provisions

9.3.1 Allowed Clauses

9.3.2 Prohibited or Limited Clauses

9.3.3 Required or Otherwise Key Public Works Clauses

9.4 California Public Records Act

9.5 Federal Law Considerations

9.6 Governmental Immunities

9.7 Contact with Public Officials

Chapter 10 Insurance & Bonding

10.1 Insurable Risks

10.2 Construction Insurance

10.2.1 Coverage Issues

10.2.2 Insurance Coverage Litigation

10.3 Bonding

Chapter 11 Contractor Licensing

11.1 Overview

11.2 Who Needs a License?

11.3 Requirements for Public Contracts

11.4 Which License Is Necessary?

11.5 Unlicensed Contractors

11.6 Exemptions from the License Law

11.7 Sanctions

11.8 Electrician Certification Requirements

11.9 Practice Pointers

Chapter 12 The Bidding Process

12.1 Competitive Bidding Requirements

12.2 Bid Responsiveness

12.2.1 Responsiveness Defined

12.2.2 Immaterial Variances May Be Waived

12.3 Bidder Responsibility

12.3.1 Responsibility Defined

12.3.2 Standard of Review

12.3.3 Notice & Opportunity to be Heard for Unsuccessful Bidders

12.4 Solicitation of Bids

12.4.1 Pre-qualification

12.4.2 Licensing Requirements

12.4.3 Information to Be Supplied to Bidders

12.5 Bid Submission

12.6 Withdrawal of Bids

12.7 Bid Mistakes

12.8 Subletting and Subcontracting Fair Practices Act

12.8.1 Post-Substitution Litigation

12.9 Bid Evaluation

12.10 Prevailing Wages

12.11 Bid Protests - Administrative Challenges

12.11.1 Notice of Award

12.11.2 Request for Hearing and Notice

12.11.3 Hearing and Decision

12.12 Bid Protests - Legal Challenges

12.12.1 Interference with Prospective Economic Advantage

12.12.2 Breach of Contract

12.12.3 Abuse of Discretion

Chapter 13 Construction Problems

13.1 Inadequate Design

13.2 Unforeseen Conditions

13.3 Changes and Modifications

13.4 Scheduling

13.5 Suspension of Work

13.6 Delay

13.7 Cumulative Impact, Disruption and Lost Productivity

13.8 Prompt Payment

13.9 Impossibility of Performance

13.10 Pass Through Agreements

13.11 Good Faith and Fair Dealing

13.12 Miscellaneous Claims

Chapter 14 Assessing Damages

14.1 Breach of Contract

14.2 Material Breach & Abandonment

14.3 Tort Damages

14.4 Waiver of Consequential Damages

14.5 Economic Loss Rule

14.6 Limitations of Liability

14.7 Fraudulent Claims

Chapter 15 Payment Remedies

15.1 Who Has These Rights?

15.2 Preliminary Notice

15.3 The Mechanic’s Lien

15.4 Enforcement of Mechanic’s Liens

15.5 Public Project Mechanic’s Liens (Rare)

15.6 Payment Bonds and Stop Notices

15.7 Prompt Payment Statutes

Chapter 16 Third Party Claims

16.1 Construction Accidents

16.1.1 Workers’ Compensation

16.1.2 Third-Party Lawsuits

16.1.3 Indemnity and Insurance Issues

16.1.4 Products Liability Issues

16.2 Construction Defects

16.2.1 Prevalence in Residential Construction

16.2.2 Typical Defects Claims

16.2.3 Strict Liability for Mass Graded Lots & Tract Housing

16.2.4 Insurance Coverage Issues

16.2.5 Residential Construction Defects

16.3 Americans with Disabilities Act

Chapter 17 Construction Claims Analysis

17.1 Phasing the Analysis

17.1.1 Phase I: The Factual Investigation

17.1.1(a) Project Roster

17.1.1(b) Project Issues List

17.1.1(c) Contract Review

17.1.1(d) Contractual Requirements

17.1.1(e) Plans and Specifications Review

17.1.1(f) Indemnity and Insurance

17.1.1(g) Key Witness Interviews

17.1.1(h) Contractor - Public Agency Meeting

17.1.2 Phase II: Detailed Claim Analysis

17.1.2(a) Project Chronology

17.1.2(b) Financial Records Review

17.1.2(c) Technical Analysis and Early Expert Witness Involvement

17.1.2(d) Calculation of Quantum

17.1.3 Phase III: Pursuing Settlement

17.1.3(a) Advantages to Early Settlement

17.1.3(b) Planning the Mediation/Negotiation

17.1.3(c) Selecting the Negotiation Team

17.1.3(d) Settlement Agenda

17.1.3(e) The Settlement

17.1.3(f) The Good Faith Settlement Motion

17.2 The False Claims Act

Chapter 18 Deadlines and Limitations

18.1 Contract Provisions

18.2 Statutory Notice Requirements

18.3 Other Public Works Statutes

18.4 Additional Statutes of Limitations

18.5 Tort Claims Issues

18.6 Statutes of Repose

Chapter 19 Dispute Resolution

19.1 Litigation

19.1.1 Special Master

19.1.2 Judicial Referee

19.2 Arbitration

19.2.1 AAA Arbitration

19.2.2 JAMS Arbitration

19.2.3 OAH Arbitration

19.2.4 CSLB Arbitration

19.2.5 Judicial Arbitration

19.3 Dispute Review Boards

19.4 Project Neutral

19.5 Mediation

19.5.1 The Strengths of Mediation

19.5.2 Unsuccessful Mediation

19.5.3 Mediation Checklist

19.6 Fact Finding

19.7 Sources of California Law on Alternative Dispute Resolution

19.8 ADR Considerations

19.9 ADR Tools for Construction Disputes

Chapter 20 Checklist for Successful Projects

Endnotes

Glossary of Infrastructure Terms

CalTrans Terminology

About The Author

Einführung

Over the past forty years, I have represented public and private clients in the construction community. They are fortunate to employ an amazing group of men and women. They strive everyday for safe, high quality, and cost-effective projects. I am part of executive teams that design and build challenging and impressive jobs throughout California.

It has also been a true privilege to serve as legal counsel to public entities on iconic projects. I have worked with some of the best public officials and agency staff in the United States.

We are now publishing the Fourth Edition of this book. It is very gratifying that my publishers have distributed over 15,000 copies, including an International Edition in Korean.

I started writing in 1999 with one goal: What could I have told my young self in 1978, when I was a freshly minted UC Berkeley lawyer with a MIT civil engineering degree? And from the response from a lot of young people who have contacted me since, we pretty much hit the mark.

These are two insights from twenty years of writing: 1) The fluid nature of the laws, policies and regulations that govern our industry and 2) In contrast, the core principles of law and construction are ancient and remain right, pure, and true.

The Caltrans Mission Statement© is an excellent example of setting clear goals to measure success, improvement and service (see text). In a similar vein, I am reminded of the AGC Award for Service, Integrity and Responsibility (SIR Award). The value of those character traits are immutable and transcend generations.

The SIR Award was created by the Northern Nevada Chapter of the AGC. My Grandfather, Ernest S. Brown, Esq, a labor lawyer, and my Father, John Webster Brown, SE, a Civil & Structural Engineer, were early Nevada SIR recipients. They were my first and the greatest of my mentors.

So, I guess you can understand my lifelong passion for the construction industry. Why I so respect the work of the agencies, design firms and construction companies. Together, creating great projects.

Chapter 1

California Projects &

Delivery Systems

Summary:

Concept to Delivery of California Infrastructure Projects. State, Local and Private Construction. The Range of Project Delivery Systems. Customary Duties of the Construction Manager, A/E’s, and General Contractors. Typical Project Relationships. Civic Leadership and Innovation. Ingrained Sources of Aggravation. Partnering and Team Building. Project Opportunities. Risks and Pitfalls.

1.1 Dreams to Reality

This is a timely guide for turning civic dreams into reality.

The United States, and California in particular, are in the midst of the largest surge of design and construction activity in our nation’s history. Overall, US construction is a $1.3 Trillion Industry.

However, our public infrastructure is in serious jeopardy. There is a critical need for a massive expansion of US infrastructure expenditures. And broad bi-partisan support in Congress and state legislatures.

The U.S. National Academies of Sciences, Engineering, and Medicine recently warned:

Many Interstate highway segments are more than 50 years old and subject to much heavier traffic than anticipated. They are operating well beyond their design life, made worse by lack of major upgrades or reconstruction. They also are poorly equipped to accommodate even modest projections of future traffic growth, much less the magnitude of growth experienced over the past 50 years.

Not only did the U.S. fail to invest appropriately in the past, funding for the next 20 years is facing a fast closing window. This 20-year period coincides with the entire system reaching the end of its design life. At the same time, it overlaps with the onset of automated, electric and connected vehicles as well as the growing impact of climate change.

The Future Interstate Report, Special Report 329, 2019 (614 pp)

A thoughtful, skillful and efficient expenditure of federal, state and local funds is needed to improve America’s highway and transit systems. In many economists’ views, upgrades to such systems (as well as public schools, the electric grid, sustainable energy, and internet access) will make the United States far more competitive in the global economy. This most recent investment cycle will obviously continue these major increases in California’s public construction and the budgets of state and local governments.

According to economist David H. Wang, the social impact from such expenditures will be safer roadways and bridges, schools equipped with state-of-the-art science labs, libraries, and massive broadband access that experts predict will amplify learning and knowledge, particularly in poorer school districts.

Each potential project encompasses a unique blend of planning, architecture, engineering, project finance, construction management and inevitable conflicts and sticky dollops of state and local politics. There are winners and losers. These projects are the heart and soul of the public expenditure budget. The accomplishments of public projects are built to last, as are their mistakes, and, unlike many current government programs, will be paid for by future generations.

The creation of public infrastructure involves making tough choices about civic priorities. The public trough is not limitless. It takes careful stewardship of public funds to meet the essential public needs of transportation, safe water, education, law enforcement and healthcare. While the immediate beneficiaries of a project may be the local residents (neighborhood parks) or the region as a whole (airports), these projects should nurture a larger community and improve public safety, economic security and business prosperity.

Californians build these projects because they wish their lives to be enriched and enjoyed. Their elected representatives must honor the public trust and purse strings while making difficult decisions about project merit. They in turn employ consultants, designers and contractors who must bring professional competence, ethics and knowledge obtained from past projects.

The true costs of a public project range far and wide, although the ultimate cost is buried in reports and ledgers of accounts not readily available to the public. The low bid figure read at bid opening and reported in news accounts of the project cost is merely a down payment on the realistic project cost. The contractor’s bid does not include such soft costs as planning, project management, engineering and architecture, land and right of way acquisition, financing and, of course, long-term staffing and operating costs.

The careful study of a project will reveal large economic costs (as well as benefits) that are external to the project. They do not show up on spreadsheets or financial projections, but are quite tangible, nevertheless. Obvious examples include environmental impacts, view blockages and traffic congestion. At times, local businesses may get a huge boost from the construction of a transit station, mixed-use village or restored wetlands.

At other times, negative externalities cause nearby residents to protest the project as NIMBY’s (not in my back yard). These impacts are felt in local neighborhoods where the government plans large regional projects that bring noise (airports), congestion (sport facilities) or annoyance (large parking lots). In a perfect world, those local and distant gains and losses would be mathematically balanced and fairly allocated among all parties. Unfortunately, nearly every large project of merit may also have disproportionate impacts on a subset of local citizens.

One way unscrupulous developers attempt to repress fair discussion and debate is a so-called strategic lawsuit against public participation (SLAPP) which are subject to early dismissal on First Amendment grounds.

Where the burdens are truly disproportional, the affected residents can seek compensation through the law of condemnation (public taking) and inverse condemnation (resulting damage to private property), mitigation (sound walls along widened roadways, residential soundproofing near airports, etc.) or tax breaks for those most severely affected.

In fact, public agencies can be held strictly liable for obstruction of businesses during construction or land movement. However, those damages may be offset by the economic benefits of the projects.

Strict liability has also been asserted to recover resulting wildfire damage caused by utility infrastructure. Similar claims are pending against Pacific Gas & Electric in the Napa and Camp Fire cases.

An evaluation of true project cost must also reflect all of the considerable risks of these projects — the potential for human and economic tragedies ranging from the devastation of earthquakes, floods and gigantic wildfires, to catastrophic dam failures and aviation accidents, as well as frequent examples, such as crane and scaffolding collapses, roadway fatalities, and spectacular failures of public infrastructure, such as the kind of levee breaks, bridge collapses and the failure of the Orville Dam spillway in 2017 that resulted in 190,000 Northern California residents being forced to evacuate.

Every complex project attracts enthusiastic proponents and vocal detractors. A worthy project can be opposed by local neighbors who are adversely affected. A poorly evaluated or over-ambitious project can be pushed through by a short-sighted public agency without fully evaluating the costs and risks of the undertaking. An expensive project may be pushed through that is really just a blatant subsidy of private interests.

Or the architect creates a prize-winning model that the local citizenry recognizes as impractical, unaffordable or ugly! While exceptional public architecture may emerge from the brilliance of a single gifted mind, it can also widely miss the mark. As one expression goes: "Doctors bury their mistakes, architects plant ivy. James Surowiecki’s Wisdom of Crowds" may in practice kill a grandiose or truly silly project when enough people oppose it.

One hundred and fifty years of California politics is typified by conflicts over the public checkbook. The battle rages on over what policies and projects will survive on such divisive issues as water, transportation, schools and seismic safety.

Our infrastructure will inflame California politics for years to come. In the forefront of these debates are the thinkers and doers — urban planners, architects, engineers, project managers, contractors, investment bankers and the bond finance community who are required for virtually any project. They sharpen their skills while competing for development schemes, projects or investment opportunities.

Often, a project will simmer for decades while the civic debate rages. Such is the fate of the proposed $10 Billion Auburn Dam in the Western Sierras just above the City of Sacramento. A thin arch concrete structure proposed in the 1960’s in the foothills above Sacramento was halted in the early phases of construction. It has remained a contentious eyesore for thirty years. Every few years, millions of taxpayer dollars are spent on further studies and evaluations. The environmental and seismic risk issues are raised and hotly debated. And once again, the project is shelved to be pondered and reshaped by future generations.

When a worthy project is identified, the stake holders, including elected public officials and staff, financers, entrepreneurs, engineering and architecture firms, contractors and suppliers, must create a project concept and process, provide impact studies, financial projections and then an execution plan — then perform their responsibilities to the highest professional and ethical level — to serve and protect the citizens and their budgets.

There are many emerging trends in project management, traditional bidding, Design-Build, Design-Build-Operate-Transfer (DBOT) and other public-private strategies. There are also a few lingering myths. This book seeks to explain these exotic project strategies as well as their pros and cons in an open and forthright discussion.

California is also undergoing a once-in-a-century revolution in the contracting strategies to accomplish public projects. After twenty-five years of experimenting with design-build projects, the State has now expanded the range of alternatives to include private financing, concessions and a broad variety of Public-Private Partnerships (P3 Projects).

The purpose of this manual is to better prepare elected officials, project managers, designers, and contractors to make better and more timely decisions about project evaluation, planning, construction management, risk identification and prevention, finance and contracting. It will arm the reader with a practical knowledge of the landscape, organizational structure and governing law of large public projects.

1.2 The California Market

California ranks #1 in public construction. The State’s economy, on a global scale, is large enough to constitute the fifth largest national economy, rivaling that of the United Kingdom. The Los Angeles region comprises a population larger than the rest of the ten U.S. Western States combined. The population exceeds that of Canada.

California is the most populous and arguably the most culturally influential state in the U.S. The City of Los Angeles or L.A. (a nickname that employs only the last two letters of its original name, El Pueblo de Nuestra Senora la Reina de los Angeles de Rio de Porciuncula) and the San Francisco Bay Area are the second and fourth largest population centers in the U.S., respectively. They are also among the fastest growing regions in the nation and their infrastructures have simply not kept up with the expanding demands of their populations.

The State of California spends billions of dollars on infrastructure projects. For example, the California Department of Transportation (CalTrans) has more than 23,000 employees with a current annual budget of about $15 billion. Headquartered in Sacramento, the Department also has 12 district offices situated in Eureka, Redding, Marysville, Oakland, San Luis Obispo, Fresno, Los Angeles, Bishop, Stockton, San Bernardino, Santa Ana and San Diego (website: www.dot.ca.gov).

A 2019-2020 CalTrans budget of almost $14.7 billion — up more than 50% from 2017-2018 — is helping to repair and repave roadways across the state, including those in the San Francisco Bay Area, the East Bay Times reported. The 12-cent-per-gallon state gas tax increase passed in 2017 will contribute approximately $5.5 billion statewide this year, allowing CalTrans to repair or repave more than 17,000 miles of road surfaces in the next eight years, as well as fix 500 bridges and 55,000 culverts.

California is also exceptional in that the majority of the population resides where fresh water is not plentiful. So, the supply of water is a major focus of projects. As is flood protection. As they say, when it rains in California, it pours. The cyclic devastation of levee breaks, flash floods, debris flow and tidal conditions are legendary. California also leads in the protection of its natural resources. Many projects use advanced wastewater treatment, grey water reuse and groundwater injection to prevent saltwater intrusion into aquifers.

Along with these design challenges comes an inconvenient truth — California’s major population centers rest … astride one of the most violent and dangerous earthquake zones in the world, as stated by author Marc Reisner. The seismic risk of California is simply monumental. Whether the State’s design, construction and public agency professionals fully grasp that fact, or are taking the right mitigation steps, is a matter of significant debate.

Then, there is the balkanization problem: there are more than 7,000 separate local public entities in California. The vast majority of these entities participate in many aspects of public infrastructure. Their expenditures on design, construction and maintenance accounts for a large portion of their annual budgets, particularly cities and counties, airports, marine facilities, water districts, sanitary districts, bridge and highway districts, schools, and highway and mass transportation authorities. Unfortunately, every public works entity in California marches to its own drum on the specifics of their contracts, bidding and project administration.

This presents the design and contracting community with a Tower of Babel of conflicting and confusing public works programs. This book advocates greater consistency and uniformity in purpose and content in local government procurement practices.

During to the State of California’s budget crisis, and U.S. Federal Government’s growing substantial deficits, the public construction outlook became financially challenging and highly competitive. Governor Newson recently has proposed $53 billion in infrastructure over the next five years.

The public works needs of California’s citizens will inevitably expand with the geometric population growth expected in coming years. As such, public works financing must become far more innovative, posing new risks and challenges.

The job of designers and builders is therefore becoming even more politically complicated and technologically challenging. California public agencies must seek political and financial support for projects, starting early in the conceptual and design process. Unions, as well, are willing to support worthy projects that create jobs in their communities. A State of California Bill, SB 50, to permit high density projects near transit hubs, was quashed amid major local government opposition.

Opponents can weigh in against disfavored projects with a time consuming environmental impact lawsuit. A union may protest the low bid of a non-union contractor’s safety record (although such labor suits can suddenly be dismissed when a project labor agreement (PLA) is signed by the public entities and the contracting community.)

And once a project starts in earnest, public agencies and their attorneys appear far more willing to make allegations of false claims against contractors, and others, if they feel the public trust has been violated. Such claims are being made even after project contracts have been closed out and all parties have signed final project change orders.

Nevertheless, in view of the strong national economy, and the compelling need for thoughtful investment, the California public construction market remains remarkably strong.

1.3 The Mission Statement

An exemplary policy statement for public infrastructure is contained in the CalTrans Mission Statement.© While CalTrans serves statewide transportation needs, its core mission and goals are applicable to any California public agency providing a public service. The Mission and Goals were issued on October 23, 2019:

MISSION: Provide a safe, sustainable, integrated and efficient transportation system to enhance California’s economy and livability

VISION: A performance-driven, transparent and accountable organization that values its people, resources and partners, and meets new challenges through leadership, innovation and teamwork

Caltrans also laid out five new goals:

SAFETY AND HEALTH: Provide a safe transportation system for workers and users, and promote health through active transportation and reduced pollution in communities.

STEWARDSHIP AND EFFICIENCY: Money counts. Responsibly manage California’s transportation-related assets.

SUSTAINABILITY, LIVABILITY AND ECONOMY: Make long-lasting, smart mobility decisions that improve the environment, support a vibrant economy, and build communities, not sprawl.

SYSTEM PERFORMANCE: Utilize leadership, collaboration and strategic partnerships to develop an integrated transportation system that provides reliable and accessible mobility for travelers.

ORGANIZATIONAL EXCELLENCE: Be a national leader in delivering quality service through excellent employee performance, public communication, and accountability.

Practice Pointer: Every public agency and private entity should inspire its employees with a Mission Statement and publicly commit to specific, measurable goals and guiding values that will ensure the long-term focus and accountability of their public works performance.

1.4 Project Delivery Pathways

The State of California and local agencies employ a variety of methods for Project Delivery. A Project Delivery System is a unique pathway for project conception, planning, evaluation, design, financing, construction and start-up. This section presents the typical project delivery systems for public works projects and their relative strengths and weaknesses.

1.4.1 Contracting Strategies & Methods

The major delivery methods for public entities considering a major project include: a) Design-Bid-Construct, b) Project Management (PM), c) Design-Build, d) Multiple Prime, e) Fast Track, f) Turnkey Projects, g) Performance-Based Contracting, h) Design-Build-Operate Transfer (DBOT) and i) Partnering & Team Building.

1.4.1(a) Design-Bid-Construct

The traditional project approach starts with engaging a design firm (A/E) and then, much later, selecting a general contractor (prime contractor) through competitive bidding. In this well-worn approach, an independent architect or engineer consults from soup to nuts, from concept through program, and into schematic and final design, including Construction Documents. The owner then advertises for interested general contractors and issues a fixed set of plans and specifications. The owner then solicits multiple bidders. The low bidder is selected, the successful general contractor is awarded the work and construction begins.¹

1.4.1(b) Project Management (PM)

Since most public owners do not have sufficient staff or expertise for the peak of project design and construction, they generally will retain a project management (PM) firm or Construction Manager (CM). This is typical for projects of more than $50 million regardless of the type of contracting method utilized by the owner.

Project managers are generally administratively oriented, often serving as an extension of the owner’s staff. Their key expertise is management, not design or field construction. In fact, in public construction, the independent CM or PM is often asked to refrain from design or construction duties.

Instead, the CM develops the selection process for designers, cost estimators and testing firms, performs extensive reviews of their expertise, develops and administers their contracts, provides expertise on constructability, manages relationships with funding and oversight agencies, and provides a system of communications, public information, emergency response, and policy advice for the owner.

An example is a major airport, where CM/PM firms manage the associated infrastructure from conceptual studies of aviation alternatives through the design and construction of the myriad of airside and landside facilities, maintain existing flight operations, assist with start-up and pursue any warranty work.

The CM/PM firms then overlap into the next cycle of conceptual design, at all times working to keep the elected representatives, the public entity staff and general public fully informed so they are ready to make key decisions from a comprehensive matrix of alternatives.

1.4.1(c) The Design-Build Process

The Design-Build method begins with the selection of a single entity for design and construction services, so a single firm is responsible for all aspects of a project. Typically, a public entity will hire a design firm to conduct early studies and develop a conceptual or schematic level of design for the project. Then, a design-build contractor is selected to provide the design and construction of the project.

In rare instances, an architectural firm may act as the leader of a design build team, providing the design services and retaining a contractor for the construction phase. A/E firms are not typically the lead firm as they generally have difficulty supplying the required project financing and bonding. Where the architectural firm is the lead organization, it will be held contractually responsible for all aspects of the project.²

Typically, a general contractor is the lead entity and employs architects or engineers (directly, or on a consulting basis) for the design phase. The construction company then performs the construction phase of the project.

The design-build methodology in theory provides savings in cost and time because the entire project is managed and constructed by a single entity, thereby eliminating the difficulties of dealing with multiple entities on one project. The design-build approach is an emerging tool. Public agencies were largely prohibited from using this method in the past due to competitive bidding requirements.

Charter public agencies may utilize this approach if their charters so provide. Other public entities have specialized legislation, discussed later, that enables design build projects. The design build approach is available in California when a public project is privately financed, at least in part. Recent legislation has expanded the use of this tool in public projects.

1.4.1(d) Multiple Prime Contracting

In this method of contracting, the public owner assumes the obligation of managing multiple prime contractors on the jobsite. The public agency thus assumes a traditional and critical role typically undertaken by a general contractor. It gives the public agency substantial control over the entire construction process.

Unfortunately, this means the public agency does not have a single contractor to assume the ultimate cost and schedule responsibility. The CM/PM hired to perform such a multiple prime project will often argue that their company should have no financial responsibility for escalations in the overall budget or delays in the schedule of the project. This leaves the public owner in the position of absorbing the majority of the risk for conflicts between the contractors and any resulting cost and schedule impacts.

1.4.1(e) Fast Track Projects

In fast-track, or phased design and construction, schedule advantages are achieved in time-critical projects by beginning construction of civil works and foundations before the final drawings are completed for a project as a whole.

This technique is typically used where time is of the essence to the owner. (One example being the rush to build a stadium after the award of a sports franchise — where the looming playing schedule is at the heart of the project.)

In such a case, the project is built using drawings and specifications that can be released early, such as grading and foundations, while the designer pursues completion of the overall project plans and specifications. Certain later plans may be modified as necessary with or without price increases.

Unfortunately, this means there is no fixed price or firm schedule for the overall project at the outset. As the design of the project is being completed as concrete is being poured, there are few opportunities to fine-tune the design to