BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | AB 983|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
THIRD READING
Bill No: AB 983
Author: Ma (D)
Amended: 5/20/08 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 5/13/08
AYES: Corbett, Harman, Ackerman, Kuehl, Steinberg
ASSEMBLY FLOOR : Not relevant
SUBJECT : Public contracts: plans and specifications
SOURCE : Associated General Contractors of California
DIGEST : This bill requires, except in design-build
projects, a local public entity, before entering into any
contract for a project, to provide full, complete, and
accurate plans and specifications and estimates of cost,
giving such direction as would enable a bidding builder or
contractor to carry them out. This bill provides that, for
purposes of a breach of warranty action based upon
incomplete, inaccurate, or misleading plans and
specifications, nothing in its provisions shall be
construed to require a contractor to prove an affirmative
or intentional misrepresentation or active concealment on
the part of the local public entity that provides the plans
and specifications nor construed to public entity, charter
city, or charter county from raising any affirmative
defensive available to it under law. This bill also
provides that nothing in its provisions expands, restricts,
CONTINUED
AB 983
Page
2
or otherwise change the liability or potential liability of
a design professional as set forth under current law.
ANALYSIS : The United States Supreme Court first
established the standard for a "breach of warranty of
correctness" of plans and specifications action against a
public entity in United States v. Spearin (1918) 248 U.S.
132. In Spearin , a case in which a dry-dock
contractor/builder detrimentally relied upon inaccurate and
misleading plans and specifications supplied by the
government, the Court held that "[I]f the contractor is
bound to build according to plans and specifications
prepared by the owner [public entity], the contractor will
not be responsible for the consequences of defects in the
plans and specifications. This responsibility of the owner
is not overcome by the usual clauses requiring builders to
visit the site, to check the plans, and to inform
themselves of the requirements of the work?."(248 U.S. at
136.) In 1999, Public Contracts Code Section 1104 (AB 1314
[Pescetti], Chapter 875, Statutes of 1999), was enacted.
Section 1104 provides that no local public entity may
require a contract bidder to assume responsibility for the
completeness and accuracy of architectural or engineering
plans and specifications on public works contracts; a
public entity may require a contract bidder to review plans
and specifications prior to a bid, and report any errors
and omissions; and any contractor review is confined to the
contractor's capacity as a contractor, not as a licensed
design professional.
After Section 1104 was enacted, the Sixth Appellate
District Court of Appeal issued its ruling in Thompson
Pacific Construction, Inc. v. City of Sunnyvale (2007) 155
Cal.App.4th 525. In Thompson , the court held that in order
to recover in a breach of warranty of correctness action,
the contractor must prove that the public entity
"affirmatively misrepresented, or actively concealed,
material facts which rendered the bid documents misleading,
and that the contractor reasonably relied on such
misrepresentations in preparing its bid." (155 Cal.App.4th
at 551.) The Thompson decision specifically relied upon
pre-Section 1104 case law. The Associated General
Contractors and the Construction Employers' Association
requested that the California Supreme Court depublish that
CONTINUED
AB 983
Page
3
part [Section F] of the appellate court decision relating
to the implied warranty of correctness of plans and
specifications. The Court denied the depublication
request.
This bill is intended to respond to the Thompson decision,
which the author, sponsor, and supporters assert was
wrongly decided, misstates current law, and runs counter to
sound public policy.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 5/20/08)
Associated General Contractors of California (source)
American Subcontractor Association California, Inc.
Associated Builders and Contractors of California
Associated General Contractors of San Diego
California Chapters of the National Electrical Contractors
Association
California Legislative Conference of the Plumbing, Heating,
and
Piping Industry
California Sheet Metal and Air Conditioning Contractors,
National Association Construction Employers' Association
Engineering Contractors' Association
Southern CA Contractors Association
State Building and Construction Trades Council of
California
OPPOSITION : (Verified 5/20/08)
Association of School Administrators (5/28/08)
California Special Districts Association
Coalition for Adequate School Housing
League of California Cities
San Diego County Water Authority (5/28/08)
ARGUMENTS IN SUPPORT : The sponsor, Associated General
Contractors of California (AGC), writes: In a recent
appellate court case, Thompson Pacific Construction v. City
of Sunnyvale (2007), the court interpreted AB 1314 [PC Code
Section 1104] and found that the contractor in question was
CONTINUED
AB 983
Page
4
liable for damages that were the result of deficient
architectural plans because the contractor could not
demonstrate that the public agency "affirmatively
misrepresented or actively concealed material facts which
rendered the bid documents misleading and the contractor
relied upon the plans in submitting its bid." Such a
standard is nearly impossible to meet because public
entities do not draft architectural or engineering plans;
instead they typically transmit plans from the architect or
engineer they hired to the contractor. While the facts of
Thompson Pacific Construction may be subject to debate, the
unreasonable evidentiary standard in the court's ruling is
problematic and the reason why this bill is needed.
The sponsor AGC responds to the opponents by stating that
current law already provides that no local public entity
may require a bidder to assume responsibility for the
completeness and accuracy of architectural and engineering
plans and specifications, and thus this bill is a
clarification of, not a major shift in, existing law. AGC
also notes that state agencies are required to prepare
full, complete, and accurate plans and specifications, and
estimates of costs to bidders on public works projects.
AGC asks why state agencies and departments should be held
to a different standard than local public entities.
Finally, AGC notes that current law provides that a local
public entity may require a bidder to review plans and
specifications prior to submission of a bid.
AGC argues that if public entities rely upon contractors to
determine whether plans and specifications are complete and
accurate, it is practically impossible for a contractor to
prove that a local public entity intentionally
misrepresented or actively concealed errors and omissions
when the public entity acknowledges that it is not in the
best position to review plans and specifications and is
effectively ceding its review authority and responsibility.
In addition, under current law, public entities may
require contractors to review plans and specification prior
to submitting bids and report any errors or omissions found
in their capacity as contractors. However, it is the
architect or other design professional who is the licensed
expert with respect to plans and specifications, not the
contractor.
CONTINUED
AB 983
Page
5
AGC argues that local public entities and their design
professionals should bear the responsibility and liability
for inadequate, inaccurate, and misleading plans and
specifications.
ARGUMENTS IN OPPOSITION : The opponents argument with the
sponsors counterparts, the League of California Cities
(LCC), states that this bill abrogates the Thompson
decision and represents a major shift in public contracting
by requiring local public entities to provide full,
complete, and accurate plans and specifications, including
cost estimates, for public works projects. LCC argues that
this essentially absolves a contractor from any
responsibility for reviewing plans and specifications
before submitting a bid on a public works project (Note:
The author's office amended the bill to respond to the
issue by providing the bill's provisions may not be
construed to prohibit a local entity from raising, in a
breach of warranty of correctness action, any affirmative
defenses available to it under the law.)
The LLC also state, "The sponsors of AB 983 maintain,
despite several court rulings, that public entities should
be held strictly liable for plans and specifications on
public projects. There is simply no law that supports
imposing such a burden on local agencies. Such a rule of
law, as proposed in AB 983, would be inconsistent with
public policy because it would shield unethical and
dishonest contractors who seek to recover funds for alleged
defects in plans and specifications. Public contracting is
a collaborative process wherein a public agency and
contractor work together to identify omissions or changes
to provided plans and specifications. In fact, public
agencies appreciate, and rely on, the expertise of
contractors, who are professionals in their field and are
in the best position to notify a public agency if project
plans may be incomplete or inaccurate. Cities want to
continue this collaborative process. However, under AP
983, a contractor would have no desire or incentive to
report any omissions to a public agency prior to submitting
a bid, resulting in expensive change orders to the benefit
of the contractor and the detriment to the taxpayers of
California."
CONTINUED
AB 983
Page
6
The Coalition for Adequate School Housing states, "AB 983
increases the liability of the school districts that hire
design consultants to produce accurate and complete plans
and specifications for construction projects by essentially
shifting the professional responsibility and liability from
design consultants and contractors to local agencies.
School districts contract with these professionals
precisely because they are educated, licensed and
continuously trained in their respective fields. School
districts rely on their expertise and knowledge. AB 983l
would essentially require school districts and other local
agencies to become experts in the building code, mechanical
systems, structural engineering, construction, etcetera, in
order to be able to certify as to the completeness and
accuracy of the plans and specifications provided by hired
professionals. This is neither feasible nor economic"
(and) "AB 983 (Ma) countervails case law." Currently, in
order for a contractor to recover losses that result from
incomplete, misrepresented, or concealed information on
plans and specifications, he or she must provide sufficient
evidence that the plans and specifications furnished for a
construction project were affirmatively or intentionally
misrepresented, or that information was intentionally
concealed from a contractor by the public entity ( Jasper
Construction, Inc. v. Foothill Junior College Dist. (1979)
91 Cal.App.3d 1, 10). By requiring local agencies to
certify to the completeness and accuracy of plans and
specifications, AB 983 directly countervails law and shifts
the burden and responsibility on to public agencies.
DLW:do 5/28/08 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****
CONTINUED