BILL ANALYSIS                                                                                                                                                                                                    

                                                       Bill No:  AB 
                       Senator Roderick D. Wright, Chair
                           2011-2012 Regular Session
                                 Staff Analysis

          AB 2181  Author:  Galgiani
          As Introduced:  February 23, 2012
          Hearing Date:  June 12, 2012
          Consultant:  Paul Donahue


                 High Speed Rail Authority: Prompt Payment Act

          Specifies that the California High-Speed Rail Authority 
          (Authority) must promptly pay certified small businesses 
          engaged in the development, design, and construction of the 
          high-speed rail system, or pay the late payment penalties 
          applicable pursuant to the California Prompt Payment Act.
                                  EXISTING LAW

          1)The Prompt Payment Act requires state agencies acquiring 
            property or services pursuant to a business contract, 
            including any change order or contract amendment, to pay 
            the person or business on the date required by the 
            contract, or be subject to a late payment penalty. 

          2)Entities subject to the Act include the state, and 
            office, officer, department, division, bureau, board, 
            commission or agency of the State claims for money 
            against which are paid by warrants drawn by the 

           1)Purpose of this bill  .  The author wishes to clarify that 
            the Prompt Payment Act applies when a certified small 


          AB 2181 (Galgiani) continued                            
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            businesses enters into a contract with the Authority. The 
            current language for Government Code Section 927 states 
            that the Act applies to all state agencies. 

           2)The Prompt Payment Act  requires the state to pay amounts 
            due on the date specified in a contract, or within 45 
            days of a properly submitted, undisputed invoice, or pay 
            a penalty of 0.25% per day if the contractor is a small 
            business or nonprofit organization, or 1% above the 
            Pooled Money Investment Account rate for all other 
            The Act requires state agencies to submit payment for 
            items or services contractually delivered by a person or 
            business no later than the date required by contract 
            between the parties.  

            The Controller's office, which makes payments to vendors 
            on behalf of state agencies, has already begun making 
            payments on behalf of the Authority for design services 
            and land parcels.  The Controller contends that Act 
            applies to the Authority and that small businesses 
            entering into a contract with the Authority would be paid 
            late penalty fees, if applicable.

                            PRIOR/RELATED LEGISLATION
           SB 856 (Committee on Budget and Fiscal Review) Chapter 719, 
          Statutes of 2010  amended the interest rate that the state 
          must pay on Prompt Payment Act penalties.

           AB 2541 (Galgiani) Chapter 861, Statutes of 2006  provides 
          that a grant is considered a contract for purposes of the 
          Prompt Payment Act, and increased the late penalty amount.

           AB 2275 (Kuykendall) Chapter 916, Statutes of 1998  requires 
          state agencies to promptly pay undisputed invoices within 
          45 days.

           AB 170 (Papan), Chapter 360, Statutes of 1997  provides that 
          a state agency may not waive, alter or limit the penalties 
          owed pursuant to the Prompt Payment Act. 


          None on file


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          None on file

           FISCAL COMMITTEE:   Senate Appropriations Committee