BILL ANALYSIS Ó Bill No: AB 2181 SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION 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 SUBJECT High Speed Rail Authority: Prompt Payment Act DESCRIPTION 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 Controller. BACKGROUND 1)Purpose of this bill . The author wishes to clarify that the Prompt Payment Act applies when a certified small AB 2181 (Galgiani) continued Page 2 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 businesses. 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. SUPPORT: None on file AB 2181 (Galgiani) continued Page 3 OPPOSE: None on file FISCAL COMMITTEE: Senate Appropriations Committee **********