BILL ANALYSIS Ó
AB 44
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Date of Hearing: April 2, 2013
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Richard S. Gordon, Chair
AB 44 (Buchanan) - As Amended: March 19, 2013
SUBJECT : Subletting and Subcontracting Fair Practices Act:
bidding practices.
SUMMARY : Requires a prime contractor to list a subcontractor's
contractor license number when bidding on public construction
projects.
EXISTING LAW :
1)Requires, under the Subletting and Subcontracting Fair
Practices Act (SSFPA), a prime contractor to list the name and
business location of each subcontractor performing work or
rendering service to the prime contractor, as specified.
(Public Contract Code [PCC] Section 4104)
2)Requires a state agency or department, as defined, prior to
awarding a contract for work to be performed by a contractor,
to do either of the following:
a) Verify with the Contractors' State License Board (CSLB)
that the person seeking the contract is licensed in a
classification appropriate to the work to be undertaken.
Verification need only be made once every two years with
respect to the same contractor; or,
b) In lieu of verification, require the person seeking the
contract to present his or her pocket license or
certificate of licensure and provide a signed statement
which swears, under penalty of perjury, that the pocket
license or certificate of licensure presented is his or
hers, is current and valid, and is in a classification
appropriate to the work to be undertaken. (PCC 6100)
3)Establishes the Contractors State License Law (CSLL), which
states that any person, licensed or unlicensed, who willfully
and intentionally uses, with the intent to defraud, a
contractor's license number that does not correspond to the
number on a currently valid contractor's license held by that
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person, is punishable by a fine of up to $10,000 or by
imprisonment in a state or county jail for up to one year, or
by both fine and imprisonment. (Business and Professions Code
[BPC] Section 7027.3)
4)Makes it a misdemeanor for a person to engage in the business
or act in the capacity of a contractor in this state without a
contractor's license, and subjects that individual to
potential fines and imprisonment, depending on the number of
prior convictions. (BPC 7028)
5)Makes it a misdemeanor for any person to submit a bid to a
public agency in order to engage in the business or act in the
capacity of a contractor within this state without having a
license, except for a person who is exempt from the CSLL or
working on a public construction project that is federally
funded, as specified. (BPC 7028.15)
6)Requires every person licensed under the CSLL to include his
license number in all construction contracts, subcontracts and
calls for bid, and all forms of advertising prescribed by the
CSLB. (BPC 7030.5)
FISCAL EFFECT : Unknown
COMMENTS :
1)Purpose of this bill . This bill aims to improve the ability
of a public entity to identify subcontractors for public
construction projects by requiring prime contractors to list
the contractor license number of each proposed subcontractor
on the bid document. By reducing the amount of time it takes
for a public entity to identify licensed subcontractors on a
bid, this bill would theoretically increase the efficiency of
awarding public contracts. This bill is sponsored by the
Northern California Carpenters Regional Council.
2)Author's statement . According to the author's office, "Under
current law, the SSFPA requires an entity taking bids for the
construction of any public work or improvement to specify in
his or her bid, the name and location of the place of business
of each subcontractor who will perform the work or render
service to the prime contractor during the project. The
current requirement of [listing a subcontractor's] name and
location is not always sufficient to determine the exact
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identity of the subcontractor. In large urban areas, multiple
contractors could have the same or very similar names, making
differentiation difficult or impossible. Including the
subcontractor's license number will allow awarding bodies to
quickly and efficiently identify all the parties included in a
bid."
3)Problems with the identification of subcontractors on public
bid documents . Current law under the SSFPA already requires
prime contractors bidding on state and local public
construction projects to list the name and business location
of subcontractors providing labor or services greater than
0.5% of the prime contractor's total bid amount.
When a public entity reviews bids submitted for public
construction projects, the entity must verify that the prime
contractor and subcontractors performing work for payment on
the project hold active contractor licenses that are in good
standing with the CSLB. Currently, public entities must read
the bid document's subcontractor designation form and verify a
subcontractor's license status by performing a search on the
CSLB's online contractor database for a subcontractor's
business name and location, which can result in numerous
possibilities that must be further narrowed. If a public
entity performs a search of a listed subcontractor on the
CSLB's online contractor database by using a contract license
number, there can only be one possible search result because
each contractor license number is a unique six-digit number.
In this way, this bill should save staff time in the award of
public construction contracts and improve the efficiency in
the award of public contracts.
The inability of a public entity to identify subcontractors of
the lowest bidder can result in the delay, denial, or protest
of a contract that is awarded to the lowest responsible
bidder. For example, the public entity may need to request
additional information from the prime contractor to confirm
the identity of subcontractors, which can delay the award of
the contract. Or, the public entity may reject the bidder for
being non-responsive (for failing to properly identify
subcontractors) or non-responsible (for failing to list
licensed subcontractors). Or, a losing bidder may protest a
winning bidder's right to the contract award by disputing the
identity or license status of subcontractors on the winning
bidder's subcontractor list.
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The author's office contends that the current process of
listing only a subcontractor's name and business location
makes it difficult to identify subcontractors for two reasons:
a subcontractor's information may be handwritten and
difficult to read because the penmanship is illegible, or
because the use of abbreviations and acronyms makes it
difficult to identify which subcontractor the prime contractor
intended to list among multiple possibilities. This problem
is compounded when subcontractors residing in the same city
share common names or use similar acronyms for their business
name, particularly in larger cities.
As an example, the author's office provided public bid
documents that prime contractors had submitted to both the
Solano Community College District and the City of Martinez for
different low-bid projects valued at over $4 million each.
The top contenders for these projects contained various
problems with subcontractor designation forms, such as the use
of abbreviated names, business names using individual names,
misspellings, and the misidentification of a subcontractor's
business location even though the forms met the minimum
completion standards.
4)Contractor license number . A contractor license number is a
six-digit number issued by the CSLB that serves as a unique
identifier for each contractor licensed in California. A
consumer can visit the CSLB Web site to verify a contractor's
license status (active, inactive, suspended, cancelled, or
revoked), and review a contractor's contact information,
classifications, bond amounts, workers' compensation policy,
and disciplinary actions that the CSLB has taken against the
contractor.
5)Potential effects of this bill . One of the potential effects
of this bill is that prime contractors and subcontractors may
be deterred from listing unlicensed subcontractors on public
bids because prime contractors could lose a contract award or
face civil and criminal penalties for using unlicensed
contractors. This bill would make it more difficult for a
prime contractor to list unlicensed subcontractors on a bid
because prime contractors would need to list every
subcontractor's unique contractor license number.
6)Arguments in support . According to the bill's sponsor, the
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Northern California Carpenters Regional Council, "This
legislation will bring much needed clarity to the public works
bidding process by requiring that prime contractors bidding on
public works projects list the name and contractor's license
number of subcontractors that will perform in excess of
one-half of one percent of the prime contractor's total bid at
the time of the bid. Requiring the subcontractor's California
contractor license number be included in the bid will reduce
the number of substitutions and create a more fair and
transparent competitive bidding process."
According to the State Building and Construction Trades
Council, "This legislation will assist the state's efforts to
combat the underground economy by ensuring that all businesses
are properly licensed before they submit bids for public works
projects. The lack of a contractor's license number is a
common signal of failure to adhere to California's consumer
protection laws and regulations."
7)Arguments in opposition . According to the Associated General
Contractors (AGC), the current process of allowing contractors
to substitute subcontractors when a subcontractor cannot meet
licensure, worker's compensation, or bond requirements in
order to perform work on a public works project, works well.
The AGC writes that "adding the subcontractor's license number
to the bids adds an additional item to the bid submission that
could result in bid protests or unresponsive bids? On large
projects involving as many as 30 to 40 subcontractors, it is
difficult for the general contractor to verify license numbers
at bid time.
"If this bill becomes law, a very significant amount of lead
time would be necessary to inform the thousands of public
agencies and licensed contractors in California concerning the
statutory change. Any mistake or oversight by a public agency
or contractor would lead to either rejection of bids [or] bid
protests - thereby increasing costs to both public agencies
and contractors. AGC believes at a minimum, if this bill were
to become law, a delayed operational date of six months (to
July 1, 2014) or more should be required for appropriate
notice and education to be given to public agencies and
contractors."
REGISTERED SUPPORT / OPPOSITION :
AB 44
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Support
Northern California Carpenters Regional Council (sponsor)
California Professional Association of Specialty Contractors
State Building and Construction Trades Council
Opposition
Associated General Contractors
Analysis Prepared by : Joanna Gin / B.,P. & C.P. / (916)
319-3301