BILL ANALYSIS Ó
AB 164
Page 1
ASSEMBLY THIRD READING
AB 164 (Wieckowski)
As Amended May 13, 2013
Majority vote
LOCAL GOVERNMENT 9-0
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|Ayes:|Achadjian, Levine, Alejo, | | |
| |Bradford, Gordon, | | |
| |Melendez, Mullin, | | |
| |Waldron, Frazier | | |
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SUMMARY : Requires the use of performance bonds and payment
bonds in local government infrastructure projects that are
financed through public-private partnerships. Specifically,
this bill :
1)Requires public-private partnership (P3) agreements between
local government agencies and private entities for the
construction of specified infrastructure projects to include
the following:
a) Performance bonds as security to ensure completion of
the construction of the facility; and,
b) Payment bonds to secure the payment of claims of
laborers, mechanics, and materialmen employed on the work
under the contract.
2)Requires payment bonds to conform to the requirements of
current law governing payment bonds in public works projects.
EXISTING LAW :
1)Authorizes local government agencies to use P3s for specified
types of infrastructure projects, and requires P3 agreements
to contain a number of elements, including security for the
construction of the facility to ensure its completion.
2)Requires a direct contractor that is awarded a public works
contract involving an expenditure in excess of $25,000 to,
before commencement of work, give a payment bond to and
approved by the officer or public entity by whom the contract
AB 164
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was awarded, as specified.
FISCAL EFFECT : None
COMMENTS : This bill requires local agency P3 agreements to
include performance bonds to ensure completion of the project
and payment bonds to secure the payment of claims of laborers,
mechanics, and materialmen employed on the project. This bill
is sponsored by the American Subcontractors Association of
California.
A performance bond is a surety bond issued by an insurance
company or a bank to guarantee satisfactory completion of a
project by a contractor. A payment bond is a surety bond posted
by a contractor to guarantee that sub-contractors and material
suppliers on the project will be paid.
According to the author's office, P3s "can make public
construction possible, especially in times of bare public
coffers. However, unlike traditional public projects, these P3s
have no bond protections to ensure contractors and suppliers
will be paid for their work. The private entity could run out
of money midway through a project and walk away, leaving the
municipality with an only partially completed structure and
subcontractors and laborers without a paycheck."
California's statutes governing the use of P3s by local agencies
were enacted in 1996 when the Legislature passed AB 2660
(Aguiar), Chapter 1040, Statutes of 1996. The law allows local
government agencies to solicit proposals and enter into
agreements with private entities for the design, construction or
reconstruction by private entities for specific types of
fee-producing infrastructure projects that could provide for
private entities to lease or operate these fee-producing
infrastructure facilities for a period of up to 35 years. These
provisions have been essentially unchanged since their
enactment.
Current law requires P3 agreements to include security for the
construction of the facility to ensure its completion, but does
not specify what that security is. This bill specifies that a
performance bond is required to secure the completion of the
project.
Current law requires public works contractors to provide a
payment bond on projects costing more than $25,000. This bill
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imposes the same requirement on local agency P3 projects.
Recent attempts to alter the state's P3 statutes include:
1)AB 878 (Caballero) of 2009 was nearly identical to AB 1261
(see below). AB 878 was referred to the Assembly Local
Government Committee, but was never heard.
2)AB 1261 (Caballero) of 2007 would have made a number of
changes to local government P3 statutes, such as: extending
the allowable lease period from 35 years to 50 years; altering
the criteria local governments must use to select a
contractor; and, allowing sanitary sewer systems, power
transmission facilities, and power distribution facilities to
be constructed under P3 agreements. AB 1261 passed the
Assembly Local Government Committee on a 7-0 vote on April 18,
2007, but subsequently died on the Senate Floor.
3)AB 345 (La Malfa) of 2005 and AB 1520 (Niello) of 2005 would
have allowed state agencies to use P3 agreements. Both bills
failed passage on April 26, 2005, in the Assembly Business and
Professions Committee.
Support arguments: Supporters argue that this bill will protect
the public and subcontractors when they invest in, or provide
materials and labor for, local agency P3 infrastructure
projects.
Opposition arguments: None
Analysis Prepared by : Angela Mapp / L. GOV. / (916) 319-3958
FN: 0000533