BILL NUMBER: AB 1705 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MARCH 28, 2014
INTRODUCED BY Assembly Member Williams
FEBRUARY 13, 2014
An act to amend Sections 7201 and 10261 of the Public Contract
Code, relating to public contracts.
LEGISLATIVE COUNSEL'S DIGEST
AB 1705, as amended, Williams. Public contracts: payment
payment.
Existing law authorizes the retention proceeds withheld from any
payment by an awarding entity, as described, from the original
contractor, by the original contractor from any subcontractor, and by
a subcontractor from any subcontractor to exceed 5% on specific
projects where the director of the applicable department
, as specified, has made, or the governing body of the
public entity or designated official of the public entity has
approved, a finding prior to the bid that the project is
substantially complex and requires a higher retention , as
specified. and the department or public entity
includes both this finding and the actual retention amount in the bid
documents.
This bill would indicate the intent of the Legislature to
define the term "substantially complex" for purposes of these
provisions. , instead of requiring that the finding
and actual retention amount be included in the bid documents, would
require that the bid documents include details explaining the basis
for the finding in addition to the actual retention amount. The bill
would also define projects that are not "substantially complex."
Vote: majority. Appropriation: no. Fiscal committee: no.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 7201 of the Public Contract Code is amended to
read:
7201. (a) (1) This section shall apply with respect to all
contracts entered into on or after January 1, 2012, between a public
entity and an original contractor, between an original contractor and
a subcontractor, and between all subcontractors thereunder, relating
to the construction of any public work of improvement.
(2) Under no circumstances shall any provision of this section be
construed to limit the ability of any public entity to withhold 150
percent of the value of any disputed amount of work from the final
payment, as provided for in subdivision (c) of Section 7107. In the
event of a good faith dispute, nothing in this section shall be
construed to require a public entity to pay for work that is not
approved or accepted in accordance with the proper plans or
specifications.
(3) For purposes of this section, "public entity" means the state,
including every state agency, office, department, division, bureau,
board, or commission, the California State University, the University
of California, a city, county, city and county, including charter
cities and charter counties, district, special district, public
authority, political subdivision, public corporation, or nonprofit
transit corporation wholly owned by a public agency and formed to
carry out the purposes of the public agency.
(b) (1) The retention proceeds withheld from any payment by a
public entity from the original contractor, by the original
contractor from any subcontractor, and by a subcontractor from any
subcontractor thereunder shall not exceed 5 percent of the payment.
In no event shall the total retention proceeds withheld exceed 5
percent of the contract price. In a contract between the original
contractor and a subcontractor, and in a contract between a
subcontractor and any subcontractor thereunder, the percentage of the
retention proceeds withheld shall not exceed the percentage
specified in the contract between the public entity and the original
contractor.
(2) This subdivision shall not apply if the contractor provides
written notice to the subcontractor, pursuant to subdivision (c) of
Section 4108, prior to, or at, the time that the bid is requested,
that bonds shall be required, and the subcontractor subsequently is
unable or refuses to furnish to the contractor a performance and
payment bond issued by an admitted surety insurer.
(3) Notwithstanding any other provision of this subdivision, the
retention proceeds withheld from any payment by an awarding entity
set forth in paragraphs (1) to (5), inclusive, of subdivision (a) of
Section 10106, from the original contractor, by the original
contractor from any subcontractor, and by a subcontractor from any
subcontractor thereunder, may exceed 5 percent on specific projects
where the director of the department has made a finding prior to the
bid that the project is substantially complex, as defined, and
therefore requires a higher retention amount than 5 percent and the
department includes both this finding and the actual
retention amount in the bid documents. in the bid
documents details explaining the basis for the finding and
the actual retention amount. In a contract between the
original contractor and a subcontractor, and in a contract between a
subcontractor and any subcontractor thereunder, the percentage of the
retention proceeds withheld shall not exceed the percentage
specified in the contract between the department and the original
contractor.
(4) Notwithstanding any other provision of this subdivision, the
retention proceeds withheld from any payment by the awarding entity
of a city, county, city and county, including charter cities and
charter counties, district, special district, public authority,
political subdivision, public corporation, or nonprofit transit
corporation wholly owned by a public agency and formed to carry out
the purposes of the public agency, from the original contractor, by
the original contractor from any subcontractor, and by a
subcontractor from any subcontractor thereunder, may exceed 5 percent
on specific projects where the governing body of the public entity
or designee, including, but not limited to, a general manager or
other director of an appropriate department, has approved a finding
, on a project by project basis, during a properly noticed
and normally scheduled public hearing and prior to bid that the
project is substantially complex, as defined, and therefore requires
a higher retention amount than 5 percent and the awarding entity
includes both this finding and the actual retention amount
in the bid documents. in the bid documents details
explaining the basis for the finding and the actual
retention amount. In a contract between the original contractor
and a subcontractor, and in a contract between a subcontractor and
any subcontractor thereunder, the percentage of the retention
proceeds withheld shall not exceed the percentage specified in the
contract between the department and the original contractor.
(5) As used in this subdivision, projects are not
"substantially complex" means ______. if they
are either of the following:
(A) Regularly, customarily, or routinely performed by the agency
or by licensed contractors.
(B) Maintenance projects.
(c) A party identified in subdivision (a) shall not require any
other party to waive any provision of this section.
(d) This section shall remain in effect only until January 1,
2016, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2016, deletes or extends
that date.
SEC. 2. Section 10261 of the Public Contract Code, as amended by
Section 6 of Chapter 700 of the Statutes of 2011, is amended to read:
10261. (a) Payments upon contracts shall be made as the
department prescribes upon estimates made and approved by the
department, but progress payments shall not be made in excess of 100
percent of the percentage of actual work completed plus a like
percentage of the value of material delivered on the ground or stored
subject to or under the control of the state, and unused, except as
otherwise provided in this section. The department shall withhold not
more than 5 percent of the contract price until final completion and
acceptance of the project. However, at any time after 95 percent of
the work has been completed, the department may reduce the funds
withheld to an amount not less than 125 percent of the estimated
value of the work yet to be completed, as determined by the
department, if the reduction has been approved, in writing, by the
surety on the performance bond and by the surety on the payment bond.
The Controller shall draw his or her warrants upon estimates so made
and approved by the department and the Treasurer shall pay them. The
funds may be released by electronic transfer if that procedure is
requested by the contractor, in writing, and if the public entity
has, in place at the time of the request, the mechanism for the
transfer.
(b) (1) Notwithstanding this section, when the director of the
department has made a finding prior to the bid that a specified
project is substantially complex, as defined, and therefore requires
a higher retention amount than 5 percent, and the department includes
both this finding and the actual retention amount in the
bid documents, in the bid documents details explaining
the basis for the finding and the actual retention amount,
then payments upon contracts by the department shall be made as the
department prescribes upon estimates made and approved by the
department. However, progress payments shall not be made in excess of
95 percent of the percentage of actual work completed, plus a like
percentage of the value of material delivered on the ground or
stored, subject to, or under the control of the state, and unused,
except as otherwise provided in this section. At any time after 95
percent of the work has been completed, the department may reduce the
funds withheld to an amount not less than 125 percent of the
estimated value of the work yet to be completed, as determined by the
department, if the reduction has been approved, in writing, by the
surety on the performance bond and by the surety on the payment bond.
The Controller shall draw his or her warrants upon estimates so made
and approved by the department and the Treasurer shall pay them with
funds appropriated therefor. The funds may be released by electronic
transfer if that procedure is requested by the contractor, in
writing, and if the public entity has, in place at the time of the
request, the mechanism for the transfer.
(2) As used in this subdivision, projects are not
"substantially complex" means ______. if they
are either of the following:
(A) Regularly, customarily, or routinely performed by the agency
or by licensed contractors.
(B) Maintenance projects.
(c) This section shall remain in effect only until January 1,
2016, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2016, deletes or extends
that date.