BILL NUMBER: AB 1705 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 14, 2014
PASSED THE ASSEMBLY AUGUST 18, 2014
AMENDED IN SENATE AUGUST 11, 2014
AMENDED IN SENATE JUNE 11, 2014
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, Williams. Public contracts: payment.
Existing law, until January 1, 2016, 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 and the
department or public entity includes both this finding and the actual
retention amount in the bid documents.
This bill would extend the operation of these provisions to
January 1, 2018, and, 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 require any finding by a public entity that a project is
substantially complex to describe the specific project and why it is
a unique project that is not regularly, customarily, or routinely
performed by the agency or licensed contractors.
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 and therefore requires
a higher retention amount than 5 percent and the department includes
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 and therefore requires a higher retention
amount than 5 percent and the awarding entity includes 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) Any finding by a public entity that a project is substantially
complex shall include a description of the specific project and why
it is a unique project that is not regularly, customarily, or
routinely performed by the agency or licensed contractors.
(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,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, 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 department has,
in place at the time of the request, the mechanism for the transfer.
(b) (1) Notwithstanding subdivision (a), when the director of the
department has made a finding prior to the bid that a specified
project is substantially complex and therefore requires a higher
retention amount than 5 percent, and the department includes 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 department has, in place
at the time of the request, the mechanism for the transfer.
(2) Any finding by the director of a department that a project is
substantially complex shall include a description of the specific
project and why it is a unique project that is not regularly,
customarily, or routinely performed by the agency or licensed
contractors.
(c) This section shall remain in effect only until January 1,
2018, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2018, deletes or extends
that date.
SEC. 3. Section 10261 of the Public Contract Code, as added by
Section 7 of Chapter 700 of the Statutes of 2011, is amended to read:
10261. (a) On and after January 1, 2018, 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 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. The department
shall withhold not less 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) This section shall become operative on January 1, 2018.