BILL NUMBER: SB 616 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 1, 2013
INTRODUCED BY Senator Wright
FEBRUARY 22, 2013
An act to amend Section 9550 of , and to add and repeal
Section 9550.1 of, the Civil Code, relating to public works.
LEGISLATIVE COUNSEL'S DIGEST
SB 616, as amended, Wright. Public works: payment bonds.
Existing law requires a direct contractor that is awarded a public
works contract involving an expenditure greater than $25,000 to give
a payment bond to, and approved by, the officer or public entity by
when whom the contract was awarded, as
specified.
This bill would make nonsubstantive changes to
, until January 1, 2017, exempt the Los Angeles Unified School
District from this provision when the district enters into
a public works contract in an amount less than $1,000,000 with a
contractor that is a small business or microbusiness, as defined,
that participates in the district's self-insurance program. The bill
would, in order for this exemption to apply, require the district to
state in its call for bids that the self-insurance program is
available to these small business and microbusiness contractors. The
bill would require the district to establish guidelines and
requirements for the small business or microbusiness to participate
in the program, as specified. The bill would require the district to
establish separate accounts for each project that participates in the
program to cover the cost of the default or failure of a small
business or microbusiness to make payments to subcontractors or
material vendors. By increasing the duties of local officials, this
bill would create a state-mandated local program .
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that, if the Commission on State Mandates
determines that the bill contains costs mandated by the state,
reimbursement for those costs shall be made pursuant to these
statutory provisions.
This bill would provide findings as to the need for special
legislation.
Vote: majority. Appropriation: no. Fiscal committee: no
yes . State-mandated local program: no
yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. The Legislature hereby finds and
declares all of the following:
(a) It is the intent of the Legislature to demonstrate an
alternative and optional procedure for the bidding of public works
projects that is applicable only to the Los Angeles Unified School
District (LAUSD).
(b) The LAUSD should be able to utilize cost-effective options for
the delivery of public works projects, to self-insure those projects
involving an expenditure of less than $1,000,000 when the contractor
is a small business or microbusiness, as defined in Section 14837 of
the Government Code.
(c) Since 2000, the LAUSD has issued more than 3,100 contracts
valued at less than $1,000,000. The total value of those contracts
exceeded more than $1,000,000,000. The estimated cost of the payment
bond passed along to the LAUSD totaled more than $31,000,000.
(d) The benefits of the self-insurance program include cost
savings through an increase in the pool of qualified contractors, a
reduction in bid amounts when contractors pass along the costs to
secure payment bonds to the LAUSD.
(e) The benefits for the small business or microbusiness
contractor include access to the LAUSD construction program, whereby
the contractor may gain long-term experience that will translate to
other public agencies and improve a small business or microbusiness's
competitive capacity on future bids.
SECTION 1. SEC. 2. Section 9550 of
the Civil Code is amended to read:
9550. (a) A direct contractor that is awarded a public works
contract involving an expenditure greater than twenty-five thousand
dollars ($25,000) shall, before commencement of work, give a payment
bond to and approved by the officer or public entity by whom the
contract was awarded.
(b) A public entity shall state in its call for bids that a
payment bond is required for a public works contract involving an
expenditure greater than twenty-five thousand dollars ($25,000).
(c) A payment bond given and approved under this section will
permit performance of and provide coverage for work pursuant to a
public works contract that supplements the contract for which the
bond is given, if the requirement of a new bond is waived by the
public entity.
(d) For the purpose of this section, a design professional is not
deemed a direct contractor and is not required to give a payment
bond.
(e) This section does not apply to a
either of the following:
(1) A public works contract with
a "state entity" as defined in subdivision (d) of Section 7103 of the
Public Contract Code.
(2) The Los Angeles Unified School District for a public works
contract in an amount less than one million dollars ($1,000,000)
entered into with a contractor that is a small business or
microbusiness, as defined in Section 14837 of the Government Code,
that participates in the district's self-insurance program pursuant
to Section 9550.1. This paragraph shall remain operative only until
January 1, 2017.
SEC. 3. Section 9550.1 is added to the
Civil Code , to read:
9550.1. (a) In lieu of requiring a contractor that is a small
business or microbusiness, as defined in Section 14837 of the
Government Code, awarded a public works contract for an amount less
than one million dollars ($1,000,000) to provide a payment bond to
the Los Angeles Unified School District pursuant to Section 9550, the
district may provide the small business or microbusiness contractor
an opportunity to participate in the district's self-insurance
program if the district states in its call for bids that this program
is available.
(b) As part of the district's self-insurance program, the district
shall establish guidelines and requirements for the small business
or microbusiness to participate. The guidelines and requirements
shall include, but will not be limited to, a requirement that the
small business or microbusiness complete the district's small
business training program, complete the district's prequalification
process, and adhere to the district's project stabilization
agreement.
(c) The district shall establish a separate account in which funds
shall be set aside for each project in the event the small business
or microbusiness defaults or fails to make payment to their
subcontractors or materials vendors.
(d) If the contractor fails to make payment to the subcontractor
or materials vendor, the district shall assume responsibility and
ensure prompt payment is made to the subcontractor and materials
vendor.
(e) At the conclusion of a contract, any funds remaining in the
separate account shall be retained by the district to be applied to
any future project.
(f) This section shall remain in effect only until January 1,
2017, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2017, deletes or extends
that date.
SEC. 4. The Legislature finds and declares that a
special law is necessary and that a general law cannot be made
applicable within the meaning of Section 16 of Article IV of the
California Constitution because of the unique resources of the Los
Angeles Unified School District to implement a self-insurance program
and self-monitor public works projects to minimize disruptions to
the completion of its public work projects. These include an in-house
labor compliance program, a project stabilization agreement, a small
business boot camp program, and in-house project managers.
SEC. 5. If the Commission on State Mandates
determines that this act contains costs mandated by the state,
reimbursement to local agencies and school districts for those costs
shall be made pursuant to Part 7 (commencing with Section 17500) of
Division 4 of Title 2 of the Government Code.