AB 552, as amended, O'Donnell. Public works contracts: damages.
Existing law prescribes requirements for contracts between private parties and public entities, as defined.
This bill wouldbegin delete requireend deletebegin insert provide that aend insert public worksbegin delete contractsend deletebegin insert contractend insert entered intobegin delete by a public agency, as defined,end delete on or after January 1, 2016,begin delete to provide that damages recoverable from a nonperforming party be liquidated and specified in the contract, to provide that liquidated damages not be disproportionate to potential actual consequential and provable damages, and to not require that a contractor be responsible for consequential damages unless those damages have been liquidated to a set amount, as provided.end deletebegin insert
that contains a clause requiring a contractor to be responsible for consequential damages is not enforceable unless the consequential damages have been liquidated to a set amount and identified in the public works contract.end insert The bill would also make findings and declarations related to public contracts.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
(a) The Legislature finds and declares that, as a
2matter of public policy, it is in the best interest of California
3taxpayers to ensure uniformity in the bidding and contracting
4process for public works construction projects within the State of
5California.
6(b) The Legislature further finds and declares that contractually
7imposing undefined and unlimited risk on to public works
8construction contractors increases public works construction costs
9because construction contractors must account for the undefined
10and unlimited risk, which is generally uninsurable, in their bids.
11(c) It is therefore in the best interest of California taxpayers and
12public works construction contractors for the Legislature to
13establish clear guidelines for how liquidated damages and
14consequential damages are expressed in a public works contract.
Section 7203 is added to the Public Contract Code, to
16read:
(a) Public works contracts entered into by a public
18agency on or after January 1, 2016, shall provide that damages
19recoverable from a nonperforming party shall be liquidated and
20specified in the contract in order to be enforceable against the
21nonperforming party. Liquidated damages shall not be
22disproportionate to potential actual consequential and provable
23damages, otherwise all damages shall not be recoverable against
24the nonperforming party.
25(b) A public agency shall not require a contractor to be
26responsible for consequential damages of any sort unless the
27consequential damages have been liquidated to a set amount and
28identified in a public works contract entered into on or after January
291, 2016.
(a) A public works contract entered into on or after
31January 1, 2016, that contains a clause requiring a contractor to
32be responsible for consequential damages is not enforceable unless
33the consequential damages have been liquidated to a set amount
34and identified in the public works contract.
30 35(c)
end delete
36begin insert(b)end insert “Public agency” shall include the state, the Regents of the
37University of California, a city, charter city, county, charter county,
P3 1district, public authority,begin delete public agency,end delete municipal utility, and any
2other political subdivision or public corporation of the state.
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