BILL NUMBER: AB 1347 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY APRIL 21, 2015
INTRODUCED BY Assembly Member Chiu
(Coauthor: Assembly Member Frazier)
FEBRUARY 27, 2015
An act to add Section 9204 to the Public Contract Code, relating
to public contracts.
LEGISLATIVE COUNSEL'S DIGEST
AB 1347, as amended, Chiu. Public contracts: claims.
(1) Existing law prescribes various requirements regarding the
formation, content, and enforcement of state and local public
contracts. Existing law applicable to state public contracts
generally requires that the resolution of claims related to those
contracts be subject to arbitration. Existing law applicable to local
agency contracts prescribes a process for the resolution of claims
related to those contracts of $375,000 or less.
This bill would establish, for contracts entered into on or after
January 1, 2016, a claim resolution process applicable to all public
entity contracts. The bill would define a claim as a
contractor's written demand or assertion, including a request for a
modification, contract amendment, or change order, seeking an
adjustment or interpretation of the terms of the contract documents,
payment of money, extension of time, or other relief, including a
determination of disputes or matters arising out of, or related to,
the contract documents or the performance of work on a public work.
a separate demand by the contractor for one
or more of: a time extension for relief from damages or penalties
for delay, payment of money or damages arising from work done
pursuant to the contract for a public work, or payment of an amount
disputed by the local agency, as specified.
The bill would require a public entity, upon receipt of a claim
sent by registered mail, to review it and, within 30 days, provide a
written statement addressing what parts of the claim are disputed and
what parts are undisputed. The bill would require any payment due on
an undisputed portion of the claim to be processed within 7
30 days, as specified. The bill would provide
an alternative procedure if the public entity fails to issue the
written statement and would require that the claim be deemed approved
in its entirety. The bill would require disputed parts of the claim
to be subject to nonbinding mediation , as specified . The
bill would provide that unpaid claim amounts accrue interest at a
statutorily prescribed rate. The bill would proscribe
prescribe a procedure by which a subcontractor
or lower tier contractor may make a claim through the contractor. The
bill would require that the text of these provisions or a summary of
them to be set forth in the plans or specifications for any public
work which may give rise to a claim. The bill would except
these provisions from laws relating to false claims. The
bill would specify that a waiver of the rights granted by its
provisions is void and contrary to public policy. By increasing the
duties of local agencies and officials, this bill would impose a
state-mandated local program.
(2) 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.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 9204 is added to the Public Contract Code, to
read:
9204. (a) The Legislature finds and declares that it is in the
best interests of the state and its citizens to ensure that all
construction business performed on public works in the state that is
complete and not in dispute is paid in full and in a timely manner.
(b) Notwithstanding any other law, including, but not limited to,
Article 7.1 (commencing with Section 10240) of Chapter 1 of Part 2,
Chapter 10 (commencing with Section 19100) of Part 2, and Article 1.5
(commencing with Section 20104) of Chapter 1 of Part 3, this section
shall apply to all claims by contractors in connection with public
works.
(c) For purposes of this section:
(1) "Claim" means a written demand or assertion by a contractor,
including a request for a modification, contract amendment, or change
order, seeking an adjustment or interpretation of the terms of the
contract documents, payment of money, extension of time, or other
relief, including a determination of disputes or matters arising out
of, or related to, the contract documents or the performance of work
on a public work.
(1) "Claim" means a separate demand by the contractor for one or
more of the following:
(A) A time extension, including without limitation, for relief
from damages or penalties for delay.
(B) Payment of money or damages arising from work done by, or on
behalf of, the contractor pursuant to the contract for a public work
and payment for which is not otherwise expressly provided or to which
the claimant is not otherwise entitled.
(C) Payment of an amount that is disputed by the local agency.
(2) "Contractor" means any type of contractor within the meaning
of Chapter 9 (commencing with Section 7000) of Division 3 of the
Business and Professions Code who has entered into a direct contract
with a public entity for public works.
(3) "Public entity" means, without limitation, a state agency,
department, office, division, bureau, board, or commission, the
California State University, the University of California, a city,
including a charter city, county, including a charter county, city
and county, including a charter city and county, 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.
(4) "Public works" has the meaning provided in Section 1720 of the
Labor Code.
(4) "Public work" means "public works contract" as defined in
Section 1101.
(5) "Subcontractor" means any type of contractor within the
meaning of Chapter 9 (commencing with Section 7000) of Division 3 of
the Business and Professions Code who either is in direct contract
with a contractor or is a lower tier subcontractor.
(d) (1) (A) Upon receipt of a claim sent by
registered mail, the public entity to which the claim applies shall
conduct a reasonable review of the claim and, within a period not to
exceed 30 days, shall provide the claimant a written statement
identifying what portion of the claim is disputed and what portion is
undisputed. Any
(B) If the public entity
needs approval from its governing body to provide the claimant a
written statement identifying the disputed portion and the undisputed
portion of the claim, and the governing body does not meet within
the 30 days following receipt of a claim sent by registered mail, the
public agency shall have up to three days following the next duly
publicly noticed meeting of the governing body to provide the
claimant a written statement identifying the disputed portion and the
undisputed portion.
(C) Any payment due on an
undisputed portion of the claim shall be processed and made within
seven 30 days after the public entity
issues its written statement. If the public entity fails to issue a
written statement, paragraph (3) shall apply.
(2) (A) Any disputed portion of the claim,
as identified in writing, shall be submitted to nonbinding mediation.
The public entity and contractor shall mutually agree to a mediator
within 10 days after the disputed portion of the claim has been
identified in writing. If the parties cannot agree upon a mediator,
each party shall select a mediator and those mediators shall select a
qualified neutral third party to mediate with regard to the disputed
portion of the claim. If either of the parties reject the mediator's
decision regarding all or part of the disputed portion of the claim,
the parts of the claim remaining in dispute shall be subject to
applicable procedures outside this section.
(B) For purposes of this section, mediation includes any
nonbinding process, such as neutral evaluation or a dispute review
board, in which an independent third party or board assists the
parties in dispute resolution through negotiation or by issuance of
an evaluation. Any mediation utilized must conform to the time frames
in this section.
(C) The mediation conducted pursuant to this section shall excuse
any further obligation under Section 20104.4 to mediate (meet and
confer) after litigation has been commenced.
(D) This section does not preclude an agency from requiring
arbitration of disputes under private arbitration or the Public Works
Contract Arbitration Program, if mediation does not resolve the
parties' dispute.
(3) Failure by the public entity to respond to a claim from a
contractor within the 30-day time
period described in paragraph (1) this
subdivision shall result in the claim being deemed approved in
its entirety, with the claim to be processed and paid within
seven 30 days from the expiration of the
30-day time period described
in paragraph (1) this subdivision or
as mutually extended by the parties.
(4) Amounts not paid in a timely manner as required by this
section shall bear interest at the legal rate prescribed by
subdivision (a) of Section 685.010 of the Code of Civil Procedure.
(5) If a subcontractor or a lower tier subcontractor lacks legal
standings to assert a claim against a public entity because privity
of contract does not exist, the contractor may present to the public
entity a claim on behalf of a subcontractor or lower tier
subcontractor. A subcontractor may request in writing, either on his
or her own behalf or on behalf of a lower tier subcontractor, that
the contractor present a claim for work which was performed by the
subcontractor or by a lower tier subcontractor on behalf of the
subcontractor. The subcontractor requesting that the claim be
presented to the public entity shall furnish reasonable documentation
to support the claim. Within 45 days of receipt of this written
request, the contractor shall notify the subcontractor in writing as
to whether the contractor presented the claim to the public entity
and, if the original contractor did not present the claim, provide
the subcontractor with a statement of the reasons for not having done
so.
(e) The provisions of the California False Claims Act (Article 9
(commencing with Section 12650) of Chapter 6 or Part 2 of Division 3
of Title 2 of Government Code) shall not apply to claims made under
this section.
(f)
(e) The text of this section or a summary of it shall
be set forth in the plans or specifications for any public works that
may give rise to a claim under this section.
(g)
(f) A waiver of the rights granted by this section is
void and contrary to public policy.
(h)
(g) This section applies to contracts entered into on
or after January 1, 2016.
SEC. 2. 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.