BILL NUMBER: AB 1347 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY JUNE 1, 2015
AMENDED IN ASSEMBLY APRIL 21, 2015
INTRODUCED BY Assembly Member Chiu
(Coauthor: Assembly Member Frazier)
( Coauthors: Senators
Cannella and Galgiani )
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. claims by
contractors in connection with public works. The bill would
define a claim as 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, public entity, 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 30 days,
as specified. The bill would provide an alternative
procedure The bill, if the public entity fails
to issue the written statement and statement,
would require that the claim be deemed approved
rejected in its entirety. The bill would
authorize, if the claimant disputes the public entity's written
response or if the public entity fails to respond to a claim within
the time prescribed, the claimant to demand to meet and confer for
settlement of the issues in dispute. The bill would require
disputed parts any disputed portion of
the claim that remains in dispute after the meet and confer
conference to be subject to nonbinding mediation, as specified.
The bill would provide that unpaid claim amounts accrue interest at
a statutorily prescribed rate. 7% per annum.
The bill would 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 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 separate demand by the contractor for one or
more of the following:
(A) A time extension, including 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. public entity.
(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 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.
(B) The claimant shall furnish reasonable documentation to support
the claim.
(B)
(C) 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)
(D) Any payment due on an undisputed portion of the
claim shall be processed and made within 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.
(2) (A) If the claimant disputes the public entity's written
response, or if the public entity fails to respond to a claim issued
pursuant to this section within the time prescribed, the claimant may
demand in writing an informal conference to meet and confer for
settlement of the issues in dispute. Upon receipt of a demand in
writing sent by registered mail, the public entity shall schedule a
meet and confer conference within 30 days for settlement of the
dispute.
(B) Within five days following the conclusion of the meet and
confer conference, if the claim or any portion of the claim remains
in dispute, the public entity shall provide the claimant a written
statement identifying the portion of the claim that remains in
dispute and the portion that is undisputed. Any payment due on an
undisputed portion of the claim shall be processed and made within 30
days after the public entity issues its written statement. Any
disputed portion of the claim, as identified in writing, shall be
submitted to nonbinding mediation, with the public entity and the
claimant sharing the associated costs equally. The public entity and
claimant 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 rejects 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)
(C) 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)
(D) 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)
(E) 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 time period described in this subdivision shall
result in the claim being deemed approved in its entirety,
with the claim to be processed and paid within 30 days from the
expiration of the time period described in this subdivision or as
mutually extended by the parties. rejected in its
entirety.
(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.
(4) Amounts not paid in a timely manner as required by this
section shall bear interest at 7 percent per annum.
(5) If a subcontractor or a lower tier subcontractor lacks legal
standings standing 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 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.
(f) A waiver of the rights granted by this section is void and
contrary to public policy.
(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.