BILL NUMBER: AB 1347 AMENDED
BILL TEXT
AMENDED IN SENATE AUGUST 17, 2015
AMENDED IN SENATE JULY 6, 2015
AMENDED IN ASSEMBLY JUNE 1, 2015
AMENDED IN ASSEMBLY APRIL 21, 2015
INTRODUCED BY Assembly Member Chiu
(Coauthor: Assembly Member Frazier)
(Coauthors: Senators Anderson, Cannella, Gaines, Galgiani, and
Hertzberg)
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 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
public entity, as specified.
The bill would require a public entity, upon receipt of a claim
sent by registered or certified mail, to review it and,
within 30 45 days, provide a written
statement identifying the disputed and undisputed portions of the
claim. The 45 -day period may be extended by mutual
agreement. The bill would require any payment due on an
undisputed portion of the claim to be processed within 30
60 days, as specified. The bill, if the public
entity fails to issue the written statement, would require that the
claim be deemed 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 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 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 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. policy,
except as specified. The bill would also specify that it does not
impose liability on a public entity that makes loans or grants
available through a competitive application process, for the failure
of an awardee to meet its contractual obligations. 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 sent by
registered mail or certified mail with return receipt requested,
for one or more of the following:
(A) A time extension, including, without limitation, for relief
from damages or penalties for delay. delay
assessed by a public entity under a public works contract.
(B) Payment by the public entity 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 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 the erection, construction, alteration,
repair, or improvement of any public structure, building, road, or
other public improvement of any kind.
(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, pursuant to this section, the public
entity to which the claim applies shall conduct a reasonable review
of the claim and, within a period not to exceed 30
45 days, shall provide the claimant a written statement
identifying what portion of the claim is disputed and what portion is
undisputed. Upon receipt of a claim, a public entity and a
contractor may, by mutual agreement, extend the time period provided
in this subdivision.
(B) The claimant shall furnish reasonable documentation to support
the claim.
(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 45
days or within the mutually agreed to extension of
time following receipt of a claim sent by registered
mail, mail or certified mail, return receipt
requested, the public agency entity
shall have up to three days following the next duly publicly
noticed meeting of the governing body after the 45-day period,
or extension, expires to provide the claimant a written
statement identifying the disputed portion and the undisputed
portion.
(D) Any payment due on an undisputed portion of the claim shall be
processed and made within 30 60 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) 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,
mail or certified mail, return receipt requested, the public
entity shall schedule a meet and confer conference within 30 days for
settlement of the dispute.
(B) Within five 10 business 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 60
days after the public entity issues its written statement. Any
disputed portion of the claim, as identified by the
contractor 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 business 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,
Each party shall bear the fees and costs charged by its
respective mediator in connection with the selection of the neutral
mediator. If mediation is unsuccessful, the parts of
the claim remaining in dispute shall be subject to applicable
procedures outside this section.
(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
shall conform to the timeframes in this section.
(D) The Unless otherwise agreed to by the
public entity and the contractor in writing, 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.
(E) This section does not preclude an agency
a public entity from requiring arbitration of disputes
under private arbitration or the Public Works Contract Arbitration
Program, if mediation under this section does not resolve
the parties' dispute.
(3) Failure by the public entity to respond to a claim from a
contractor within the time period periods
described in this subdivision or to otherwise meet the
time requirements of this section shall result in the claim
being deemed rejected in its entirety. A claim that
is denied by reason of the public entity's failure to have responded
to a claim, or its failure to otherwise meet the time requirements of
this section, shall not constitute an adverse finding with regard to
the merits of the claim or the responsibility or qualifications of
the claimant.
(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
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 project
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. policy, provided,
however, that (1) upon receipt of a claim, the parties may mutually
agree to waive, in writing, mediation and proceed directly to the
commencement of a civil action or binding arbitration, as applicable;
and (2) a public entity in its public works contracts may include
dispute resolution provisions that comply with this section,
including the timeframes set forth herein, and that prescribe
additional reasonable and equitable terms regarding actions or
procedures to be taken by the parties.
(g) This section applies to contracts entered into on or after
January 1, 2016.
(h) Nothing in this section shall impose liability upon a public
entity that makes loans or grants available through a competitive
application process, for the failure of an awardee to meet its
contractual obligations.
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.