BILL NUMBER: AB 1347	AMENDED
	BILL TEXT

	AMENDED IN SENATE  SEPTEMBER 1, 2015
	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  and repeal  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 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 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, 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. 
   This bill would, on January 1, 2019, repeal the provision
establishing the claim resolution process. 
   (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 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 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 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 45 days or within the mutually agreed
to extension of time following receipt of a claim sent by registered
mail or certified mail, return receipt requested, the public 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 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 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 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 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. 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 shall conform to the timeframes
in this section.
   (D) 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 after litigation has been commenced.
   (E) This section does not preclude 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 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, 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. 
   (i) This section shall remain in effect only until January 1,
2019, and as of that date is repealed, unless a later enacted
statute, that is enacted before January 1, 2019, deletes or extends
that date. 
  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.