BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON APPROPRIATIONS
                             Senator Ricardo Lara, Chair
                            2015 - 2016  Regular  Session

          AB 1347 (Chiu) - Public contracts:  claims
          
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          |Version: August 17, 2015        |Policy Vote: JUD. 7 - 0         |
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          |Urgency: No                     |Mandate: Yes                    |
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          |Hearing Date: August 27, 2015   |Consultant: Jolie Onodera       |
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          *********** ANALYSIS ADDENDUM - SUSPENSE FILE ***********
             The following information is revised to reflect amendments 
                     adopted by the committee on August 27, 2015


          Bill  
          Summary:  AB 1347 would establish, until January 1, 2019, a  
          claims resolution process for public works contracts entered  
          into on or after January 1, 2016, by which a general contractor  
          may seek public agency review of the claim. 


          Fiscal  
          Impact:  
           Major costs potentially in the millions of dollars (General  
            Fund) to numerous state agencies engaged in significant public  
            works contracts for claims review and resolution, which will  
            result in additional administrative costs to review, evaluate,  
            and respond to claims within 45 days, and for mandated  
            mediation. State agencies are currently not subject to any  
            statutory timelines for claims review and resolution, and  
            unresolved claims are subject to arbitration. Caltrans, which  
            has over 600 ongoing contracts valued at over $10 billion,  







          AB 1347 (Chiu)                                         Page 1 of  
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            expects it would need additional personnel at an annual cost  
            of approximately $11.5 million. Other agencies that would be  
            significantly impacted include but are not limited to the  
            Departments of General Services, Department of Water  
            Resources, the Department of Corrections and Rehabilitation,  
            the University of California, and the California State  
            University. 

           Potentially major state-reimbursable costs in the tens of  
            millions of dollars (General Fund) to local agencies engaged  
            in public works projects to the extent this new process  
            results in higher administrative costs, including any increase  
            in administrative costs incurred under the existing process  
            for resolution of claims under $375,000.

           Additional costs to state and local agencies for additional  
            interest costs accrued on late payments under the timelines  
            prescribed in this bill. 


          Committee  
          Amendments:  Sunset the provisions of the bill on January 1,  
          2019.


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