BILL ANALYSIS Ó AB 1347 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 1347 (Chiu) As Amended September 4, 2015 Majority vote -------------------------------------------------------------------- |ASSEMBLY: | 76-0 | (June 3, |SENATE: | 40-0 | (September 10, | | | |2015) | | |2015) | | | | | | | | | | | | | | | -------------------------------------------------------------------- Original Committee Reference: A. & A.R. SUMMARY: Establishes a claims resolution process for public works contracts by which a general contractor may seek public agency review of the claim. The Senate amendments: 1)Exclude the following state entities from the requirements of this bill: a) Department of Water Resources, b) Division of Boating and Waterways in the Department of Parks and Recreation, AB 1347 Page 2 c) Department of Corrections and Rehabilitation, d) Military Department, e) Department of General Services, and f) High-Speed Rail Authority. 2)Define public work to mean the erection, construction, alteration, repair, or improvement of any public structure, building, road, or other public improvement of any kind. 3)Require claims from contractors or responded to by public entities to be sent by either certified or registered mail. 4)Clarify what constitutes a claim. 5)Change timeframe for public entities to respond to claims from 30 days to 45 days with a statement that identifies disputed and undisputed amounts. 6)Allow parties to mutually agree to extend the time period to respond to a claim. 7)Extend the payment due for undisputed amounts from 30 days to 60 days after the public entity issues its statement. 8)Extend from five days to 10 business days after the end of the meet and confer conference for a public entity to provide a claimant with a statement identifying disputed and undisputed amounts. AB 1347 Page 3 9)Extend the payment due for undisputed amounts from 30 days to 60 days after the public entity issues its statement. 10)Specify how mediators are paid. 11)State that, unless otherwise agreed to by both parties in writing, the mediation specified by this bill will excuse the obligation to mediate specified in another section. 12)Specify that the failure of a public entity to respond to a claim during specified periods shall not constitute an adverse finding regarding the merit of the claim. 13)Allow parties to mutually agree to waive, in writing, mediation and proceed directly to a civil action or binding arbitration. 14)Sunset the provisions of this bill on January 1, 2019. 15)Make other clarifying and nonsubstantive changes. EXISTING LAW: 1)Sets a resolution process for disputes between contractors and state entities for public works contracts that relies primarily on arbitration. 2)Sets a separate resolution process for disputes between contractors and local entities for public works contracts for claims of $375,000 or less. AB 1347 Page 4 FISCAL EFFECT: According to the Senate Appropriation Committee: 1)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, 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. 2)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. 3)Additional costs to state and local agencies for additional interest costs accrued on late payments under the timelines prescribed in this bill. COMMENTS: Senate amendments generally provide public entities more time to respond to and pay claims. Additionally, they sunset the provisions of this bill on January 1, 2019, and make other clarifying changes. Analysis Prepared by: AB 1347 Page 5 Scott Herbstman / A. & A.R. / (916) 319-3600 FN: 0002367