BILL ANALYSIS Ó
AB 1347
Page 1
GOVERNOR'S VETO
AB
1347 (Chiu)
As Enrolled September 16, 2015
2/3 vote
--------------------------------------------------------------------
|ASSEMBLY: | 76-0 | (June 3, |SENATE: | 40-0 | (September 10, |
| | |2015) | | |2015) |
| | | | | | |
| | | | | | |
--------------------------------------------------------------------
--------------------------------------------------------------------
|ASSEMBLY: | 77-0 | (September 11, | | | |
| | |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:
AB 1347
Page 2
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;
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
AB 1347
Page 3
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.
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.
AB 1347
Page 4
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.
FISCAL EFFECT: According to the Senate Appropriations
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.
AB 1347
Page 5
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.
GOVERNOR'S VETO MESSAGE:
This bill creates, for three years, a new dispute resolution
process under which contractors could seek public agency review
of claims that arise during public works projects.
Contractors who perform work for public agencies should be paid
promptly. Swift resolution of payment disputes is in the best
interest of contractors, workers, and the public agencies that
are charged with efficiently managing taxpayer funds. I'm not
convinced, however, that the procedures contemplated by this
bill are an improvement over current law.
I am committed, however, to ensuring timely payment for work
ordered by public agencies. In the interest of furthering that
AB 1347
Page 6
goal I am directing my departments to immediately work with
industry partners and the proponents of this bill on ways of
improving our prompt payment policies.
Analysis Prepared by:
Scott Herbstman / A. & A.R. / (916) 319-3600
FN: 0002513