BILL ANALYSIS �
Bill No: AB
2181
SENATE COMMITTEE ON GOVERNMENTAL ORGANIZATION
Senator Roderick D. Wright, Chair
2011-2012 Regular Session
Staff Analysis
AB 2181 Author: Galgiani
As Introduced: February 23, 2012
Hearing Date: June 12, 2012
Consultant: Paul Donahue
SUBJECT
High Speed Rail Authority: Prompt Payment Act
DESCRIPTION
Specifies that the California High-Speed Rail Authority
(Authority) must promptly pay certified small businesses
engaged in the development, design, and construction of the
high-speed rail system, or pay the late payment penalties
applicable pursuant to the California Prompt Payment Act.
EXISTING LAW
1)The Prompt Payment Act requires state agencies acquiring
property or services pursuant to a business contract,
including any change order or contract amendment, to pay
the person or business on the date required by the
contract, or be subject to a late payment penalty.
2)Entities subject to the Act include the state, and
office, officer, department, division, bureau, board,
commission or agency of the State claims for money
against which are paid by warrants drawn by the
Controller.
BACKGROUND
1)Purpose of this bill . The author wishes to clarify that
the Prompt Payment Act applies when a certified small
AB 2181 (Galgiani) continued
Page 2
businesses enters into a contract with the Authority. The
current language for Government Code Section 927 states
that the Act applies to all state agencies.
2)The Prompt Payment Act requires the state to pay amounts
due on the date specified in a contract, or within 45
days of a properly submitted, undisputed invoice, or pay
a penalty of 0.25% per day if the contractor is a small
business or nonprofit organization, or 1% above the
Pooled Money Investment Account rate for all other
businesses.
The Act requires state agencies to submit payment for
items or services contractually delivered by a person or
business no later than the date required by contract
between the parties.
The Controller's office, which makes payments to vendors
on behalf of state agencies, has already begun making
payments on behalf of the Authority for design services
and land parcels. The Controller contends that Act
applies to the Authority and that small businesses
entering into a contract with the Authority would be paid
late penalty fees, if applicable.
PRIOR/RELATED LEGISLATION
SB 856 (Committee on Budget and Fiscal Review) Chapter 719,
Statutes of 2010 amended the interest rate that the state
must pay on Prompt Payment Act penalties.
AB 2541 (Galgiani) Chapter 861, Statutes of 2006 provides
that a grant is considered a contract for purposes of the
Prompt Payment Act, and increased the late penalty amount.
AB 2275 (Kuykendall) Chapter 916, Statutes of 1998 requires
state agencies to promptly pay undisputed invoices within
45 days.
AB 170 (Papan), Chapter 360, Statutes of 1997 provides that
a state agency may not waive, alter or limit the penalties
owed pursuant to the Prompt Payment Act.
SUPPORT:
None on file
AB 2181 (Galgiani) continued
Page 3
OPPOSE:
None on file
FISCAL COMMITTEE: Senate Appropriations Committee
**********