AB 2471, as amended, Frazier. Public contracts: change orders.
Existing law contains various provisions relating to contracts by a public entity for the performance of public works of improvement, including provisions for the payment of progress payments and the disbursing and withholding of retention proceeds. Existing law, until January 1, 2016, prohibits progress payments upon state contracts from being made in excess of 100% of the percentage of actual work completed, and authorizes the Department of General Services to withhold not more than 5% of the contract price until final completion and acceptance of the project, except as specified.
This bill would require a public entity, as defined, when authorized to order changes or additions to the work in a public works contract awarded to the lowest bidder, to issue a change order promptly, and no later than 60 days after the extra work isbegin delete performed
and reasonable documentation has been submitted, except as specifiedend deletebegin insert complete and a specified agreement is reachedend insert. The bill would, if this requirement is not met, make the public entity liable to the original contractor for thebegin insert completedend insert extra workbegin delete that has already been performedend deletebegin insert in accordance with any provisions for change order work that may be contained in the public works contractend insert. The bill would require prejudgment interest to accrue on any amount for which the public entity fails to issue a change order promptly or make a payment due pursuant to this bill. The bill would also authorize an
original contractor to present to the public entity a request for a change order for extra work performed by a subcontractor, including a lower tier subcontractor. It would also authorize a subcontractor to request that an original contractor present a change order request for extra work directed by the public entity that was performed by the subcontractor or lower tier subcontractor. The bill would require the original contractor to notify the subcontractor as to whether the original contractor presented the request to the public entity, as specified.
Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.
The people of the State of California do enact as follows:
Section 7204 is added to the Public Contract
2Code, to read:
(a) (1) Except as otherwise provided in paragraph (2),
4a public entity, when authorized to order changes or additions to
5the work in a public works contract awarded to the lowest bidder,
6shall, for extra work required of the original contractorbegin insert ordered
7by the duly authorized representative of the public entity, and
8subject to any limitations on that authorizationend insert, issue a change
9orderbegin insert
for the authorized workend insert promptly, and in no event later than
1060 days after the extra work isbegin delete performed and the original begin insert end insertbegin insertcomplete and an agreement is
11contractor has submitted reasonable documentation to support the
12request for a change order. For purposes of this section, extra work
13includes extra work performed by the original contractor, a
14subcontractor, or a lower tier subcontractor. Extra work also
15includes work or requirements that differ from those under the
16public works contract with the public entity before the amendment
17of the contract by the change orderend delete
18reached concerning the merit,
conditions, costs, and time for
P3 1performance. An original contractor shall respond promptly to a
2request from the duly authorized representative of the public entity
3for documentation to support a request for a change order. Each
4public entity shall specify in the public works contract the
5information that shall be required from the contractor to support
6any requested change orderend insert.
7(2) (A) When a change order is subject to approval by the
8governing body of a public entity, but the governing body is not
9scheduled to meet in the 60 days following the performance of
10extra work, and reasonable documentation to support the request
11for a change order for extra work has been submitted, the public
12entity shall havebegin delete threeend deletebegin insert
fiveend insert days following the next scheduled
13meeting of the governing body to issue a change order for extra
14work performed.
15(B) When a change order for extra work by a school district or
16community college district is subject to approval by the Division
17of the State Architect, the school district or community college
18district shall submit the change order to the division no later than
1930 days following receipt of reasonable documentation to support
20the change order for extra work. The Division of the State Architect
21shall respond to the request for the change order no later than 30
22days from receipt of the documentation.
23(3) Nothing in this section shall be construed to prohibit a public
24entity from issuing a change order in less than 60 days following
25
thebegin delete performanceend deletebegin insert
completionend insert of extra work, prior to the work being
26performed, or during the course of the work being performed.
27(4) An original contractor may present to the public entity a
28request for a change order for extra work performed by a
29subcontractor or a lower tier subcontractor. A subcontractor may
30request in writing that an original contractor present a change order
31request for extra work, directed by the public entity, that was
32performed by the subcontractor or by a lower tier subcontractor
33on behalf of the subcontractor. This subcontractor shall furnish
34reasonable documentation to support the change order. Within 45
35days of receipt of this written request, the original contractor shall
36notify the subcontractor in writing as to whether the original
37contractor presented the request to the public entity and, if
the
38original contractor did not present the request, provide the
39subcontractor with a statement of the reasons for not doing so.
P4 1(b) Upon the failure of the public entity to issue a change order
2begin insert for authorized workend insert within the time limits prescribed in subdivision
3(a), the original contractor may bill for thebegin delete extra work that has begin insert completed extra work in accordance with any
4already been performed, and the public entity shall be liable for
5that extra workend delete
6provisions for change order work that may be contained in the
7public works contractend insert.
8(c) If there is a dispute concerning the need for a change order
9forbegin insert a portion of theend insert extra work, the public entity shallbegin delete pay a begin insert promptly payend insert for the portion of the extra work
10reasonable amountend delete
11that is not in dispute.
12(d) When the dispute concerning the extra work relates only to
13the amount that the original contractor shall be paid, the public
14entity shall promptly pay thebegin delete reasonableend delete value of the work or the
15amount that the public entity does not dispute, whichever is greater.
16(e) The public entity, and the original contractor, may reserve
17their respective rights as to any amount paid or unpaid that remains
18in dispute.
19(f) Prejudgment interest shall accrue on any amount for which
20the public entity fails to issue a change order or fails to pay in
21accordance with this section at 7 percent per annum.begin insert This
22subdivision shall only apply to any amount that is not in dispute.end insert
23(g) In addition to any other remedies that may be available to
24it, an original contractor may enforce this sectionbegin delete through a writ begin insert
by way of mediation or other alternative dispute
25of mandateend delete
26resolution processend insert.
27(h) The public entity shall not require the original contractor to
28waive any provision of this section.
29(i) For purposes of this section, “public entity” means the state,
30including a state agency, department, office, division, bureau,
31board, or commission, the California State University, the
32University of California, a city, including a charter city, county,
33including a charter county, city and county, including a charter
34
city and county, district, special district, public authority, political
35subdivision, public corporation, or nonprofit transit corporation
36wholly owned by a public agency and formed to carry out the
37purposes of the public agency.
38(i) For purposes of this section:
end insertbegin insert
P5 1(1) “Alternative dispute resolution process” means a process
2in which parties meet with a neutral third party to assist them in
3resolving their dispute outside of formal litigation.
4(2) “Duly authorized
representative of the public entity” means
5an officer or employee of the public entity authorized to order
6extra work.
7(3) “Extra work” includes extra work performed by the original
8contractor, a subcontractor, or a lower tier subcontractor. “Extra
9work” also includes work or requirements that differ from those
10under the public works contract with the public entity before the
11amendment of the contract by the change order.
12(4) “Mediation” means a process in which a neutral person or
13persons facilitate communication between disputants to assist them
14in reaching a mutually acceptable agreement.
15(5) “Public entity” means the state, including a state agency,
16department, office, division, bureau, board, or commission, the
17California State University, the University of California, a city,
18including a charter city, county, including a charter county, city
19and county, including a charter city and county, district, special
20district, public authority, political subdivision, public corporation,
21or nonprofit transit corporation wholly owned by a public agency
22and formed to carry out the purposes of the public agency.
23(j) This section shall not prevent a public entity from prohibiting
24a contractor from performing extra work until after the public
25entity issues a change order.
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