Amended in Senate August 4, 2014

Amended in Senate June 30, 2014

Amended in Assembly May 23, 2014

Amended in Assembly April 24, 2014

Amended in Assembly April 7, 2014

California Legislature—2013–14 Regular Session

Assembly Bill No. 2471

Introduced by Assembly Member Frazier

(Coauthors: Senators Cannella and Galgiani)

February 21, 2014

An act to add Section 7204 to the Public Contract Code, relating to public contracts.

LEGISLATIVE COUNSEL’S DIGEST

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 is begin delete complete and a specified agreement is reached. end delete begin insert performed and documentation end insert begin insert has been submitted, as specified. end insert The bill would, if this requirement is not met, make the public entity liable to the original contractor for the completed extra work begin delete in accordance with any provisions for change order work that may be contained in the public works contract end delete . The bill would require prejudgment interest to accrue on any amount begin delete for which the public entity fails to issue a change order promptly or make a payment due pursuant to this bill. end delete begin insert that this bill would require to be paid that the public entity fails to pay. end insert 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 1.  

Section 7204 is added to the Public Contract
Code, to read:

7204.  

(a) (1) Except as otherwise provided in paragraph (2),
a public entity, when authorized to order changes or additions to
the work in a public works contract awarded to the lowest bidder,
shall, for extra work required of the original contractor begin delete ordered by
the duly end delete begin insert by an end insert authorized representative of the public entity, begin delete and
subject to any limitations on that authorization, end delete issue a change
order for the begin delete authorized end delete begin insert extra end insert work promptly, and in no event later
than 60 days after the extra work is begin delete complete and an agreement is
reached concerning the merit, conditions, costs, and time for
performance. end delete begin insert performed and the original contractor has submitted
documentation setting forth the reasons and providing sufficient
support that a fair and equitable adjustment in the contractor’s
compensation or time for performance, or both is warranted. For
purposes of this section, extra work includes extra work performed
by the original contractor, a subcontractor, or a lower tier
subcontractor. Extra work also includes work or requirements
that differ from those under the public works contract with the
public entity before the amendment of the contract by the change
order. end insert An original contractor shall respond promptly to a request
from the begin delete duly end delete authorized representative of the public entity for
documentation begin delete to support a request for a end delete begin insert necessary to warrant the end insert
change order. Each public entity shall specify in the public works
contract the information that shall be required from the contractor
to support any requested change order.

(2)  begin delete (A) end delete begin delete   end delete When a change order is subject to approval by the
governing body of a public entity, but the governing body is not
scheduled to meet in the 60 days following the performance of
extra work, and reasonable documentation to support the request
for a change order for extra work has been submitted, the public
entity shall have five days following the next scheduled meeting
of the governing body to issue a change order for extra work
performed.

begin delete

(B) When a change order for extra work by a school district or
community college district is subject to approval by the Division
of the State Architect, the school district or community college
district shall submit the change order to the division no later than
30 days following receipt of reasonable documentation to support
the change order for extra work. The Division of the State Architect
shall respond to the request for the change order no later than 30
days from receipt of the documentation.

end delete

(3) Nothing in this section shall be construed to prohibit a public
entity from issuing a change order in less than 60 days following
the completion of extra work, prior to the work being performed,
or during the course of the work being performed.

(4) An original contractor may present to the public entity a
request for a change order for extra work performed by a
subcontractor or a lower tier subcontractor. A subcontractor may
request in writing that an original contractor present a change order
request for extra work, directed by the public entity, that was
performed by the subcontractor or by a lower tier subcontractor
on behalf of the subcontractor. This subcontractor shall furnish
reasonable documentation begin delete to support the change order. end delete begin insert setting
forth the reasons and providing sufficient support to warrant that
the change order be issued. end insert Within 45 days of receipt of this
written request, the original contractor shall notify the
subcontractor in writing as to whether the original contractor
presented the request to the public entity and, if the original
contractor did not present the request, provide the subcontractor
with a statement of the reasons for not doing so.

(b) Upon the failure of the public entity to issue a change
order begin delete for authorized work end delete begin insert for extra work required by an authorized
representative of the public entity end insert within the time limits prescribed
in subdivision (a), the original contractor may bill for the begin delete completed end delete
extra work begin delete in accordance with any provisions for change order
work that may be contained in the public works contract. end delete begin insert that has
already been performed, and the public entity shall be liable for
fair and equitable adjustments in the compensation or time for
performance for the completed extra work. end insert

begin delete

(c) If there is a dispute concerning the need for a change order
for a portion of the extra work, the public entity shall promptly
pay for the portion of the extra work that is not in dispute.

end delete begin delete

(d)

end delete

begin insert (c) end insert  When the dispute concerning the extra work relates only to
the amount that the original contractor shall be paid, the public
entity shall promptly pay the begin insert reasonable end insert value of the work or the
amount that the public entity does not dispute, whichever is greater.

begin delete

(e)

end delete

begin insert (d) end insert  The public entity, and the original contractor, may reserve
their respective rights as to any amount paid or unpaid that remains
in dispute.

begin delete

(f)

end delete

begin insert (e) end insert  Prejudgment interest begin insert in accordance with applicable law end insert
shall accrue on any amount begin delete for which the public entity fails to
issue a change order or fails to pay in accordance with this section
at 7 percent per annum. This subdivision shall only apply to any
amount that is not in dispute. end delete begin insert this section requires to be paid that
the public entity fails to pay. end insert

begin delete

(g) In addition to any other remedies that may be available to
it, an original contractor may enforce this section by way of
mediation or other alternative dispute resolution process.

(h) The public entity shall not require the original contractor to
waive any provision of this section.

end delete begin delete

(i)

end delete

begin insert (f) end insert  For purposes of this section:

begin delete

(1) “Alternative dispute resolution process” means a process in
which parties meet with a neutral third party to assist them in
resolving their dispute outside of formal litigation.

(2) “Duly authorized

end delete

begin insert (1) end insert begin insert   end insert begin insert “Authorized end insert representative of the public entity” means an
officer or employee of the public entity authorized to order extra
work.

begin delete

(3)

end delete

begin insert (2) end insert  “Extra work” includes extra work performed by the original
contractor, a subcontractor, or a lower tier subcontractor. “Extra
work” also includes work or requirements that differ from those
under the public works contract with the public entity before the
amendment of the contract by the change order.

begin delete

(4) “Mediation” means a process in which a neutral person or
persons facilitate communication between disputants to assist them
in reaching a mutually acceptable agreement.

end delete begin delete

(5)

end delete

begin insert (3) end insert  “Public entity” means the state, including a state agency,
department, office, division, bureau, board, or commission, the
California State University, the University of California, a city,
including a charter city, county, including a charter county, city
and county, including a charter city and county, district, special
district, public authority, political subdivision, public corporation,
or nonprofit transit corporation wholly owned by a public agency
and formed to carry out the purposes of the public agency.

begin delete

(j)

end delete

begin insert (g) end insert  This section shall not prevent a public entity from prohibiting
a contractor from performing extra work until after the public
entity issues a change order.