BILL ANALYSIS �
AB 2471
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Date of Hearing: April 30, 2014
ASSEMBLY COMMITTEE ON ACCOUNTABILITY AND ADMINISTRATIVE REVIEW
Jim Frazier, Chair
AB 2471 (Frazier) - As Amended: April 24, 2014
SUBJECT : Public contracts: change orders.
SUMMARY : Requires state and local public entities engaged in a
public works contract awarded to the lowest bidder to promptly
issue change orders when extra work is required of the
contractor or subcontractor.
Specifically, this bill :
1)Requires public entities, when additional work is needed, to
issue change orders promptly, and in no event later than 60
days after the extra work is performed.
2)Allows the original contractor to present to the public entity
a request for a change order for extra work from a
subcontractor.
3)Makes the public entity liable to the original contractor for
payment of the contractor's invoice for the change order if
the 60 day requirement is not met.
4)Sets rules related to disputes between the public entity and
contractor.
EXISTING LAW contains various provisions related to contracts by
a public entity for the performance of public works projects.
FISCAL EFFECT : Unknown
COMMENTS : This bill requires public entities to issue change
orders for public works projects promptly. When a public entity
asks for extra work beyond the original agreement with a
contractor, it must prepare and both parties must sign an
amendment to the contract. Such an amendment is called a
"change order." This bill specifies that "extra work" could
include work by the original contractor or subcontractors.
According to United Contractors, the sponsor of this bill,
contractors usually cannot bill for extra work until the agency
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issues a change order. The sponsor explains that if the agency
does not prepare a change order, it can delay paying for the
extra work, which can result in months or even years of payment
delays. In such cases, the original contractor must continue to
pay employees and subcontractors for their work while waiting
for payment from public entities.
This bill requires public entities, when additional work is
needed, to issue change orders promptly, and in no event later
than 60 days after the extra work is performed. If the public
entity fails to issue a change order within this timeframe, the
original contractor may bill for this work that has already been
performed, and the public entity shall be liable for that work.
Prejudgment interest, which is interest from the time the amount
was due until the case was resolved, would accrue at the rate of
10% per year if the public entity fails to promptly issue a
change order or pay in compliance with this bill. Additionally,
an original contractor may enforce requirements of this bill
through a writ of mandate, which is a court order to a
government entity.
If a dispute arises regarding the need for a change order for
extra work occurs, this bill requires the public entity to pay a
reasonable amount for the portion of the extra work that is not
in dispute. If the dispute only relates to the amount that the
original contractor shall be paid, the public entity would be
required to promptly pay the greater of the reasonable value of
the work or the amount that the public entity does not dispute.
Both the public entity and original contractor may reserve their
rights on paid or unpaid amounts in dispute.
Opponents, representing local governments, state that this bill
places an unreasonable burden on local agencies with the 60-day
requirement, raises the financial risk associated with public
works contracts, and would lead to unnecessary and costly
litigation.
REGISTERED SUPPORT / OPPOSITION :
Support
United Contractors (Sponsor)
Air Conditioning Sheet Metal Association
Air-conditioning & Refrigeration Contractors Association
Air Conditioning Trade Association
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American Subcontractors Association
Associated Builders and Contractors- San Diego Chapter
Associated General Contractors
Building Industry Credit Association
California Chapter of the American Fence Association
California Chapter of the National Electrical Contractors
Association
California Fence Contractors' Association
California Legislative Conference of the Plumbing, Heating, and
Piping Industry
California Professional Association of Specialty Contractors
California State Association of Electrical Workers
California State Council of Laborers
California State Pipe Trades Council
Flasher Barricade Association
Marin Builders Association
Plumbing-Heating-Cooling Contractors Association of California
Southern California Contractors Association
State Building and Construction Trades Council, AFL-CIO
Western Electrical Contractors Association
Western States Council of Sheet Metal Workers
Opposition
California Airports Council
California Association of Sanitation Agencies
California Special Districts Association
California State Association of Counties
County of San Bernardino
El Dorado Irrigation District
La Puente County Water District
League of California Cities
Newhall County Water District
Pico Water District
Rowland Water District
Rural County Representatives of California
Urban Counties Caucus
Analysis Prepared by : Scott Herbstman / A. & A.R. / (916)
319-3600