BILL ANALYSIS �
AB 2471
Page 1
ASSEMBLY THIRD READING
AB 2471 (Frazier)
As Amended May 23, 2014
Majority vote
ADMINISTRATIVE REVIEW 13-0APPROPRIATIONS 14-0
-----------------------------------------------------------------
|Ayes:|Frazier, Achadjian, |Ayes:|Gatto, Bocanegra, |
| |Buchanan, | |Bradford, |
| |Ian Calderon, Cooley, | |Ian Calderon, Campos, |
| |Gorell, Hagman, | |Eggman, Gomez, Holden, |
| |Lowenthal, Medina, Olsen, | |Linder, Pan, Quirk, |
| |Quirk-Silva, Salas, | |Ridley-Thomas, Wagner, |
| |Wagner | |Weber |
| | | | |
-----------------------------------------------------------------
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 generally within 60 days
after the extra work is performed as long as the contractor
submitted reasonable documentation to support the request for
a change order.
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 an exception to the 60-day requirement if a change order
is subject to approval by the governing body of a public
entity and that body is not scheduled to meet in the 60 days
after the performance of the extra work.
5)Specifies the process for meeting the 60-day requirement for
school districts and community colleges when change orders are
subject to approval by the Division of the State Architect
AB 2471
Page 2
(State Architect).
6)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 : According to the Assembly Appropriations
Committee, costs to state and local agencies cannot be
quantified, and would depend on the extent to which: a) the
bill deviates from any agency's current contracting practices;
b) agencies are able to meet the required timelines and how much
interest costs would accrue for noncompliance; and c) agencies
incur additional administrative costs to comply with this bill's
requirements. In general, agencies should be able to meet the
60-day review period.
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
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 generally not later
than 60 days after the extra work is performed as long as the
contractor submitted reasonable documentation to support the
request for a change order. 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
AB 2471
Page 3
until the case was resolved, would accrue at the rate of 7% 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.
This bill sets an exception to the 60-day requirement. If a
change order is subject to approval by the governing body of a
public entity and that body is not scheduled to meet in the 60
days after the performance of the extra work, then the entity
would be required to issue a change order within three days of
the next scheduled meeting of the governing body.
Additionally, this bill specifies the process for meeting the
60-day requirement for school districts and community colleges
when change orders are subject to approval by the State
Architect. These entities are required to submit change orders
to the State Architect within 30 days of receiving reasonable
documentation to support the change orders. The State Architect
is required to respond to requests for change order no later
than 30 days after receiving them.
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.
Analysis Prepared by : Scott Herbstman / A. & A.R. / (916)
319-3600
FN: 0003823