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AB-2471 Public contracts: change orders.(2013-2014)

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AB2471:v94#DOCUMENT

Amended  IN  Senate  August 04, 2014
Amended  IN  Senate  June 30, 2014
Amended  IN  Assembly  May 23, 2014
Amended  IN  Assembly  April 24, 2014
Amended  IN  Assembly  April 07, 2014

CALIFORNIA LEGISLATURE— 2013–2014 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 complete and a specified agreement is reached. performed and documentation has been submitted, as specified. The bill would, if this requirement is not met, make the public entity liable to the original contractor for the completed extra work in accordance with any provisions for change order work that may be contained in the public works contract. 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. that this bill would require to be paid that the public entity fails to pay. 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   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 ordered by the duly by an authorized representative of the public entity, and subject to any limitations on that authorization, issue a change order for the authorized extra work promptly, and in no event later than 60 days after the extra work is complete and an agreement is reached concerning the merit, conditions, costs, and time for performance. 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. An original contractor shall respond promptly to a request from the duly authorized representative of the public entity for documentation to support a request for a necessary to warrant the 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) (A)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.

(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.

(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 to support the change order. setting forth the reasons and providing sufficient support to warrant that the change order be issued. 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 orderfor authorized work for extra work required by an authorized representative of the public entity within the time limits prescribed in subdivision (a), the original contractor may bill for thecompleted extra work in accordance with any provisions for change order work that may be contained in the public works contract. 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.

(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.

(d)

(c) 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 reasonable value of the work or the amount that the public entity does not dispute, whichever is greater.

(e)

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

(f)

(e) Prejudgment interest in accordance with applicable law shall accrue on any amount 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. this section requires to be paid that the public entity fails to pay.

(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.

(i)

(f) For purposes of this section:

(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

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

(3)

(2) “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.

(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.

(5)

(3) “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.

(j)

(g) 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.