SACRAMENTO — CAL SMACNA’s co-sponsored “Change Order Reform” legislation AB 626 (Chiu) is awaiting action by Governor Brown.
He has until the end of September to sign or veto this bill.
Please write to Governor Brown today and ask him to sign this bill.
STEP #1—A sample letter has been prepared for your use. Please take a moment to personalize it and place it on your company’s letterhead.
Thank you for your help!! Together we can make a difference for our industry.
This bill is the same as last year’s AB 1347 that was vetoed by Governor Brown. We understand the primary reason for the veto were due to strong internal objections by CALTRANS and other state agencies. AB 626 was introduced this year and specifically exempted these state agencies thus the bill now only applies to local agencies, universities and airports. It’s a good start on needed policy change.
What does this bill do? You can read the bill in it’s entirety here or see the summary below:
- This bill would establish, for contracts entered into on or after January 1, 2017, a claim resolution process applicable to any claim by a contractor in connection with a local public works project.
- The bill would define a claim as a separate demand by the contractor for one or more of the following: a time extension for relief from damages or penalties for delay, payment of money or damages arising from work done pursuant to the contract for a public work, or payment of an amount disputed by the public entity.
- This bill would require a local public entity upon receipt of a claim sent by registered or certified mail, to review it and, within 45 days, provide a written statement identifying the disputed and undisputed portions of the claim. The bill would authorize the 45-day period to be extended by mutual agreement.
- The bill would require any payment due on an undisputed portion of the claim to be processed within 60 days. The bill would require that the claim be deemed rejected in its entirety if the public entity fails to issue the written statement.
- This bill would authorize, if the claimant disputes the public entity’s written response or if the public entity fails to respond to a claim within the time prescribed, the claimant to demand to meet and confer for settlement of the issues in dispute.
- The bill would require any disputed portion of the claim that remains in dispute after the meet and confer conference to be subject to nonbinding mediation.
- The bill would provide that unpaid claim amounts accrue interest at 7% per annum.
- The bill would prescribe a procedure by which a subcontractor or lower tier contractor may make a claim through the contractor.
SAMPLE LETTER –PLEASE FILL-IN BLANKS
September 8, 2016
Honorable Edmund G. Brown, Jr.
Governor, State of California
State Capitol, First Floor
Sacramento, CA 95814
RE:AB 626(Chiu) – Public contracts: prompt payment to contractors –Request for Signature
Dear Governor Brown:
On behalf of ________________,I respectfully request your signature upon AB 626 related to prompt payment to contractors on public works projects.
Under current law, public project owners can order their contractors to perform additional work not covered by the original contract under threat of termination. Because this new work is outside the original contract our state’s prompt pay laws do not apply and the public agency can delay payments indefinitely.
Public agencies can and do put off approving and paying for months or even years. In the meantime, the contractors and subcontractors who performed the extra work are left without payment to reimburse them for labor and materials. These delays are often calculated and used in a strategic and predatory manner by public project managers to leverage unfair concessions from their contractors.
The delay of payment to contractors on public works has serious negative financial consequences on the employer and their employees. Delayed employer trust fund contributions can cause the loss of health insurance for workers and significant fines for the signatory employer. In addition, the lack of prompt payment for extra work by public agencies denies contractors the necessary liquidity to bid the next project and continue providing jobs.
AB 626 is an important industry bill that simply ensures that public project owners act in a fair and reasonable manner when dealing with the businesses that are performing on their vital public works projects.
For these reasons we request your signature on AB 626. Should you have any questions regarding our position, please do not hesitate to contact our office.
cc: Ms. Melinda McLean, Deputy Secretary for Legislation, Office of Governor Brown
Assemblymember David Chiu