GOVERNOR BROWN SIGNS CHANGE ORDER REFORM BILL

SACRAMENTO – Governor Brown signed CAL SMACNA co-sponsored legislation last week to reform how change orders are to be addressed by local public agencies.  CAL SMACNA worked with NECA, MCA, UCON and others to get this bill written and signed into law.

This bill AB 626, authored by Assemblymember David Chiu (D- San Francisco),establishes a claim resolution process for local public works projects and public universities.

It specifies that contractors can submit change order claims to public entities and requires those agencies to provide a written response to those claims within 45 days that details disputed and undisputed amounts. This bill also sets out a process to resolve remaining disputes. Contractors can demand a meet and confer conference with the entity for remaining disputes.  Items not resolved during the conference are submitted to nonbinding mediation.

This bill is substantially similar to our AB 1347 that the Governor vetoed in 2015 due to the strong opposition from CALTRANS. The key difference between AB 626 and AB 1347 is that it exempts the Department of General Services and all other state agencies from the application of this new law.

Please see the summary below or click hereto read the bill in it’s entirety.

CALIFORNIA CHANGE ORDER REFORM FOR LOCAL PUBLIC AGENCIES 

  • This bill establishes, 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 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, as specified.
  • The bill prescribes a procedure by which a subcontractor or lower tier contractor may make a claim through the prime contractor.
  • This bill requires a public entity, defined to exclude certain state entities, 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, as specified. 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 authorizes, 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, as specified. The bill would provide that unpaid claim amounts accrue interest at 7% per annum.
  • This bill requires the text of these statutory provisions, or a summary, to be set forth in the plans or specifications for any public work which may give rise to a claim. The bill would specify that a waiver of these rights is void and contrary to public policy, except as specified.

TOGETHER YOU MADE A DIFFERENCE IN 2016!!
The Governor vetoed similar legislation in 2015 and this was by no means an easy bill for him to sign in 2016.  However, CAL SMACNA’s members made this bill their lobbying priority at the 2016 Day at the Capitol event and the focus of a robust letter writing campaign to the Governor in the past month. It all helped create a better result in 2016.  Congratulations.

CAL SMACNA is pleased to provide you with this CAPITOL UPDATE.  If you should have questions about this bill, or would like additional information, please do not hesitate to contact Chris Walker at (916) 363-7460 or chris@cal-smacna.org