The URL can be used to link to this page

Home My WebLink About10 SENATE BILL 619 09-18-07_\ _~ ~~ AGENDA REPORT Agenda Item Reviewed: City Manager Finance Director ~~ N/A MEETING DATE: SEPTEMBER 18, 2007 TO: WILLIAM A. HUSTON, CITY MANAGER FROM: PUBLIC WORKS DEPARTMENT SUBJECT: SENATE BILL 619 SUMMARY Senate Bill 619 proposes to reduce the amount of contract payment retention allowed for public works contracts from 10% to 5%.The Assembly has placed this bill in the inactive file and staff is recommending that the City Council take no action at this time. RECOMMENDATION Staff recommends no action at this time. FISCAL IMPACT There is no fiscal impact associated with this item. BACKGROUND Payment retention is an effective method of keeping contractors on the job until it is fully complete. Current state law allows withholding from contractors not less than 5% of the contract amount for time and materials (Public Contract Code Section 10261). Often times this retention amount can be as much as 10% or more. Public agencies are also allowed to reward contractors that are doing a satisfactory job by 'ratcheting down' the retention amount from 10 percent to 5 percent, or even pay the full contract right away. This bill would remove a local agency's discretion by prohibiting state and local government agencies from withholding from a contractor, more than 5% of a payment on public works contract. The bill has been approved by the full Senate and by two Assembly committees. On Sept. 11, 2007, the bill was placed in the inactive file by the Assembly. Staff will continue to monitor this legislation and report back to the City Council sh®uld it become active again . ~~---~ Tim D. Serlet Director of Public Works/City Engineer ~. J ' Byers Administrative Services Manager Senate Bill 1016.doc Attachments A. SB 619 B. Draft Letter of Opposition AMENDED IN SENATE MARCH 29, 2007 SENATE BILL No. 619 Introduced by Senator Migden February 22, 2007 An act to amend Section-~'~9399-e~ 10261 of, and to add Section 7201 to, the Public Contract Code, relating to public contracts. LEGISLATIVE COUNSEL'S DIGEST SB 619, as amended, Migden. r...':~ ~~=~. Public contracts: retention proceeds. (1) Existing law authorizes the Department of General Services, or any other department with authority to enter into contracts, to contract with suppliers for goods and services. Existing law provides that in a contract between the original contractor and a subcontractor and in a contract between a subcontractor and any subcontractor thereunder, the percentage of retention proceeds withheld cannot exceed the percentage specked in the contract between the public entity and the original contractor: This bill would instead require that retention proceeds not exceed S% of the payment, as specked, for all contracts entered into on or after January 1, 2008, between a public entity, as defined, and an original contractor, between an original contractor and a subcontractor and between all subcontractors thereunder. (2) Existing law contains various provisions relating to contracts for the performance of public works of improvement; including provisions for the disbursing and withholding of retention proceeds. Existing law requires the Department of General Services to withhold not less than S% of the contract price until final completion and acceptance of the project. 98 SB 619 - 2 - This bill would require the Department of General Services to withhold not more than S% of the contract price until final completion and acceptance of the project. cc » > > > > > > > cc » > > > > > > Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no. The people of the State of California do enact as follows: 1 SECTION 1. Section 7201 is added to the Public Contract 2 Code, to read: 3 7201. (a) (1) This section shall apply with respect to all 4 contracts entered into on or after January 1, 2008, between a 5 public entity and an original contractor, between an original 6 contractor and a subcontractor, and between all subcontractors 7 thereunder; relating to the construction of any public work of 8 improvement. 9 (2) Under no circumstances shall any provision of this section 10 be construed to limit the ability of any public entity to withhold 11 1 SO percent of the value of any disputed amount of work from the 12 final payment, as provided for in subdivision (c) of Section 7107. 13 In the event of a good faith dispute, nothing in this section shall 14 be construed to require a public entity to pay for work that is not 15 approved or accepted in accordance with the proper plans or 16 spec cations. 17 (3) For purposes of this section, `public entity "means the state, 18 including every state agency, of~ice, department, division, bureau, 19 board, or commission, the California State University, the 20 University of California, a city, county, city and county, including 21 chartered cities and chartered counties, district, special district, 22 public authority, political subdivision, public corporation, or 98 3 - SB 619 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 nonprofit transit corporation wholly owned by a public agency and formed to carry out the purposes of the public agency. (b) (1) The retention proceeds withheld from any payment by a public entity from the original contractor, by the original contractor from any subcontractor; and by a subcontractor from any subcontractor thereunder shall not exceed S percent of the payment. In no event shall the total retention proceeds withheld exceed S percent of the contract price. In a contract between the original contractor and a subcontractor, and in a contract between a subcontractor and any subcontractor thereunder; the percentage of the retention proceeds withheld may not exceed the percentage specified in the contract between the public entity and the original contractor. (2) This subdivision shall not apply if the contractor provides written notice to the subcontractor; prior to or at the time that the bid is requested, that a bond may be required and the subcontractor subsequently is unable or refuses to furnish to the contractor a performance or payment bond issued by an admitted surety insurer. (c) No party ident~ed in subdivision (a) may require any other party to waive any provision of this section. SEC. 2. Section 10261 of the Public Contract Code is amended to read: 10261. Payments upon contracts shall be made as the department prescribes upon estimates made and approved by the department, but progress payments shall not be made in excess of 95 percent of the percentage of actual work completed plus a like percentage of the value of material delivered on the ground or stored subject to or under the control of the state, and unused, except as otherwise provided in this section. The department shall withhold not-less more than 5 percent of the contract price until final completion and acceptance of the project. However, at any time after 95 percent of the work has been completed, the department may reduce the funds withheld to an amount not less than 125 percent of the estimated value of the work yet to be completed, as determined by the department, if the reduction has been approved, in writing, by the surety on the performance bond and by the surety on the payment bond. The Controller shall draw his or her warrants upon estimates so made and approved by the department and the Treasurer shall pay them. The funds may be released by electronic transfer if that procedure is requested by the 98 SB 619 - 4 - 1 contractor, in writing, and if the public entity has, in place at the 2 time of the request, the mechanism for the transfer. 3rnr-~T7ni.r ~ . ° e~tii~r-l~v-Qrt~3e--i ..i. ~: ~ r,.r~~„~ r ~ a ~ ;„ 4 ~ a~a +~ _ ~a: 5 > > 6 > 7 , 8 , 9 , O 98 SB 619 Assembly Bill - Status CURRENT BILL STATUS MEASURE S.B. No. 619 AUTHOR(S) Migden. TOPIC Public contracts: retention proceeds. HOUSE LOCATION ASM +LAST AMENDED DATE 03/29/2007 TYPE OF BILL Active Non-Urgency Non-Appropriations Majority Vote Required Non-State-Mandated Local Program Fiscal Non-Tax Levy LAST HIST. ACT. DATE: 09/11/2007 Page 1 of 1 LAST HIST. ACTION Placed on inactive file on request of Assembly Member Bass. FILE ASM THIRD READING FILE DATE 09/11/2007 ITEM 34 COMM. LOCATION ASM APPROPRIATIONS COMM. ACTION DATE 08/22/2007 COMM. ACTION Do pass. COMM. VOTE SUMMARY Ayes: 11 Noes: 00 PASS TITLE An act to amend Section 10261 of, and to add Section 7201 to, the Public Contract Code, relating to public contracts. http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0601-0650/sb_619 bill_20070911_statu... 09/12/2007 SB 619 Senate Bill - History Page 1 of 1 COMPLETE BILL HISTORY BILL NUMBER S.B. No. 619 AUTHOR Migden TOPIC Public contracts: retention proceeds. TYPE OF BILL Active Non-Urgency Non-Appropriations Majority Vote Required Non-State-Mandated Local Program Fiscal Non-Tax Levy BILL HISTORY 2007 Sept. 11 Placed on inactive file on request of Assembly Member Bass. Aug. 27 Read second time. To third reading. Aug. 23 From committee: Do pass. (Ayes 11. Noes 0.) July 5 From committee: Do pass, but first be re-referred to Com. on APPR. (Ayes 10. Noes 0.) Re-referred to Com. on APPR. June 26 Set, first hearing. Hearing canceled at the request of author. May 24 To Com. on B. & P. May 17 In Assembly. Read first time. Held at Desk. May 17 Read third time. Passed. (Ayes 38. Noes 0. Page 999.) To Assembly. May 16 Read second time. To third reading. To Special Consent Calendar. May 15 From committee: Do pass. (Ayes 15. Noes 0. Page 969.) May 8 Set for hearing May 14. May 7 Hearing postponed by committee. Apr. 25 Set for hearing May 7. Apr. 24 From committee: Do pass, but first be re-referred to Com. on APPR. (Ayes 8. Noes 0. Page 712.) Re-referred to Com. on APPR. Apr. 19 Re-referred to Com. on G.O. Apr. 17 Set for hearing April 24 in G.O. pending receipt. Apr. 16 Withdrawn from committee. Re-referred to Com. on RLS. Mar. 29 From committee with author's amendments. Read second time. Amended. Re-referred to Com. on ED. Mar. 8 To Com. on ED. Feb. 23 From print. May be acted upon on or after March 25. Feb. 22 Introduced. Read first time. To Com. on RLS. for assignment. To print. http://www.leginfo.ca.gov/pub/07-08/bill/sen/sb_0601-0650/sb_619 bill_20070911 hist... 09/12/2007