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Claims Resolution Procedure Changes

02 Dec 2016 00:00:00 -0800

Claims resolution procedures for public contracts in California will change under a new law that takes effect Jan. 1. Assembly Bill 626, recently signed by Gov. Jerry Brown, establishes a claims resolution process applicable to any contractor claim, as defined, filed in connection with a public works project for contracts entered into on or after Jan. 1, 2017.

Public Contract Code section 20104, which remains in place and establishes a dispute resolution procedure for local agencies, only applies to public works claims of $375,000 or less; however, AB 626 will apply to all public works claims, regardless of the amount.

Within 45 days of receipt of any claim, AB 626 requires specified public entities to provide a written statement to the claimant identifying the disputed and undisputed portions of the claim. If a written response is not timely issued, the entire claim is deemed rejected. If the claimant disputes the public entity’s response, the claimant may demand a meet-and-confer conference, and any portion of the claim that the parties continue to dispute following the conference is subject to nonbinding mediation.

Payment due on undisputed portions of a claim must be processed within 60 days, and unpaid claim amounts accrue interest at 7 percent per annum. AB 626 also establishes a formal process for subcontractors and lower tier subcontractors that lack standing to assert claims to request the prime contractor to pass through claims, and imposes requirements on the prime contractor with regard to any such requests. AB 626 does not affect other existing claims resolution procedures, such as the Government Claims Act.

Moving forward, this process must be included in the plans or specifications for all public works projects. Best Best & Krieger LLP will issue additional, detailed guidance to clients regarding incorporating these provisions into contract documents. If you have any questions about this legislation or how it may impact your agency, please contact the attorney authors of this Legal Alert, or your BB&K attorney.

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Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

Lease-Leaseback Legislation Signed Into Law

27 Sep 2016 00:00:00 -0800

The lease-leaseback construction delivery method for K-12 school facilities projects changed under a new law signed Friday by Gov. Jerry Brown. Previously, Education Code Section 17406 authorized school districts, without advertising for bids, to lease property to a contractor under a lease-lease back agreement. Under such agreements, typically, the contractor constructs the school facilities and then leases the facilities back to the school district, with title vesting in the district upon expiration of the lease.

Assembly Bill 2316, which goes into effect Jan. 1, amends Education Code 17406 and addresses some of the legal issues raised by the Court of Appeal decision in Davis v. Fresno Unified School District (2015) 237 Cal.App.4th 261.

AB 2316 establishes a competitive “best value” solicitation process for school districts that utilize a lease-leaseback procurement method in the future. School districts will also now be required to publish their procedures and guidelines for the evaluation of proposers and provide an estimate of the price of the project. AB 2316 also expressly authorizes school districts to contract with the lease-leaseback contractor for preconstruction services. Further, if a project procured using lease-leaseback prior to July 1, 2015 is invalidated by a court because it failed to fall within the former competitive bidding exception, the contractor would be entitled to be paid the reasonable cost of work it performed, except for profit, so long as several conditions are met.

We will issue additional, detailed guidance to clients regarding AB 2316. If you have any questions about this legislation or how it may impact your agency, please contact the attorney authors of this Legal Alert listed to the right in the firm’s Education Law practice group, or your BB&K attorney.

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Disclaimer: BB&K legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

Court of Appeal Issues Decision Clarifying the Applicability of Prevailing Wage Law to Offsite Fabrication of Materials

30 Sep 2014 00:00:00 -0800

The California Court of Appeal has ruled that fabrication of materials for a public works project is not subject to California’s prevailing wage law if it occurs at a “permanent, offsite manufacturing facility, the location and existence of which is determined wholly without regard to the particular public works project.” In Sheet Metal Workers’ International Assn., Local 104 v. Duncan, published Aug. 27, Russ Will Mechanical, Inc. was the heating, ventilation, and air conditioning subcontractor contracted to perform the HVAC component for a community college district project.

As part of the public works project, Russ Will fabricated sheet metal for various HVAC components at a permanent offsite facility it had operated for more than a decade. An employee of Russ Will filed a complaint with the Department of Industrial Relations claiming he should have received prevailing wages for his work fabricating sheet metal at the offsite facility. Following the DIR’s administrative review of the matter, DIR’s final coverage determination concluded that Russ Will was not required to pay prevailing wages. Local 104, which had participated in the DIR proceedings, then filed a petition for a writ of mandate in court challenging the final DIR coverage determination. Local 104’s petition was granted, and the court returned the matter to the DIR. Russ Will then appealed.

The Court of Appeal’s decision clarifies and solidifies the rule consistently set forth in past DIR coverage determinations that prevailing wage requirements do not apply when the offsite fabrication takes place at a permanent, offsite manufacturing facility, where the location and existence of the facility has no relationship to the public works project in question. While this decision could be appealed to the California Supreme Court, for now, the Sheet Metal Workers’ International decision provides certainty that the payment of prevailing wages is not required in relation to a public agency’s direct purchase of materials for a public works project from a permanent offsite manufacturing facility, so long as the facility’s existence is not reliant on, or otherwise related to, the public works project.

For more information about this case and how it may impact your agency, please contact one of the attorney authors of this legal alert in the Education, Special Districts or Municipalpractice groups, or your BB&K attorney.

Disclaimer: BB&K legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

All California Contractors and Subcontractors Involved with Public Works Projects Now Required to Register With State by March 1, 2015

10 Jul 2014 00:00:00 -0800

The California Legislature has imposed a new registration requirement for contractors and subcontractors involved with public works projects. Senate Bill 854, passed late last month, created a registration program, effective July 1, 2014, to fund the Department of Industrial Relations’ monitoring and enforcement of prevailing wage laws.

The registration period is open now, and contractors and subcontractors wishing to work on a public works project must be registered by March 1, 2015. For public agencies/awarding bodies, the new law requires that all public works projects with bids due after March 1, 2015, or awarded on or after April 1, 2015, use only registered contractors and subcontractors. The bill also requires awarding bodies to include notice of the registration requirement in their bid invitations and bid documents. In addition, public agencies must also file notice of their public works projects using DIR approved forms.

Registration is completed through an online application and requires a non-refundable $300 fee to be paid by the contractors and subcontractors. The registration process requires contractors to:

provide workers’ compensation coverage to its employees
hold a valid Contractors State License Board license
have no delinquent unpaid wage or penalty assessments
not be subject to federal or state debarment

Contractors must pay an annual renewal fee by July 1 of each year. The registration form is located on the DIR’s website at http://www.dir.ca.gov/DLSE/dlsepublicworks.html.

To help awarding bodies and contractors comply with the new requirements, the DIR will post a database of registered contractors and subcontractors on its website. While non-registered contractors may not be awarded public works contracts after the effective date, inadvertently listing an unregistered subcontractor on a bid will not necessarily invalidate that bid. In addition, the registration requirement does not apply to private jobs that are determined to be public works after the contract has been awarded.

The new registration system replaces the previous requirement that awarding bodies pay for costs to monitor and enforce compliance with prevailing wage laws for certain public works projects. Registration and renewal fees will go into the State Public Works Enforcement Fund, which provides for the administration of contractor registration, monitoring and enforcement of prevailing wage laws, and the enforcement of Labor Code violations on public works projects by the DIR.

For more information on the new public works contractor registration requirement and its potential impact on public works projects, please contact the authors of this e-alert listed at right, an attorney in the firm’s Public Contracts and Construction group or your BB&K attorney.

Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

California Authorizes Alternative Procurement Method for Public Construction Projects

07 Apr 2014 00:00:00 -0800

Effective January 1, 2014, all California counties are expressly authorized to use the “construction management at risk” project delivery method (CMAR) for any building projects over $1 million. This alternative procurement process has been in use by the private sector and other public agencies for many years. The CMAR project delivery method offers both benefits and risks for the project owner, which should be carefully evaluated.

Proponents of CMAR commonly cite the following benefits for the owner: the opportunity to select the contractor who will lead the project based on factors other than price; getting a contractor’s perspective during design; and a known price that is not automatically subject to increase on account of design deficiencies. Unlike design-build, the owner utilizing CMAR retains control of the entire design process.

Risks to the owner and criticisms of CMAR include the up-front cost of preconstruction services and the need for the agency to have sufficient expertise to evaluate cost proposals and assess the final project accounting. Agency staff also have to understand that the construction manager under a CMAR agreement is not a typical “agency” construction manager who works on the owner’s behalf. Some agencies choose to retain an owner’s representative to act on the owner’s behalf during the project, which increases overall project cost.

No project delivery method is fool-proof. One important key to a successful CMAR project is a contract that clearly identifies the risks the owner is shifting to the construction manager. Another is training the owner’s staff to use the contract to enforce those responsibilities.

Public Contract Code Section 20146 (SB 328) adds counties to the ranks of local public agencies that the Legislature has expressly authorized to engage a licensed contractor who provides preconstruction services and construction administration to deliver the project for a fixed construction cost. The CMAR contract can be awarded to the “lowest responsible bidder” or based on “best value.”

On a CMAR project, the owner retains the construction manager during (or before) design. The construction manager provides a contractor’s perspective during design, assists in value engineering, and performs quality control to reduce common design problems such as coordination and constructability issues. The construction documents are divided into “trade packages” suitable for competitive bidding as separate contracts. The construction manager selects the trade contractors through procedures established by the county, and is responsible for scheduling, coordinating and completing the project for a guaranteed maximum price.

The construction manager is typically paid a fixed sum for its preconstruction services and receives a fee, calculated as a percentage of hard construction cost, for services during construction. The construction manager may also provide site services for the project, such as security and sanitation, and may, in some cases, perform portions of the work. If it does so, payment for that work may be in addition to the fee.

The overall price for construction of the project, either a lump sum or guaranteed maximum price, is usually established late in the design phase or after all trade contracts have been bid. That price should change only if the owner modifies the project, if regulatory changes increase the cost of the work, or if unexpected site conditions appear.

For further information about CMAR and whether it is appropriate for your project, please contact one of the attorney authors of this legal alert listed at right in the Public Contracts and Construction practice, or your BB&K attorney.

Protecting Your Agency from Contractor Claims, Implementing the California False Claims Act and Public Works Contracting Lessons Learned

27 Mar 2014 00:00:00 -0800

This event discussed lessons learned the hard way and their application to assist anyone responsible for managing public works contracts in California. Helpful tips to utilize the California False Claims Act were also covered. Techniques for avoiding claims or contractual provisions that protect public agencies along with how to handle and manage claims once they are submitted were presented.

When:
March 27, 2014

Where:
Sheraton Grand Sacramento Hotel
1230 J Street
Sacramento, California 95814

BB&K Speaker:
Scott Campbell, Partner (Los Angeles, CA)

For more information about the event, please visit the League of California Cities website.

FCC Seeks Additional Input to Improve E-Rate School & Library Technology Program

17 Mar 2014 00:00:00 -0800

The Federal Communication Commission’s Wireline Competition Bureau (WCB) released a second public notice seeking focused comment on three issues raised in the E-rate Modernization Notice of Proposed Rulemaking. (See prior BB&K legal alert on this subject.) Comments in the proceeding are due by April 7, and reply comments are due by April 21 to address:

How best to focus E-rate funds on high-capacity broadband, especially high-speed Wi-Fi and internal connections;
Whether and how the Commission should begin to phase down or phase out support for traditional voice services in order to focus more funding on broadband; and
Whether there are demonstration projects or experiments that the Commission should authorize as part of the E-rate program that would help the Commission test new, innovative ways to maximize cost-effective purchasing in the E-rate program.

BB&K will be assembling a coalition of local governments and local educators to provide input to the FCC. The BB&K coalition will seek to answer these questions (paragraph of the second public notice is identified in parentheses):

If the Commission is to expand funding for internal connections, what broadband equipment/software should the Commission fund? (¶ 11) If the Commission is to expand that funding, should the Commission:
- retain the existing prioritization method, but limit upgrades to once every five years;
- only fund an applicant after all other applicants have received support or declined the opportunity to seek funding; or
- provide some support to all applicants every year? (¶¶ 14-22)

Should the Commission undertake a limited initiative within the priority-one system to incent the deployment of high-capacity broadband connections to schools and libraries? If so, how? Raise the discount rate for all? Adopt a flat discount rate for all applicants? Give full support to schools and libraries in remote areas or tribal lands? (¶¶ 24-29)
- How should it identify schools and libraries that need support?
- How should it prioritize applications?
- Should it follow the current program’s “economic need” approach? Or a different measure? (¶¶ 30-33)

How can the Commission encourage consortium purchasing?
- Should it require applicants seeking internal connections to provide a plan regarding their proposed use?
- How can the Commission best collect data on speed and quality of school connections, and on the cost-effectiveness of purchases? (¶¶ 34-39)

How should the Commission reduce support for voice services—gradually, immediately, or just give it a lower priority? Should the Commission eliminate support for internal connections used for voice? Should it continue to support voice services in some areas? How can the Commission ease the administrative burdens related to reducing this support? (¶¶ 40-54)

Should the Commission develop any demonstration projects to test:
- approaches to bulk purchasing,
- a technical-assistance program,
- temporary discounts for public-private partnerships,
- linking last-mile infrastructure to BTOP funded networks? (¶¶ 55)

The Universal Service Program for schools and libraries (more commonly called the E-rate program) provides discounted telecommunications, Internet access and internal connections to eligible schools and libraries. It is the federal government’s largest educational technology program. The program was established in the landmark Telecommunications Act of 1996, when only 14 percent of the nation's K-12 classrooms had access to the Internet. Today, virtually every library and school in the nation is connected to the Internet.

Spending on the E-rate program is capped at $2.25 billion per year, indexed to inflation since 2010. For the 2013 funding year, schools and libraries sought E-rate funding in excess of $4.9 billion, more than twice the 2013 cap of $2.4 billion. Demand has exceeded the E-rate cap every year since the program's inception and FCC Chairman Wheeler recently announced that he would make an additional $1 billion in support available in 2014 and 2015.

For more information on the FCC’s Notice of Proposed Rulemaking and how your agency or school district can provide input, contact one of the attorney authors of this legal alert listed at right in the Telecommunications or Education practice groups, or your BB&K attorney.

Two New Prevailing Wage Laws Aimed at Stopping Wage Theft

28 Jan 2014 00:00:00 -0800

Effective January 1st, two new California prevailing wage laws affect public works projects. Senate Bill 377 establishes new deadlines for issuing prevailing wage coverage determinations and imposes new reporting requirements on public agencies. Assembly Bill 1336 extends the statutory deadline for the Labor Commissioner to issue civil wage and penalty assessments from 180 days to 18 months, and tolls that deadline until the Labor Commissioner is provided a timely notice of the filing of a Notice of Completion and/or acceptance of a public works project. Together these new bills provide the Labor Commissioner and private joint labor-management committees greater ability to enforce compliance with the state’s prevailing wage laws.

Because these new prevailing wage laws may extend the exposure faced by contractors who have failed to pay prevailing wages (and the sureties on their payment bonds), it is important for public agencies to understand that these contractors and/or their sureties may seek to shift liability back to the awarding bodies. The practical effect of these bills on public agencies still remains to be determined. Best practice for public agencies is to annually train their staff on the rules regarding public works construction, including Notices of Completion, prompt payment rules, stop-notices, prevailing wages, and related bonding and surety matters.

The central purpose of the prevailing wage law is to protect and benefit employees on public works projects. Prevailing wage laws are intended to prevent government contractors from using itinerant, cheap, bootleg labor. State prevailing wages must be paid on all contracted public works projects over $1,000 as defined under the Labor Code. Higher thresholds may apply ($15,000 or $25,000) if the public entity has adopted a special labor compliance program. Existing law requires the Labor Commissioner to issue a civil wage and penalty assessment against a contractor or subcontractor, or both, if the Labor Commissioner determines after investigation that the contractor and/or subcontractor violated the prevailing wage laws.

SB 377 amends Labor Code section 1773.5 to set new deadlines for the Director of Industrial Relations to issue public works coverage determinations at 60 days for public works projects or 120 days for otherwise private development projects receiving public funds, subject to certain extensions. For public agencies, these new deadlines may result in more prevailing wage coverage determinations being issued by the Director of Industrial Relations and potentially resulting in more projects being deemed public works. As a result, this is a good time for public agencies to review their public works contracts to ensure that all recommended prevailing wage provisions are incorporated. SB 377 also establishes an administrative appeal deadline of 30 days and a deadline of 120 days for the Director to make a final determination on that appeal. SB 377 also grants the Director the legal authority to make prevailing wage coverage determinations (equivalent to legislative policy-making) and provides that a final determination of an appeal is subject to judicial review.

As for public agencies, SB 377 adds a new Section 1741.1 to the Labor Code allowing the deadline for serving civil wage and penalty assessments by the Labor Commissioner to be tolled until the Labor Commissioner is provided notice of completion/acceptance of a project in a timely manner. Specifically, SB 377 requires that public agencies notify the Labor Commissioner within five days of the filing of a notice of completion with the county recorder or the acceptance of a public work by a public agency, whichever is later. No specific penalty is included in the legislation for noncompliance.

Meanwhile, AB 1336 amended Labor Code section 1741 (a) to extend the statute of limitations for a State Labor Commissioner to enforce a civil wage and penalty assessment from 180 days to 18 months after the filing of a valid notice of completion or acceptance of the public work, whichever occurs later. This period of time will be tolled until the Labor Commissioner is provided notice of completion/acceptance of a project in a timely manner by the public agency, per SB 377. AB 1336 also extended the deadline for private joint labor-management committees to enforce a deadline from 180 days to 18 months and provided these committees additional civil remedies in the form of interest on unpaid amounts, liquidated damages, and injunctive relief against the contractor and/or subcontractor. AB 1336 also requires that certified payroll records shared with these joint labor-management committees or certain trust funds be redacted only to prevent disclosure of an individual’s full social security number.

For questions regarding these new laws, please contact one of the attorney authors of this legal alert listed at right, or your BB&K attorney.

BB&K legal alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

New Laws Affecting Businesses in California

26 Nov 2013 00:00:00 -0800

During the 2013 legislative session, Gov. Brown signed into law new legislation affecting California businesses, most of which will go into effect in less than six weeks. For more information on any of the new laws below, click on the title to view the full legal alert or article and contact the attorney author or your BB&K attorney.

AB 44 - Assembly Bill 44 Requires Submission of Subcontractors' License Numbers in Public Construction Bids
Public Agencies Must Modify Bid Forms to Require Subcontractor LicenseNumber
Effective July 1, 2014

AB 227 - Amendment to Prop 65 Provides Businesses a Grace Period
Assembly Bill 227 Aims to Reduce Frivolous Lawsuits and Excessive Penalties
AB 227 was effective immediately

AB 440 – Local Agencies Empowered to Order the Cleanup of Contaminated Properties
Assembly Bill 440 Provides Agencies Immunity from Liability For Cleanup Efforts
Effective January 1, 2014

AB 556 and AB 218 – Two New California Laws Will Affect Hiring and Fair Employment Practices
Assembly Bill 556 Impacts All Employers; Assembly Bill 218 Impacts Public Employers Only
AB 556 is effective January 1, 2014
AB 218 does not impact businesses

SB 7 – Controversial New Law Conditions State Funding on Charter City Compliance With State Prevailing Wage Law for Locally Funded Projects
Senate Bill 7 Could Face Legal Challenges
Effective January 1, 2015, unless the contract was advertised for bid prior to that date

SB 323 - New Law Will Change the Way Limited Liability Companies Form and Operate
The California Revised Uniform Limited Liability Company Act Will Impact Existing and Future Businesses
Effective January 1, 2014

SB 594 – New California Law Further Restricts Nonprofit Organizations From Engaging in Campaign Activity
Restricted Resources Include Cash, Office Supplies and Other Property Received From Local Agencies
Effective January 1, 2014

Assembly Bill 44 Requires Submission of Subcontractors’ License Numbers in Public Construction Bids

17 Sep 2013 00:00:00 -0800

Governor Jerry Brown last week signed into law Assembly Bill 44 (AB 44), which amends Public Contract Code section 4104 to require a prime contractor to list a subcontractor’s contractor license number when bidding on public construction projects, beginning July 1, 2014. AB 44 requires public agencies to modify their public construction bid forms to require the license number in the subcontractor listing form.

AB 44 also provides that an inadvertent error in listing the subcontractor’s license number shall not be grounds for filing a bid protest, or grounds for considering the bid nonresponsive, if the corrected contractor’s license number is submitted to the public entity by the prime contractor within 24 hours after the bid opening – provided that the corrected license number corresponds to the submitted name and location of the subcontractor.

Current law under the Subletting and Subcontracting Fair Practices Act requires that any public entity taking bids for the construction of a public construction project must require prime contractors bidding on the project to list the name and business location of subcontractors providing labor or services greater than 0.5% of the prime contractor’s total bid amount. According to the comments to AB 44, the amended law is intended to better enable public entities to verify that the listed subcontractors hold active contractor licenses and are in good standing with the Contractors State License Board. Particularly in large urban areas, multiple contractors could have very similar names, making differentiation difficult and potentially complicating or delaying public entities’ review and award of contractors. In contrast, each contractor license number is unique.

For more information on AB 44 and how it may affect your agency or business, please contact one of the authors of this legal alert listed at right or your BB&K attorney in the Municipal Law, Special Districts or Education Law practice groups.