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Home My WebLink AboutSB 802 - Public ContractsCITY OF PALM DESERT COMMUNITY SERVICES DEPARTMENT STAFF REPORT REQUEST: CONSIDERATION OF LEGISLATIVE REVIEW COMMITTEE ACTION ON SB 802 (LENO) AT ITS MEETING OF MARCH 24, 2009. DATE: April 9, 2009 CONTENTS: SB 802 Language RECOMMENDATION: X V By Minute Motion, concur with the action taken by the Legislative Review Committee at its meeting of March 24, 2009, and direct staff to prepare a letter of opposition for the Mayor's signature with regard to SB 802 (Leno) relative to public contracts. BACKGROUND: Existing law authorizes local agencies to enter into contracts for goods and services and allows that retention proceeds not exceed the percentage specified in the contract. If passed, SB 802 would prohibit retention proceeds to exceed five percent of the payment as specified in all contracts entered into or after January 1, 2010, between a public entity and contractors. Analysis of past contracts reveals that five percent is not adequate retention for a variety of contracts entered into for public projects. Therefore the Legislative Review Committee recommends that the City Council oppose SB 802 and direct staff to prepare a letter stating that position to appropriate legislators and committees for the Mayor's signature. PATRICIA SCULLY, CFE PAUL GIBSON SENIOR MANAGEMENT ANALYST DIRECTOR OF FINANCE/CITY TREASURER SHEILA R. GILLIGAN— i N M. WOHLMUTH ACM/COMMUNITY SERVI ITY MANAGER CITY COUNCIL�ICTION APPROVED '/ RECEIVED . DENIED OTHER MEETING DATE ' 17-t AYES: Aen bn, T r uson,I1Ier714,/ yj 37/el NOES: /Vo/)P ABSENT: /Vo/I ABSTAIN: Al67� VERIFIED BY•%)K/ram Original on File with City Clerk's Office State Net Bill Text 2._ Page 1 of 3 In bill text the following has special meaning underline denotes added text s«u:,k :,uc text denotes deleted text 2009 CA S 802 AUTHOR: Leno VERSION: Introduced VERSION DATE: 02/27/2009 SENATE BILL No. 802 INTRODUCED BY Senator Leno FEBRUARY 27, 2009 An act to amend Section 10261 of, and to add Section 7201 to, the Public Contract Code, relating to public contracts. LEGISLATIVE COUNSEL'S DIGEST SB 802, as introduced, Leno. 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 specified in the contract between the public entity and the original contractor. This bill would instead prohibit retention proceeds to exceed 5% of the payment, as specified, for all contracts entered into on or after January 1, 2010, 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 5% of the contract price until final completion and acceptance of the project. This bill would require the Department of General Services to withhold not more than 5% of the contract price until final completion and acceptance of the project. Vote: majority. Appropriation: no. Fiscal committee: yes. State -mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: http://client.statenet.com/secure/ne/ts.cQi?mode=fetch&text vereinn=Pe')nnonnnc4m ')n 7/^1o/norm State Net Bill Text Page 2 of 3 SECTION 1. Section 7201 is added to the Public Contract Code, to read: 7201. (a) (1) This section shall apply with respect to all contracts entered into on or after January 1, 2010, between a public entity and an original contractor, between an original contractor and a subcontractor, and between all subcontractors thereunder, relating to the construction of any public work of improvement. (2) Under no circumstances shall any provision of this section be construed to limit the ability of any public entity to withhold 150 percent of the value of any disputed amount of work from the final payment, as provided for in subdivision (c) of Section 7107. In the event of a good faith dispute, nothing in this section shall be construed to require a public entity to pay for work that is not approved or accepted in accordance with the proper plans or specifications. (3) For purposes of this section, "public entity" means the state, including every state agency, office, department, division, bureau, board, or commission, the California State University, the University of California, a city, county, city and county, including chartered cities and chartered counties, 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. (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 5 percent of the payment. In no event shall the total retention proceeds withheld exceed 5 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 shall 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) A party identified in subdivision (a) shall not 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 contractor, in writing, and if the public entity has, in place at the time of the request, the mechanism for the transfer. http://client.statenet.com/secure/pe/ts.cgi?mode=fetch&text version=CA2009000S802_20... 2/28/2009