Legal Update on Procurement and Construction Legislation Glenn N. Gould, DWK September 10, 2014 This training is provided for educational, compliance and loss-prevention purposes only and, absent the express, prior agreement of DWK, does not create or establish an attorney-client relationship. The training is not itself intended to convey or constitute legal advice for particular issues or circumstances. Contact a DWK attorney for answers to specific questions. AGENDA New Laws to Be Discussed SB 854 New DIR Requirements for Contractors Capital Outlay & Design-Build: Offset of Rental Payments AB 1705- Contract Retention Limits AB 173 Exception to Bidding: SBEs, Microbusinesses, DVBEs 2 1
AGENDA AB 44 Subcontractor s List AB 630 Architect s Instruments of Service SB 681 Piggyback Contracts AB 1336 Extension of Time to File Prevailing Wage Action 3 AGENDA The Bills That Didn t Survive: AB 2471 Change Orders AB 1823 - Construction Claims: Attempt to redefine disputed amount. AB 1734 Adjustment of Participation Goals for SBEs and DVBEs. 4 2
SB 854 New DIR Law Two new laws on different subjects in same bill: DIR and Design- Build New DIR requirements for contractors effective July 1, 2014 Major changes to administration and enforcement of DIR s prevailing wage requirements. All CMU or LCP requirements based upon the funding source have been eliminated. Replaced by a new public works contractor registration program DIR (through the Labor Commissioner s Office) will now monitor and enforce prevailing wage laws. 5 SB 854 - New DIR Law DIR no longer charging awarding bodies for monitoring and enforcement. Awarding bodies will now be required to submit form PWC-100 for all public works projects. (This in effect now!!) Each contractor or subcontractor must pay nonrefundable $300 registration fee. Awarding body must state in bid documents that no bid can be accepted without proof that contractor and all subcontractors are registered. 6 3
SB 854 - New DIR Law Every July 1 st, contractor or subcontractor must: Pay $300 renewal fee Provide specific information to establish eligibility to be re-registered All contractors and subcontractors must be registered by March 1, 2015. For any new projects awarded after April 1, 2015, awarding bodies must utilize only registered contractors and subcontractors. 7 SB 854 - New DIR Law By January 1, 2016, awarding bodies must utilize only registered contractors and subcontractors on all public works projects (new or ongoing) awarded on or after this date. Labor Commissioner has power to exempt projects undertaken by LCP legacy programs or projects covered by project labor agreements. 8 4
SB 854 Rental Payment Offset Existing law authorizes State Public Works Board to augment major capital outlay or design-build project with a reasonable construction reserve. The reserve amount can be used after lease-revenue bonds are sold to ensure completion of the project. 9 SB 854 Rental Payment Offset Previously, upon completion of capital outlay project or design-build project, any remaining funds in construction reserve fund were required to be used to offset rental payments. SB 854 deletes that offset requirement. 10 5
AB 1705 Contract Retention Public Contract Code section 7107 previously provided: Prohibits state and local agencies from retaining more than five percent of contract price unless there is a prior finding by the agency that the project is substantially complex No definition provided for substantially complex. Provision was only in effect until January 1, 2016. 11 AB 1705 Contract Retention AB 1705 now requires: That the agency include in the bid documents an explanation of the basis for the finding that project is substantially complex. That the finding be made during a properly noticed and scheduled public hearing prior to the bid. 12 6
AB 1705 - Contract Retention Limits Project cannot be deemed substantially complex if it they are projects which are regularly, customarily, or routinely performed by the agency or licensed contractors. AB 1705 extends the expiration deadline from January 1, 2016 to January 1, 2018. 13 AB 173 Exception to Bidding New provision in Public Contract Code, 20651.2 provides: Without being subject to pertinent competitive bidding laws, a community college district may award a contract for the acquisition of goods, services, or information technology to: a a certified small business, including a microbusiness, or a disabled veteran business enterprise (DVBE) if, 14 7
AB 173 Exception to Bidding the contract has an estimated value of greater than five thousand dollars ($5,000), but less than two hundred fifty thousand dollars ($250,000), and if, The community college district obtains price quotes from two or more certified small businesses, or from two or more disabled veteran business enterprises. 15 AB 173 Exception to Bidding Key elements of AB 173 Certified Small Business DVBE Microbusiness How certification is determined: Office of Small Business and Disabled Veteran Business Enterprise Services has sole responsibility for: Determining which small businesses qualify as microbusinesses Certifying and determining which businesses qualify as DVBEs 16 8
AB 173 Exception to Bidding Overview of Certification Criteria: Small Business: Independently owned and operated business not dominant in its field Principal office located in California and officers live in California 100 or fewer employees and average annual gross receipts of less than $10,000,000 over three previous years, or a manufacturer with a 100 or fewer employees 17 AB 173 Exception to Bidding Overview of Certification Criteria: Microbusiness: Small business with average gross receipts of less than $2,500,000 over the three previous years, or a manufacturer with 25 or fewer employees. DVBE Business enterprise with 51% or more ownership by disabled veteran Daily operations managed and controlled by a disabled veteran. 18 9
AB 173 Exception to Bidding Things to keep in mind: Beware of cost issues SBE/DVBE sale of goods likely to be in capacity as distributor. If so, there may be a premium over cost if procured from manufacturer. Unclear how cost increases are treated. Is it enough that estimated value at time of award is under $250,000? How many quotes must I obtain? Need quotes from two or more certified small businesses, including microbusinesses, or from two or more disabled veteran business enterprises 19 AB 173 Exception to Bidding Things to keep in mind: Only bidding affected. Other requirements of public works/public contracts applicable to AB 173 procurement (bonds, prevailing wage rates, etc.) Advisable to institute a pre-qualification process for SBE/DVBE status. 20 10
AB 44 Subcontractor s List Changes in Public Contract Code section 4104 Current law: when taking bids for the construction of any public work or improvement, public agencies must require that any person making a bid or offer to perform work provide the name and location of business of each subcontractor who will perform work in an amount in excess of one-half of one percent of total bid. 21 AB 44 Subcontractor s List Section 4104 now requires that, in addition, the bidder provide the California contractor license number of each subcontractor. It also provides that an inadvertent error in listing a contractor 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 within 24 hours after deadline for receiving bids. 22 11
AB 44 Subcontractor s List Does this mean that the bid must be deemed non-responsive if the deadline to correct is not met? No. The defect can be waived because it is not material. 23 AB 44 Subcontractor s List Modify your bid documents. Establish subcontractor s list disclosure requirements: Subcontractor Business Location California Contractor License Number Establish a process for correcting inadvertent listing of incorrect license number. Make it clear in bid documents that if required license information is not submitted by deadline, the bid may be deemed non-responsive 24 12
SB 630 Architect s Instruments of Service Addition of Section 5536.4 to Business & Professions Code. Use of architect s instruments of service prohibited without architect s consent In a written contract; Written agreement; or written license specifically authorizing that use. Architect shall not unreasonably withhold consent from a person for whom the architect provided services 25 SB 630 Architect s Instruments of Service Architect can withhold consent for cause, including, but not limited to, lack of full payment or failure to fulfill conditions of written contract. 26 13
SB 630 Architect s Instruments of Service Key provisions to put into architect agreement. Cite new law and Education Code provisions regarding school district/architect agreements as basis for including the following: architect shall not to unreasonably withhold consent to allow re-use of instruments of service (new law) District retains ownership rights to instruments of service (Ed. Code 17316) Architect retains rights to intellectual property. (Ed. Code 17316) Establish indemnity obligations of District when re-using instruments of service. (Ed. Code 17316) 27 SB 681 Piggyback Contracts Up until now, community college districts had limited ability to use piggyback contracts. A piggyback contract allows an agency other than the original awarding agency to execute an agreement for the lease of, or purchase of personal property, utilizing the terms and conditions of a competitively bid agreement previously awarded. 28 14
SB 681 Piggyback Contracts Piggyback contract can also include reasonable costs of furnishing services incidental to the lease or purchase of the personal property. 29 SB 681 Piggyback Contracts Before SB 681, community college districts could only enter into piggyback contracts with the original awarding agency. Now, districts can also enter into piggyback contracts with the vendor of the original contract. New law conforms the law to the piggyback contract law for school districts. 30 15
AB 1336 Time to File Prevailing Wage Action A joint labor-management committee is authorized to bring an action against any employer who fails to pay prevailing wages as required by state law. Until now, the action had to be filed within 180 days of the filing of a valid notice of completion, or not later than 180 days after the acceptance of the public work. 31 AB 1336 Time to File Prevailing Wage Action AB 1336 deletes the 180-day rule and replaces it with the following: The Action must be commenced not later than three years after the wages in question were due. 32 16
The Bills That Didn t Survive AB 2471 Change Orders Bill would have required: Public entity to issue a change order for authorized work promptly and in now event later than 60 days after the extra work is complete. Authorized contractor, upon failure of public entity to pay within the 60 days to bill for the completed work. 33 The Bills That Didn t Survive AB 1823 - Construction Claims Attempted to carve out contractor s claims for additional compensation from disputed amount for which agency can hold 150 percent of disputed amount. 34 17
The Bills That Didn t Survive AB 1734 Gradually adjusted participation goals for Small Business Enterprises and Disabled Veteran Business Enterprises. Would have required that districts establish and achieve annual goal of 25% small business participation in state procurements and contracts. 35 The Bills That Didn t Survive AB 1754 Would have allowed the use of Prop. 39 bond money to purchase portable electronic equipment (laptops, tablets, etc.) and instructional materials. 36 18
Thank you. Glenn N. Gould / ggould@dwkesq.com 37 19