BILL NUMBER: SB 802	INTRODUCED
	BILL TEXT


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:

  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.