Amended in Senate August 18, 2015

Amended in Assembly May 4, 2015

Amended in Assembly March 26, 2015

California Legislature—2015–16 Regular Session

Assembly BillNo. 975

Introduced by Assembly Memberbegin delete Frazierend deletebegin insert Mullinend insert

February 26, 2015

begin deleteAn act to amend Sections 20101, 20111.5, and 20111.6 of the Public Contract Code, relating to public contracts. end deletebegin insertAn act to add Section 5111 to the Public Contract Code, relating to school facilities, and declaring the urgency thereof, to take effect immediately.end insert


AB 975, as amended, begin deleteFrazierend delete begin insertMullinend insert. begin deleteLocal Agency Public Construction Act: bid criteria. end deletebegin insertSchool facilities: lease-leaseback contracts: contractor relief.end insert

begin insert

Existing law, until January 1, 2019, authorizes the governing board of a school district, without advertising for bids, to lease real property owned by the school district for a minimum rental of $1 per year if the instrument by which this property is leased requires the lessee to construct, or provide for the construction of, a building to be used by the school district during the term of the lease and provides that the title to the building shall vest in the school district at the end of the lease.

end insert
begin insert

This bill would provide that when a project for the construction, alteration, repair, or improvement of any structure, building, or other improvement of any kind that was leased through an instrument pursuant to the provisions described above before July 1, 2015, and that instrument is later determined to be invalid, the contractor who entered into the contract with the school district is entitled to be paid the reasonable cost of the labor, equipment, materials, and services furnished by the contractor before the date of the determination, subject to specified conditions.

end insert
begin insert

This bill would declare that it is to take effect immediately as an urgency statute.

end insert
begin delete

The Local Agency Public Construction Act sets forth the requirements for competitive bidding on various types of contracts awarded by state and local agencies, including a school district. The act authorizes a public entity or school district to require prospective bidders for a construction contract to complete and submit to the governing board a prequalification questionnaire and financial statement, and requires the board to adopt and apply a uniform system of rating bidders on the basis of completed questionnaires and financial statements.

end delete
begin delete

This bill would also prohibit a public agency or school district under the act, from disqualifying a prospective bidder based solely on whether the prospective bidder filed a claim against a project owner.

end delete
begin delete

Because this bill would impose new requirements on the governing body of a local school board, it would impose a state-mandated local program.

end delete
begin delete

The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.

end delete
begin delete

This bill would provide that, if the Commission on State Mandates determines that the bill contains costs mandated by the state, reimbursement for those costs shall be made pursuant to these statutory provisions.

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Vote: begin deletemajority end deletebegin insert23end insert. Appropriation: no. Fiscal committee: begin deleteyes end deletebegin insertnoend insert. State-mandated local program: begin deleteyes end deletebegin insertnoend insert.

The people of the State of California do enact as follows:

P2    1begin insert

begin insertSECTION 1.end insert  

end insert

begin insertSection 5111 is added to the end insertbegin insertPublic Contract
end insert
begin insert, to read:end insert

begin insert

begin insert5111.end insert  

(a) This section shall apply retroactively to a project
4for the construction, alteration, repair, or improvement of any
5structure, building, or other improvement of any kind that was
6leased through an instrument pursuant to Section 17406 of the
7Education Code before July 1, 2015. If at any time the instrument
P3    1is determined to be invalid by a court of competent jurisdiction,
2the contractor who entered into the instrument with the school
3district shall be entitled to be paid the reasonable cost of the labor,
4equipment, materials, and services furnished by the contractor
5before the date of the determination that the instrument is invalid
6if all of the following conditions are met:

7(1) The contractor proceeded with construction, alteration,
8repair, or improvement based upon a good faith belief that the
9instrument was valid.

10(2) The school district has reasonably determined that the work
11performed is satisfactory.

12(3) Contractor fraud did not occur in the obtaining or
13performance of the instrument.

14(b) In no event shall payment to the contractor pursuant to this
15section exceed the contractor’s costs as included in the instrument
16plus the cost of any approved change orders.

17(c) Notwithstanding subdivision (a), this section shall not affect
18any protest and legal proceedings, whether contractual,
19administrative, or judicial, to challenge the award of the public
20works contract, nor affect any rights under Section 337.1 or 337.15
21of the Code of Civil Procedure.

end insert
22begin insert

begin insertSEC. 2.end insert  

end insert
begin insert

This act is an urgency statute necessary for the
23immediate preservation of the public peace, health, or safety within
24the meaning of Article IV of the Constitution and shall go into
25immediate effect. The facts constituting the necessity are:

end insert
begin insert

26As a result of a California appellate court decision that was
27published on June 1, 2015, that called into question the legality
28of lease-leaseback school construction agreements, school districts
29have indicated that additional legal challenges are now
30forthcoming. These challenges may seek disgorgement of all funds
31from the general contractor for projects that have been completed
32or are under construction, which may bankrupt even the most
33stable contractor. In order to ensure that contractors are not
34subject to disgorgement in these legal challenges if the contractor
35relied upon a good faith belief that the instrument was valid, it is
36necessary that this act take effect immediately.

end insert

All matter omitted in this version of the bill appears in the bill as amended in the Assembly, May 4, 2015. (JR11)