BILL NUMBER: SB 1642	AMENDED
	BILL TEXT

	AMENDED IN SENATE  APRIL 3, 2008
	AMENDED IN SENATE  MARCH 25, 2008

INTRODUCED BY   Senator Yee

                        FEBRUARY 22, 2008

   An act to  add Section 9204 to   amend
Sections 20104 and 20104.2 of  the Public Contract Code,
relating to public contracts.



	LEGISLATIVE COUNSEL'S DIGEST


   SB 1642, as amended, Yee. Public contracts: claims.
   Existing law authorizes a public entity to compromise or otherwise
settle any 3rd-party claim relating to a public works contract.
   This bill would define "claim" for those purposes to mean a
written demand or assertion by a contractor  or public entity
 , a local agency, charter city, or charter county
 or other relief with respect to the contract documents, as
specified.
   This bill would  , for contracts entered into on or after
January 1, 2009,  provide for a mediation process and binding
arbitration process for claim disputes  over $50,000 
between a contractor and  public entity   a
local agency  , charter city, or charter county which does not
have an alternative dispute process, if those claims remain
unresolved after a specified time period. This bill would authorize,
if either party is required to initiate a civil action in which to
enforce the rights provided under these provisions, reasonable
attorney fees and costs to the prevailing party. 
   By requiring local agencies, charter cities, and charter counties
to incorporate this mediation and binding arbitration process in
specified claim disputes, this bill would impose a state-mandated
local program.  
   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.  
   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. 
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program:  no   yes  .


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 20104 of the   Public
Contract Code   is amended to read: 
   20104.  (a)  (1)    This article
applies to all public works claims  of three hundred
seventy-five thousand dollars ($375,000) or less  which
arise between a contractor and a local agency  , charter city, or
charter county  . 
   (2) This article shall not apply to any claims resulting from a
contract between a contractor and a public agency when the public
agency has elected to resolve any disputes pursuant to Article 7.1
(commencing with Section 10240) of Chapter 1 of Part 2. 
   (b) (1) "Public work" has the same meaning as in Sections 3100 and
3106 of the Civil Code, except that "public work" does not include
any work or improvement contracted for by the state or the Regents of
the University of California.
   (2) "Claim" means  a separate demand by the contractor for
(A) a time extension, (B) payment of money or damages arising from
work done by, or on behalf of, the contractor pursuant to the
contract for a public work and payment of which is not otherwise
expressly provided for or the claimant is not otherwise entitled to,
or (C) an amount the payment of which is disputed by the local agency
  a written demand or assertion by a contractor, local
agency, charter city, or   charter county, including change
orders seeking an adjustment or interpretation of the terms of the
contract documents, payment of money, extension of time, or other
relief with respect to the contract documents, including a
determination of disputes or matters in question between the local
agency, charter city, or charter county and contractor arising out of
or related to the contract documents of the performance of the work
 .
   (c) The provisions of this article or a summary thereof shall be
set forth in the plans or specifications for any work which may give
rise to a claim under this article.
   (d) This article applies only to contracts entered into on or
after January 1,  1991   2009  .
   SEC. 2.    Section 20104.2 of the   Public
Contract Code   is amended to read: 
   20104.2.  For any claim subject to this article, the following
requirements apply:
   (a) The claim shall be in writing and include the documents
necessary to substantiate the claim. Claims must be filed on or
before the date of final payment. Nothing in this subdivision is
intended to extend the time limit or supersede notice requirements
otherwise provided by contract for the filing of claims.
   (b) (1) For claims of less than fifty thousand dollars ($50,000),
the local agency , charter city, charter county, or contractor
 shall respond in writing to any written claim within 45 days of
receipt of the claim, or may request, in writing, within 30 days of
receipt of the claim, any additional documentation supporting the
claim or relating to defenses to the claim the local agency may have
against the claimant.
   (2) If additional information is thereafter required, it shall be
requested and provided pursuant to this subdivision, upon mutual
agreement of the local agency  , charter city, charter county, or
contractor  and the claimant.
   (3) The local agency's  , charter city's, charter county's, or
contractor's  written response to the claim, as further
documented, shall be submitted to the claimant within 15 days after
receipt of the further documentation or within a period of time no
greater than that taken by the claimant in producing the additional
information, whichever is greater. 
   (c) (1) For claims of over fifty thousand dollars ($50,000) and
less than or equal to three hundred seventy-five thousand dollars
($375,000), the local agency shall respond in writing to all written
claims within 60 days of receipt of the claim, or may request, in
writing, within 30 days of receipt of the claim, any additional
documentation supporting the claim or relating to defenses to the
claim the local agency may have against the claimant. 

   (2) If additional information is thereafter required, it shall be
requested and provided pursuant to this subdivision, upon mutual
agreement of the local agency and the claimant.  
   (3) The local agency's written response to the claim, as further
documented, shall be submitted to the claimant within 30 days after
receipt of the further documentation, or within a period of time no
greater than that taken by the claimant in producing the additional
information or requested documentation, whichever is greater.
 
   (d) If the claimant disputes the local agency's written response,
or the local agency fails to respond within the time prescribed, the
claimant may so notify the local agency, in writing, either within 15
days of receipt of the local agency's response or within 15 days of
the local agency's failure to respond within the time prescribed,
respectively, and demand an informal conference to meet and confer
for settlement of the issues in dispute. Upon a demand, the local
agency shall schedule a meet and confer conference within 30 days for
settlement of the dispute.  
   (e) Following the meet and confer conference, if the claim or any
portion remains in dispute, the claimant may file a claim as provided
in Chapter 1 (commencing with Section 900) and Chapter 2 (commencing
with Section 910) of Part 3 of Division 3.6 of Title 1 of the
Government Code. For purposes of those provisions, the running of the
period of time within which a claim must be filed shall be tolled
from the time the claimant submits his or her written claim pursuant
to subdivision (a) until the time that claim is denied as a result of
the meet and confer process, including any period of time utilized
by the meet and confer process.  
   (c) (1) This subdivision shall apply to all claims over fifty
thousand dollars ($50,000) with any local agency, charter city,
charter county, or contractor which does not have an alternative
dispute process provided for by contract.  
   (2)  Upon submission of the claim, the applicable local agency,
charter city, charter county, or contractor shall review the claim
and make a determination within a 45-day period as to what portion of
the claim, if any, is undisputed and shall satisfy that portion of
the claim. If the local agency, charter city, or charter county
requests additional information to analyze the claim or any portion
thereof, it shall submit a request for information within 30 days of
the date on which it first receives the claim. Once a local agency,
charter city, charter county, or contractor has received additional
information, it shall have an additional 30-day period in which to
satisfy any undisputed portion of the claim, and to identify those
portions of the claim which it disputes. The maximum amount of time
the local agency, charter city, charter county, or contractor may
request additional information to extend the requirement that it
provide a final written determination is 105 days from the date of
the first submission of the claim.  
   (3) In the event there is any portion of a claim that remains
unresolved, the party who submitted the claim, at its discretion, may
demand mediation with the parties mutually agreeing to a mediator
within 30 days from the date of the demand for mediation. If the
parties are not able to mutually agree on a mediator, the parties
shall utilize the American Arbitration Association to assist in the
selection of a mediator. 
    (4)   If any portion of the claim remains unsettled
after mediation, the contractor and the local agency, charter city,
or charter county shall submit the dispute to binding arbitration,
and shall follow the same procedure for selecting an arbitrator as
set forth in paragraph (2) for the selection of a mediator. 

   (5) Failure by the local agency, charter city, or charter county
to respond to a claim within the time periods set forth in this
subdivision shall result in the claim deemed being approved in its
entirety, and shall be processed for payment within five days from
the expiration of the time period in which the local agency, charter
city, or charter county is required to act. Failure by the contractor
to respond to a claim from the public entity, charter city, or
charter county within the time periods prescribed in this subdivision
shall result in the claim being denied. The parties may extend the
time period for response by mutual agreement.  
   (6) If either party is required to initiate a civil action in
which to enforce the rights provided under this section, the
prevailing party shall be entitled to its reasonable attorney fees
and costs.  
   (f) 
    (d)  This article does not apply to tort claims and
nothing in this article is intended nor shall be construed to change
the time periods for filing tort claims or actions specified by
Chapter 1 (commencing with Section 900) and Chapter 2 (commencing
with Section 910) of Part 3 of Division 3.6 of Title 1 of the
Government Code. 
   (e) Exercising rights established under this section supercedes
any and all notice requirements under Part 3 (commencing with Section
900) of Division 3.6 of Title 1 of the Government Code. 
   SEC. 3.    If the Commission on State Mandates
determines that this act contains costs mandated by the state,
reimbursement to local agencies and school districts for those costs
shall be made pursuant to Part 7 (commencing with Section 17500) of
Division 4 of Title 2 of the Government Code.  
  SECTION 1.    Section 9204 is added to the Public
Contract Code, to read:
   9204.  (a) For purposes of this article, "claim" means a written
demand or assertion by a contractor or public entity including change
orders seeking an adjustment or interpretation of the terms of the
contract documents, payment of money, extension of time, or other
relief with respect to the contract documents, including a
determination of disputes or matters in question between the public
entity and contractor arising out of or related to the contract
documents of the performance of the work.
   (b) (1) This subdivision shall apply to any public entity, charter
city, or charter county which does not have an alternative dispute
process provided for by contract.
   (2) Upon submission of a claim, the applicable public entity,
charter city, charter county, or contractor shall review the claim
and make a determination within a 30-day period as to what portion of
the claim, if any, is undisputed and shall satisfy that portion of
the claim. If the public entity, charter city, or charter county
requests additional information to analyze the claim or any portion
thereof, it shall submit a request for information within 30 days of
the date on which it first receives the claim. Once a public entity,
charter city, or charter county has received additional information,
it shall have an additional 30 day period in which to satisfy any
undisputed portion of the claim, and to identify those portions of
the claim which it disputes. The maximum amount of time the public
entity, charter city, or charter county may request additional
information is 90 days from the date of the first submission of the
claim.
   (3) In the event there is any portion of a claim that remains
unresolved, the party who submitted the claim, at its discretion, may
demand mediation with the parties mutually agreeing to a mediator
within 30 days from the date of the demand for mediation. If the
parties are not able to mutually agree on a mediator, the parties
shall utilize the American Arbitration Association to assist in the
selection of a mediator.
   (4) If any portion of the claim remains unsettled after mediation,
the contractor and the public entity, charter city, or charter
county shall submit the dispute to binding arbitration, and shall
follow the same procedure for selecting an arbitrator as set forth in
paragraph (3) for the selection of a mediator.
   (c) Failure by the public entity, charter city, or charter county
to respond to a claim within the time periods set forth in
subdivision (b) shall result in the claim deemed being approved in
its entirety, and shall be processed for payment within five days
from the expiration of the time period in which the public entity,
charter city, or charter county is required to act. Failure by the
contractor to respond to said claim from the public entity, charter
city, or charter county within the time periods prescribed in
subdivision (b) shall result in the claim being denied. The parties
may extend this time period by mutual agreement.
   (d) If either party is required to initiate a civil action in
which to enforce the rights provided under this section, the
prevailing party shall be entitled to its reasonable attorney fees
and costs.