BILL NUMBER: AB 649AMENDED BILL TEXT AMENDED IN ASSEMBLY MAY 6, 2009 INTRODUCED BY Assembly Members Nestande and Portantino FEBRUARY 25, 2009 An act to add Article 1.6 (commencing with Section 10507.1) to Chapter 2.1 of Part 2 of Division 2 of the Public Contract Code, relating to public contracts. LEGISLATIVE COUNSEL'S DIGEST AB 649, as amended, Nestande. Contracts: University of California. Existing law authorizes the Regents of the University of California to enter into contracts for the erection, construction, alteration, repair, or improvement of a university structure, as specified. This bill would provide for specified procedures when a contractor, as defined, files a change order with the Regents of the University of California pursuant to an existing contract. The bill also would provide for specified procedures allowing arbitration between the Regents of the University of California and contractors. 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. Article 1.6 (commencing with Section 10507.1) is added to Chapter 2.1 of Part 2 of Division 2 of the Public Contract Code, to read: Article 1.6. Approval of Contracts 10507.1. (a) Notwithstanding any other law, this article applies to all public works contracts awarded under this chapter by the Regents of the University of California to a contractor. (b) For purposes of this article: (1) "Claim" means a demand for monetary compensation or damages arising under or relating to the performance of a public works contract. (2) "Contractor" means a contractor within the meaning of Chapter 9 (commencing with Section 7000) of Division 3 of the Business and Professions Code. (3) "Prime contractor" means the contractor who contracts directly with the Regents of the University of California. (4) "Subcontractor" means a contractor who contracts directly with the prime contractor. (5) "Public works contract" means a public works contract as defined by Section 1101. (6) "University" means the Regents of the University of California. (c) The provisions of this article, or a summary thereof, shall be set forth in the plans or specifications for any public works that may give rise to a claim under this article. (d) This article applies only to contracts entered into on or after January 1, 2010. 10507.2. (a) The university may, without affecting the validity of the public works contract, order changes, modifications, deletions, and extra work pursuant to a written proposed change order. (b) Within 20 working days of the issuance of the change order request, the contractor shall provide to the university, in writing, the price of the change, with supporting documentation. (1) If the university agrees to the proposed price, it shall issue to the contractor a written change order within 10 working days. The change order shall be incorporated into, and become part of, the public works contract. (2) If the university does not agree to the proposed price, it may issue a written change order with an alternative price, with supporting documentation, within 10 working days. If the parties cannot reach agreement upon the amount to be charged or credited, they shall proceed to arbitration as provided in this article. (3) If the university fails to approve or reject the scope and pricing within 30 working days after receipt thereof, there shall exist a rebuttable presumption that the university has approved the change order. (c) If there is a dispute concerning whether work to be performed by the contractor is outside the scope of work required by the public works base contract, the contractor shall immediately notify the university, in writing, of its position, with supporting documentation. If the university rejects the contractor's claim for extra work, the university shall, within 20 working days, provide a written response, with supporting documentation relating to defenses to the claim the university may have against the contractor. If the parties cannot resolve their dispute by negotiation, they shall proceed to arbitration as provided in this article. (d) Payments to the contractor for extra work performed by the contractor shall be made as the extra work progresses concurrently with payments made under the payment schedule. The contractor may stop work if any payment, including payment for extra work, is not made to the contractor as provided in this article. (e) Requests for extra work shall be made in writing. (f) Failure to adhere to the provisions of this article does not preclude recovery of compensation for work performed by the contractor based on quasi-contract, quantum meruit, restitution, or a similar remedy designed to prevent unjust enrichment. 10507.3. The following procedures are established for all claims arising under public works contracts made under the provisions of this chapter. (a) If the university fails to respond within the time prescribed for change orders, or if the contractor disputes the university's written response to a claim for extra work, or if the parties are otherwise unable to resolve any claim arising under a public works contract, the contractor may notify the university and demand an informal conference to settle the issues in controversy. Upon a demand by the contractor, the university shall schedule an informal conference within 30 working days of the contractor's written demand for settlement of the issues in controversy. (b) If any claim remains unresolved following the informal conference, or if the informal conference does not proceed within 30 working days of the contractor's written demand, the contractor may immediately initiate arbitration proceedings.The contractor shall not be required to exhaust any administrative procedure or to pursue any contractual dispute resolution procedure contained in the public works contract, or otherwise, as a condition precedent to initiating arbitration.(c) Unless otherwise agreed to by the parties, all of the following apply: (1) For claims of less than fifty thousand dollars ($50,000), the arbitration shall be conducted by a single arbitrator selected by the parties. If the parties cannot agree on the arbitrator, either party may petition the superior court to appoint an arbitrator. (2) For claims in excess of fifty thousand dollars ($50,000), the arbitration shall be conducted by a three-member arbitration panel composed of one representative chosen by each of the parties and one representative chosen jointly. (d) Except as provided in this chapter, the procedure governing the arbitrations shall be as set forth in Title 9 (commencing with Section 1280) of Part 3 of the Code of Civil Procedure. For claims in excess of fifty thousand dollars ($50,000), the provisions of Section 1283.05 of the Code of Civil Procedure, except subdivision (e) of that section, apply to the conduct of discovery for any arbitration conducted pursuant to this section. (e) Unless the parties to the contract otherwise agree, the arbitration decision shall be decided under, and in accordance with, the laws of this state, shall be supported by substantial evidence, and shall set forth, in writing, the basis for the decision, findings of fact, and conclusions of law. (f) The cost of conducting the arbitration shall be borne equally by the parties, except that the arbitrator shall award to the prevailing party reasonable attorneys' fees and costs. (g) Interest may be recovered as part of the award as in a civil action. The arbitrator shall have the same authority as a court in awarding interest and the commencement of the arbitration is equivalent to the filing of an action under subdivision (b) of Section 3287 of the Civil Code for the purpose of an award of interest. (h) A party may petition, within the applicable time periods and upon the grounds specified in this section and in Article 1 (commencing with Section 1285) of Chapter 4 of Title 9 of Part 3 of the Code of Civil Procedure, the court to confirm, correct, or vacate the award rendered by the arbitrator.