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New California Construction Law for 2019

The California Legislature introduced over 2637 bills in the second half of the 2017-2018 session. This article summarizes some of the more important bills affecting contractors in their roles as contractors, effective January 1, 2019, unless otherwise noted. Not addressed here are many other bills that will affect contractors in their roles as businesses, taxpayers, and employers. Each of the summaries is brief, focusing on what is most important to contractors. Because not all aspects of these bills are discussed, each summary’s title is a live link to the full text of the referenced bills for those wanting to explore the details of the new laws.

BIDDING & PREQUALIFICATIONS

Public School Bidder Prequalification Extended Indefinitely (AB 2031, O’Donnell)

Current law requires a prospective bidder for a construction contract for certain school facility projects to submit a prequalification questionnaire and financial statement, under oath, as part of the bidding process and requires each prospective bidder to submit a bid by completing and executing a standardized proposal form. Current law required the Director of Industrial Relations to submit a report to the Legislature, by January 1, 2018, on whether violations of the Labor Code on school district projects have decreased during the years these provisions are applicable to contracts. Existing law makes all of the above-specified provisions inoperative on January 1, 2019, and repeals them on July 1, 2019. This new law extends the operation of these provisions indefinitely and eliminates the reporting requirement.

Competitive Bidding Project Size Threshold Increased to $200,000 and Alternate Procedures Allowed for Smaller Projects. (AB 2249, Cooley)

The Uniform Public Construction Cost Accounting Act authorizes public projects of $45,000 or less to be performed by the employees of a public agency, authorizes public projects of $175,000 or less to be let to contract by informal procedures, and requires public projects of more than $175,000 to be let to contract by formal bidding procedures. The act permits the governing body of a public agency, in the event all bids received for the performance of that public project are in excess of $175,000, to award the contract at $187,500 or less to the lowest responsible bidder if it determines the cost estimate of the public agency was reasonable. The new law increases these thresholds and authorizes public projects of $60,000 or less to be performed by the employees of a public agency, authorizes public projects of $200,000 or less to be let to contract by informal procedures, and requires public projects of more than $200,000 to be let to contract by formal bidding procedures. If all bids received for the performance of a public project are in excess of $200,000, the agency may award a contract at $212,500 or less to the lowest responsible bidder if it determines the cost estimate of the public agency was reasonable.

Bid Preferences Expanded and Substitutions Allowed for Disabled Veteran Business Enterprises, Local Small Business Enterprises, and Social Enterprises. (AB 2762, Carrillo)

Existing law authorizes a local agency in facilitating contract awards to small businesses to provide for a small business preference of 5% in construction, the procurement of goods, or the delivery of services, and establishes a subcontracting participation goal for small businesses on contracts with a 5% preference for those bidders who meet the goal. The new provisions increase preference for small business to 7%. It also–for the Counties of Alameda, Contra Costa, Lake, Los Angeles, Marin, Napa, San Francisco, San Mateo, Santa Clara, Solano, and Sonoma–establishes until January 1, 2024, preferences of a maximum of 7% for an individual preference and up to 15% for a single bid having 2 or more preferences, up to a maximum of $150,000, for disabled veteran businesses and social enterprises, as defined. The new law also allows a prime contractor, with the approval of the local agency, to substitute another subcontractor for the purpose of meeting specified goals while providing the protections of the Subletting and Subcontracting Fair Practices Act and verifying with the subcontractor the basis for the preference. Each local agency within the target counties must establish a certification process to ensure subcontractors fall within the agencies’ definitions of a small business, disabled veteran business, or social enterprise.

DIR Public Contractor Registration Fee Increase and Three-Year Renewal. (SB 96, Committee on Budget and Fiscal Review)

This new law has 96 sections, and we are concerned with only one in this Law Note. Existing law requires for contracts entered into on or after April 1, 2015 that a contractor or subcontractor register with the Department of Industrial Relations to be eligible to bid on, be listed on a bid proposal for, or perform work on any public work. This registration requires that the contractor or subcontractor provide certain documentation, including proof of proper licensure and proof of workers’ compensation coverage, and pay a $300 fee and an annual renewal fee. This law removes the April 1, 2015 date restriction, increases the fee to $400, and allows a contractor to register or renew for up to 3 years at a time. The law imposes various civil penalties, to be deposited into the State Public Works Enforcement Fund, for each day of work performed in violation of the registration requirement. The Labor Commissioner is now required to issue and serve a stop order prohibiting the use of an unregistered contractor or unregistered subcontractor. Violation of such an order is a misdemeanor.

BONDS & INSURANCE

Authorization for Architects, Engineers, and Land Surveyors to Work as LLPs Extended. (SB 920, Cannella)

Current law authorizes persons licensed to engage in the practice of engineering, land surveying, or architecture to form registered limited liability partnerships and foreign limited liability partnerships if specified conditions are met. Existing law requires those partnerships to provide security of no less than $2,000,000 for claims arising out of the partnership’s professional practice. This law extends this authority to January 1, 2026.

CONSTRUCTION DELIVERY

Caltrans’ Right to Use Construction Manager At-Risk Construction Contracts Expanded. (SB 1262, Beall)

Prior law authorized the Department of Transportation to engage in a Construction Manager General Contractor project delivery method for a limited number of construction of highway, bridge, or tunnel projects with construction costs greater than $10,000,000 and certain other projects. Caltrans was required to use employees or consultants under contract with the department to perform all project design and engineering services related to design services for many of the projects and inspection services for all of these projects. The new law removes the cap on the number of projects and requires use of department employees or consultants to perform project design and engineering services on at least 2/3 of these projects. Caltrans must submit an interim report to the legislature on the effectiveness of each of these projects no later than July 1, 2021 and a final report no later than July 1, 2025.

County Agencies Now Authorized to Use Construction Manager At-Risk Construction Contracts. (SB 914, Dodd)

Current law authorizes a county until January 1, 2023 to utilize construction manager at-risk construction contracts for the erection, construction, alteration, repair, or improvement of any building owned or leased by the county, subject to certain requirements, including that the method may only be used for projects that are in excess of $1,000,000. This law expands that authorization to include public entities, of which the members of the county board of supervisors make up the members of the governing body of that public entity, with the approval of its governing body.

Project Labor Agreements Now Required for All School District and Community College Job Order Contracts Over Amounts Set by Them. (AB 618, Low)

The Local Agency Public Construction Act authorizes job order contracting for school districts and community colleges. This law changes the Act to require a project labor agreement or agreements for all public works awarded through job order contracting and to all other public works that exceed a monetary threshold set by the school district or community college. The bill also extends the limitation that an architect, engineer, consultant, or contractor retained to assist the school district or community college in the development of the job order contract documents may not bid on the job order contract.

Pilot Program Authorized for LAUSD Task Order Contracting. (AB 2488, O’Donnell)

This law establishes, until January 1, 2024, a pilot project in which the Los Angeles Unified School District is authorized to award multiple annual task order procurement contracts, not exceeding $3,000,000 each, for purposes that include, but are not limited to, services, repairs, maintenance, and construction, that are paid for with moneys from the school district’s general fund. Contracts must be awarded to the lowest responsible bidder and be based primarily on plans and specifications for typical work. The school district, before entering into a contract under these provisions, must ensure that it is in compliance with existing provisions authorizing personal services contracting by school districts when specified conditions are met. Task order procurement contracts may be awarded only to supplement existing personnel and may not be used to supplant existing personnel. LAUSD may use task order contracting only if the school district has entered into a project labor agreement or agreements. LAUSD must report to the Legislature on the use of task order contracts by January 15, 2023.

Existing law generally requires the Regents of the University of California to let all contracts involving an expenditure of more than $100,000 annually, and the governing board of any community college district for any expenditure of more than $50,000 annually, for goods and materials or services to the lowest responsible bidder meeting certain specifications, or to reject all bids. Under law sunsetting January 1, 2019, they were authorized to use “best value” in evaluating bids and selecting contractors. This law removes the sunset, so the best value procurement authority is extended indefinitely. This law also removes a requirement that UC and the community college districts report to the legislature on the effectiveness of such procurement.

CSLB

15-Day Time Limit for Requesting Administrative Hearing Review of Licensing Citations. (SB 1042, Monning)

The Contractors’ State License Law provides for the licensure and regulation of contractors by the Contractors’ State License Board in the Department of Consumer Affairs. Existing law requires the board to appoint a registrar of contractors to carry out administrative duties, as provided. Under current law, if the registrar has probable cause to believe that a person is acting in the capacity of or engaging in the business of a contractor or salesperson without a license or registration in good standing, the registrar must issue a citation to that person, as specified. This law requires a person cited under those provisions file a written request for an administrative hearing within 15 days after service of the citation.

Contractors Must Report Multifamily Construction Judgments, Awards, and Settlements of $1,000,000 or More to the CSLB. (SB 1465, Hill)

Licensed contractors, both direct and subcontractors, must report to the CSLB within 90 days of learning of any complex civil action resulting in a final judgment, executed settlement agreement, or final arbitration award in an action in which the contractor is named as a defendant or cross-defendant if (i) the amount or value of the judgment, award, or settlement is $1,000,000 or greater, and (ii) involves a claim for damages to property or person allegedly caused by construction on any part of a multifamily rental residential structure resulting from a failure or condition that creates a substantial risk of a failure of a load bearing element. The registrar must review these reports, return them to the licensee, and take no further action if the registrar finds no basis for disciplinary action. A returned report is deemed to be a complaint resolved in favor of the licensee. An insurer who pays all or a portion of any such judgment, award, or settlement must report to the CSLB certain information about the payment within 30 days of the payment.

DESIGN BUILD

Orange County and Orange County Flood Control District Authorized to Use Design-Build Contracts. (AB 2654, Quirk-Silva)

This new law authorizes the County of Orange to use the design-build process for specified types of public works infrastructure projects, limited to no more than one project per year in excess of $5,000,000. The bill also authorizes the Orange County Flood Control District to use the design-build process for flood protection improvements with a limit of no more than 12 projects in excess of $5,000,000 prior to January 1, 2025.

MISCELLANEOUS

Hospital Seismic Safety Requirements Deadlines Extended. (AB 2190, Reyes)

Existing law, the Alfred E. Alquist Hospital Facilities Seismic Safety Act of 1983, establishes, under the jurisdiction of the Office of Statewide Health Planning and Development, a program of seismic safety building standards for certain hospitals constructed on and after March 7, 1973. A violation of any provision of the act is a misdemeanor. This new law would require all hospitals with buildings subject to the existing January 1, 2020, compliance deadline and who are seeking an extension for their buildings to submit an application to the Office of Statewide Health Planning and Development by April 1, 2019, that specifies the seismic compliance method each building will use, as specified. The new law requires the office to grant an additional extension of time to an owner who is subject to the January 1, 2020, deadline if specified conditions are met. The bill authorizes the additional extension to be until July 1, 2022, if the compliance plan is based upon replacement or retrofit, as defined, or up to 5 years if the compliance plan is for a rebuild, as defined. The bill requires the office, before June 1, 2019, to provide the Legislature with a specified inventory of hospital buildings. The bill authorizes the office to promulgate emergency regulations as necessary to implement these provisions.

April Proclaimed as “California Safe Digging Month.” (SCR 120, Hill)

Utility lines are often buried only a few inches underground, making them easy to strike, which can cause damage and harm even for shallow excavation projects; and more than 300,000 underground utility lines are struck each year in the United States. Approximately 16 percent of all digging damage in the United States results from not contacting the 811 program before digging. Free notification services provided by Underground Service Alert of Northern California and Nevada and Underground Service Alert of Southern California have dramatically reduced the number of accidents causing property damage, personal injury, and interruption of vital services.

The 811 “Call Before You Dig” program is a vital public education and awareness program dealing with the safety of subsurface excavation, and education is the key to promoting safe digging practices. Excavators, homeowners, and professional contractors can save time and money while making California’s communities a safer place to live and work by dialing 811 in advance of all digging projects. Based on the foregoing, the Senate of the State of California, with the concurrence of the Assembly, resolved that April be proclaimed as “California Safe Digging Month.”

New Driver’s Test Questions about Unsafe, Unsecured Loads. (AB 1925, Choi)

Current law requires the Department of Motor Vehicles to administer a written test of those persons seeking driver’s licenses or certificates of renewal. This bill requires the department to include at least one question in at least 20% of the tests of an applicant’s knowledge and understanding of the provisions of the code to verify that the applicant has read and understands that driving with an unsafe, unsecured load is a violation of law and may create a severe traffic safety hazard for other motorists.

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