NEW!!   SB 293 & SB 474 - Signed by Governor TWO Victories for the Construction Industry!

October 11, 2011 American Subcontractors Association of California Supported!

SB 293 - RETENTION affects retention in public works projects

SB 474 - INDEMNIFICATION affects commercial construction

See Below for What these 2 Bills Governor Brown Signed mean to YOU and YOUR Company!  These two new laws are MAJOR improvements for the construction industry!  THANKS TO ALL OF YOU WHO HELPED BY WRITING LETTERS!

SB 293 (Padilla) (SCROLL DOWN FOR SB 474)
Introduced in behalf of the California State Council of Laborers, and as subsequently amended to cap retentions in public projects, it was supported by numerous groups. ASAC always supported the 5% retention cap and shorter pay period but was in full support of SB 474 when it was also amended to preserve subcontractors' late bond claim rights. In support as of the final senate staff analysis were:

Air-conditioning & Refrigeration Contractors Association
Associated General Contractors of California
Building Industry Credit Association
California Chapters of the National Electrical Contractors Association
California Landscape & Irrigation Council
California Legislative Conference of Plumbing, Heating, and Piping Industry
Concrete Contractors Association, Inc.
Engineering & Utility Contractors Association
Golden State Building Exchange
Los Angeles Department of Water and Power
State Building and Construction Trades Council
(per staff report)

In opposition were hundreds of public entities.

SB 293 takes effect January 1, 2012. It:

1.Decreases, from 10 to 7, the number of days by which a prime contractor or subcontractor must pay a subcontractor after receiving a progress payment, unless otherwise agreed to in writing.

2.Requires a subcontractor to give written notice to the surety and bond principal that he or she is enforcing a claim prior to completion or recordation of the Notice of Completion of a project, except as specified, if the 20-day public works preliminary notice was required by any person that has no direct contractual relationship with the contractor and who has not given notice as provided in Civil Code Section 3098, that person may enforce a claim by giving written notice to the surety and bond principal within 15 days after recordation of a notice of completion. If no notice of completion has been recorded, the time for giving written notice to the surety and the bond principal is extended to 75 days after completion of the work of improvement. This provision would not apply in the event that all progress payments, other than those disputed in good faith, have been made to a subcontractor who has a direct contractual relationship with the general contractor to whom the claimant has provided materials or services, or in the case of a subcontractor who has been terminated from the project pursuant to the contract, all such progress payments have been made as of the termination date, except those disputed in good faith.

3.Exempts a laborer from preliminary notice requirements to a surety and bond principal and any deadline to enforce a claim after the completion of a project for private works of improvement.

4.Prohibits a public entity from retaining more than five percent of a contract price until final completion and acceptance of a project.

5.Requires that retention proceeds between an original contractor and a subcontractor, or between two subcontractors, not exceed five percent of payment or contract price. Does 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.

6. Prohibits progress payments on public works contracts from being made in excess of 100 percent of the percentage of actual work completed.

7.Authorizes a public entity to retain more than five percent of the contract price in public works projects under the following conditions:

A. For certain projects awarded by state departments, the project is substantially complex and the department includes this finding and the actual retention amount in the bid documents;

B. For projects awarded by local entities, the governing body of the local public entity, or its designee, has approved or ratified by a majority vote during a properly noticed and normally scheduled public hearing prior to bid that the project is substantially complex, and includes this finding and the actual retention amount in the bid documents;
and,

C. Retention proceeds between an original contractor and a subcontractor, or between two subcontractors, shall not exceed the specified retention percentage in the contract between the public entity and the original contractor.

1.Sunsets these retention provisions on January 1, 2016.

2.Defines "public entity" to mean 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.

SB 474 (Evans)...Indemnity Reform

Cosponsored by :
California Association of Sheet Metal and Air Conditioning, Contractors' National Association,
California Legislative Conference of the Plumbing, Heating and Piping Industry,
Concrete Contractors Association,
Crane Owners Association,
California Chapters of the National Electrical Contractors Association.

In opposition, among others, were:
Associated General Contractors
California Conference of Carpenters
Construction Employers Association

SB 474 takes effect on January 1, 2013

SB 474's staff synopsis as enrolled and sent to the Governor:

1. Prohibits construction contracts requiring indemnity, insurance, or defense obligations by a subcontractor for the active negligence or willful misconduct of a general contractor, his/her agents, or certain other subcontractors.

2. Provides that, unless otherwise prohibited under this bill, the parties to a construction contract can freely contract for other protections and obligations of each party, but allows numerous exemptions, including residential construction contracts, direct contracts with a public agency or owner, and insurance contracts for project wrap up and workers' compensation.

3. Requires an insurer to uphold their contractual obligations to additional insureds pursuant to Presley Homes, Inc. v. American State Insurance Company (2001) 90 Cal.App.4th 571.

4. Provides that an insurer maintains reimbursement rights from a general contractor or other subcontractor pursuant to the holding in Buss v. Superior Court (1997) 16 Cal.4th 35.

5. Provides a defense or settlement option for commercial construction contracts similar to existing law regarding residential construction contracts under which a subcontractor, after receiving claim information from the general contractor, has the option to defend the claim or pay its portion of the claim.

6. Provides that in the event a contractor fails to maintain its obligations to defend or pay its portion of the claim, the general contractor may make a claim for compensatory and consequential damages and reasonable attorney's fees.

7. Clarifies that a public agency is prohibited from shifting its liability for its active negligence to a contractor, subcontractor, or materials supplier.

8. Establishes that a project owner, not acting as a project manager, general contractor, or materials supplier, is prohibited from shifting liability for its active negligence to a contractor, subcontractor, or materials supplier.

9. Provides that these new rights and obligations shall be construed to affect the obligation, if any, of either a contractor or construction manager to indemnify, including defending or paying the costs to defend, a public agency against any claim arising from the alleged active negligence of the public agency under Civil Code Section 2782(b) or to indemnify, including defending or paying the costs to defend, an owner of privately owned real property to be improved against any claim arising from the alleged active negligence of the owner under Civil Code Section 2782(c).

10.Provides that the foregoing changes shall not be construed to affect the obligation, if any, of either a contractor or construction manager to provide or maintain insurance covering the acts or omissions of the promisor, including additional insurance endorsements covering the acts or omissions of the promisor during ongoing and completed operations pursuant to a construction contract with a public agency under Civil Code Section 2782(b) or an owner of privately owned real property to be improved under Civil Code Section 2782(c).

ASA California will continue to educate its members and supporters - watch your e-mail for more information on how these two bills will help YOU!

Non-Members: Please e-mail us at asac@asacalif.com to find out how you can join the association that is LEADING SUBCONTRACTORS AND SUPPLIERS TO EQUITABLE LEGISLATION IN CALIFORNIA!  Visit ASA California on the Web!

www.ASACalif.com  Soon to include a list of ASAC members and Government Relations Donors.  Add it to your favorites and visit often!

ASAC Appreciates YOUR Help!

ASAC leaders asked you to do your part, helping our Subcontractor community with your letters and phone calls.
Many of you came through, and can take pride in helping get these two bills through the Legislature.
Remember -- We only ask when we truly believe your efforts will be influential in determining the direction a bill or movement heads.
Those efforts do make a difference! There's strength in numbers!!!!!

Santo Pernicano                                                          Daniel McLennon, Esq.
ASAC President                                                          ASAC Government Relations Chair
AREA-WEST FENCE CO.                                          McLENNON LAW CORPORATION
619-561-4900                                                             415-394-6688
santo@areawestfence.com                                      dmclennon@mclennonlaw.com

         FAIRNESS TO SUBCONTRACTORS CONTRIBUTORS: These companies came through already in 2011 for ASAC!  Thank you to:

As you can imagine, running bills in the California Legislature and defending your subcontractor rights is a costly undertaking. ASAC asks that you contribute what you are able to this effort. Please write your check today.   For more information and a CONTRIBUTION FORM Please Click on the link.

SAVE THE DATE: ASA BUSINESS FORUM AND CONVENTION 2012 SET FOR MARCH 1-3 IN SAN ANTONIO

ASA’s flagship education and networking event for subcontractors, the ASA Business Forum and Convention, will take place March 1-3, 2012, at the Hyatt Regency San Antonio. In addition to dozens of educational sessions designed to help construction subcontractors improve their businesses, the convention will include special events and networking opportunities. The Hyatt Regency San Antonio is located near the Alamo in the heart of San Antonio’s famed River Walk, providing immediate access to lush River Walk area restaurants and boutiques. Mark your calendar now for this once-a-year event! Throughout the year, visit www.asaonline.com for updates on convention programming and special events. Call (888) 421-1442 to make your hotel room reservation. The cutoff for the ASA special room rate of $189 (single/double) is Jan. 28, 2012.

ASAC Quarterly Meetings  October 28, 2011  California State Capitol, Sacramento CA FOR ASA California MEMBERS  NOW IS THE TIME TO REVIEW YOUR INSURANCE

For most contractors there has been little urgency to review their Liability insurance over the past few years.

Payrolls and sales have been down, and so have premiums. Insurance has not been a major expense factor. There are two major reasons why that situation might be changing, and why you should start giving some serious thought to your insurance program.

The first is the economy itself. There are signs that indicate that the decline in construction over the past few years has now slowed, or hopefully stopped, and work is beginning to come back. It will be many years before we return to where we were, but we are hearing that many contractors are having to hire back a few employees as business starts to pick up. This will definitely impact your insurance costs.

TThe second reason is the insurance marketplace itself. Workers Comp rates are already beginning to rise. General Liability rates often follow. Property insurance rates are likely to  increase as a result of all the natural disasters both in the US and around the world. You need to be prepared to bid new jobs accurately by knowing what your insurance costs are likely to be in the future, not what they are now.

Your association has been planning ahead for when this turn-around would take place. We have been working to put together a Liability/Package program tailored specifically for our members. It has very attractive cash flow advantages that any contractor would appreciate.  These include monthly payroll reporting, rolling the deposit at renewal, no minimum premium, audits both up and down, competitive rates, and broad coverages.

To learn more, please call one of these ASAC members who send part of their commission to the association.  CALL NOW AND START SAVING

IOA Insurance Services
Sacramento CA
Ken Wagner 916-692-7007
ken.wagner@ioausa.com
Lic# 0E67768

Rancho Mesa Insurance Services
San Diego CA
Sam Clayton 619-937-0167
sclayton@ranchomesa.com
Lic# OC32169

RPW / United Agencies
Downey CA
Gregg Wright 562-373-9351
gwright@unitedagencies.com
Lic#