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Public projects don’t always afford the same protection as private ones. Sure, Little Miller Acts do a good job of closing the protection gap between public and private projects, but there’s nothing quite like the power of a mechanics lien to speed up late payments (or payments that are not forthcoming at all). A few weeks back, we posted about how Stop Payment Notices help to bridge protection for California public projects where payment bonds aren’t present. This fall, another tool for protection was put into law – AB 1223.

Here’s the full text of AB 1223, as well as analysis from the Assembly Committee on Local Government.

California Public Projects: Payments to GC’s Are Published Online

Payment Bond Claims and Stop Payment notices both provide protection for California public projects, but there are other tools for protection – like prompt payment laws and retainage laws.

These protections set time periods for how quickly payment must be sent down the chain after being made by a public entity. Notably, if payments aren’t made according to statute, penalties come into play – a party who fails to pay will have to pay steep interest percentages on those payments. Under Cal. Pub Cont. Code § 10262.5, a contractor who fails to make timely payments to a subcontractor faces interest of 2% per month!

While these penalties should be enough to keep payments on track, enforcing prompt payment or retainage claims can be a chore. One major issue has been this – How will a subcontractor or supplier even know when payment made its way from the public entity to the contractor? This info may have been hard to come by in the past, but California AB 1223 is here to change that.

Check out our posts on AB 534, AB 1701, and other recent California legislation.

California AB 1223

Under AB 1223, subs and suppliers will know when a contractor has received payment. It’s rare that we can fit new legislation into a blog post in it’s entirety, but here’s AB 1223:

(a) Within 10 days of making a construction contract payment, a state agency that maintains an Internet Web site shall post on its Internet Web site the following:
1. The project for which the payment was made.
2. The name of the construction contractor or company paid.
3. The date the payment was made or the date the state agency transmitted instructions to the Controller or other payer to make the payment.
4. The payment application number or other identifying information.
5. The amount of the payment.
(b) This section shall not apply to a construction contract valued below twenty-five thousand dollars ($25,000).
(c) This section shall not apply to progress payments published under Section 10262.3.

What it means

Unlike many construction laws, AB 1223 is pretty darn straight forward. But it couldn’t hurt to break it down a little more…

What does it do? AB 1223 requires that when payment is made by a public entity to a GC, notice that a payment was made must be posted online within 10 days. Subs and suppliers will now know when a GC has been paid.

Where does it apply? AB 1223 applies to California public projects exceeding $25,000.

Who does it help? The biggest benefit is bestowed upon subs and suppliers. For GC’s, it should really change much – except now everyone on a project will know when they’ve been paid.

Who does it hurt? For public entities, this means that they’ll be required to post a lot of information. That’s why opponents to the bill tried (unsuccessfully) to extend the period for posting from 10 days to 21 days. The opponents were successful in limiting the scope of the bill, though –  agencies who do not maintain a website where the information would otherwise be posted will not be required to make such postings.

How quickly will the information be posted? The public agency, if required, will have to do so within 10 days of making payment to the GC.

Where can this information be found? The information required by AB 1223 can be found on an agency’s website (if it has one). Here’s an example from the California Department of Transportation.

Check out our California Construction Payment Resources for more California construction law info. Working in other states too? Select any state.

California Public Projects: Payments to GC's Are Published Online
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California Public Projects: Payments to GC's Are Published Online
On California public projects, prompt payment and retainage laws create penalties for slow paying contractors. With the passing of AB 1223, subs and suppliers can better enforce their right to payment.
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Lien Law News
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