California 2023 Construction Law Highlights | Snell & Wilmer

SB 674 High Roads Jobs-Transportation

  • This bill would establish the High “Road Jobs in Transportation – Related Public Contracts” to support the creation of equitable high-quality transportation and related manufacturing and infrastructure jobs. This relates directly to the State’s intention to purchase EVs and related equipment valued at $10 million or more to incorporate high road job standards which need to be developed. The intent is to incorporate social justice policy into construction contracts in alternate energy infrastructure public works.
  • What is a High Road Job? A High Road Job is one that pays good wages, follows labor standards, adheres to practices of substantial environmental policies and incorporates social justice. There are no construction criteria but a state law to force undefined “justice” social policy into public works contracts.
  • This bill will require a contractor every 12 months to submit information necessary to demonstrate its compliance with the specified requirements to the relevant public agency regarding High Road Job regulations and compliance thereof. Failure to comply submits the contractor to a $10,000 fine for each report that’s missed to be deducted from final payment. The bill is intended to cover the electrification in public works to accommodate EVs.

AB 2232 School HVAC Requirements

  • This bill requires that a covered school, defined as a school district, the County office of education, a chartered school, a private school, the California Community Colleges, the California State University, and requests the University of California, to ensure their facilities have HVAC systems that meet specified minimum ventilation rate requirements, unless the existing HVAC system is not capable of safely and efficiently providing the minimum ventilation rate in which case the bill would require a covered school, and request the University of California, to ensure that its HVAC systems meet the minimum ventilation rates in effect at the time the building permit for installation of the HVAC system was issued.

AB 2446 Carbon Emissions Construction Materials

  • This bill would require the State, by July 1, 2025, to develop a framework for measuring and then reducing the average carbon intensity of the materials used in the construction of new buildings, including those for residential uses. The bill would require the framework to include a comprehensive strategy for the State’s building sector to achieve a 40% net reduction in greenhouse gas emissions of building materials, as determined from a baseline calculated using a certain 2026 report (to be created). The bill would require the strategy to achieve this 40% target as soon as possible, but no later than December 31, 2035, with an interim target of 20% net reduction by December 31, 2030.

SB 1422 No Bid Contracts

  • This bill would authorize the Director of General Services to use alternative no-bid contracting procedures for contracts for the installation or purchase and installation, of carpet, resilient flooring, synthetic turf, or lighting fixtures that will satisfy existing law. Existing law authorizes state and local agencies to contract with suppliers awarded those contracts without further competitive bidding.
  • The state or agency may contract with suppliers and may award these no-bid contracts if all of the following requirements are satisfied: 1) the installation work is not performed in connection with new construction; 2) compliance with the labor code; and 3) commitment that a skilled and trained workforce will be used to complete the installation work.

SB 1354 Design Build- ADA Compliance

  • This bill would authorize a city, county, or city and county to use the design build contracting process for contracts for constructing projects that are necessary in order to comply with construction-related accessibility standards.

SB 991 Design Build- Water Projects

  • This bill, and until January 1, 2029, authorized local agencies, defined as any city, county, city and county, or special district authorized by law to provide for the production, storage, supply, treatment, or distribution of any water from any source to use the progressive design build process for up to 15 public works projects in excess of $5 million for each project.
  • After selecting a design build entity, the local agency may enter into a contract to direct the design build entity to begin design and preconstruction activities sufficient to establish a guaranteed maximum price for the project.
  • Upon agreement of the guaranteed maximum price for the project, the local agency, at its sole and absolute discretion, may amend its contract with the design build entity to contract for the remaining design, preconstruction, construction activity sufficient to complete and close out the project, consistent with the guaranteed maximum price. There are exceptions for unforeseen conditions.
  • If the cost for completing all remaining design, preconstruction, construction activity sufficient to completely close out the project exceed the guaranteed maximum price, the cost exceeding the guaranteed maximum price shall be the responsibility of the design build entity.
  • If the cost for these activities are less than the guaranteed maximum price, the design build entity shall not be entitled to the difference between the cost and the guaranteed maximum price unless there is a prior written agreement concerning the sharing of these funds. For purposes of this section, costs shall include the design build entity’s direct costs, general conditions, overhead, and fee.
  • The design professionals responsible for performing design services on behalf of a design build entity that has been replaced pursuant to this statute, shall have sole liability for the design errors and omissions, provided the local agency elects to use their complete and stamped designs.
  • This is a comprehensive multipage statute and is new law without any case law guidance.

AB 1932 Construction Manager At-Risk

  • Existing law authorizes, until January 1, 2023, a county, with approval of the Board of Supervisors, or a public entity, of which the members of the County Board of Supervisors makeup members of the governing body of the public entity, with the approval of its governing body, to utilize construction manager at risk construction contracts for the construction, alteration, repair or improvement of any infrastructure, owned or leased by the county, subject to certain requirements including that the method be used only for products that are in excess of $1 million. This bill extends those provisions until January 1, 2029.

AB 2173- Exception to 5% Retention Withholding- Public Contract Code

  • Existing law, to January 1, 2023, authorizes the retention proceeds withheld from any payment by an awarding entity, as described, from the original contractor, by the original contractor from any subcontractor, and by subcontractor from any subcontractor, to exceed 5% on specific projects where the director of the applicable department, as specified has made, or the governing body of the public entity or designated official of the public entity has approved, a finding prior to the bid that the project is substantially complex and requires a higher retention in the department or public entity includes both this finding and the actual retention amount in the bid documents. This bid would make these provisions operative indefinitely. Public Contract Code 7201.

Notable Construction Cases

  • One issue that has finally been resolved is whether B&P Section 7031 bars a licensed contractor from seeking compensation for work performed by an unlicensed subcontractor. In Kim v. TWA Construction, Inc., Case No. H045900 (May 13, 2022), the 6th District Court of Appeals finally addressed that issue. The Court of Appeals looked at the Contractors State License Law and determined the statutory scheme of which it is part of and concluded that section 7031 bars a licensed contractor from seeking compensation for work performed by an unlicensed subcontractor.
  • In Cell-Crete Corporation v. Federal Insurance Company, 82 Cal.App.5th 1090 (2022), the 4th District Court of Appeal examined whether a payment bond surety, who prevails in a claim against the payment bond, is entitled to statutory attorneys’ fees when the party actually incurring the attorneys’ fees was the general contractor, pursuant to its defense and indemnity obligations, as opposed to the surety itself. The surety argued on appeal that it was entitled to recover its costs in the plain language of CCP 1032 in any action or proceeding. The Court of Appeal explained that a judge must award reasonable attorney’s fees to the prevailing party regardless of whether the prevailing party ultimately is responsible to pay for the fees. For payment bond sureties and their principals this case clarifies that prevailing payment bond sureties, even if defended by their principals pursuant to a defense and indemnity agreement, are entitled to recover the attorneys’ fees incurred in defending against claims against the payment bond.