New laws concerning the construction industry will go into effect in 2007, some of which are previewed below. These laws encompass a wide variety of issues including indemnification of design professionals, the ability of architects to practice as limited liability partnerships, “green” building construction, expansion of design-build procurement, revocation and suspension of contractors’ licenses, execution of public university contracts, and regulation of the conduct of architects.
AB 573: Indemnity of Design Professionals
Assembly Bill 573 limits public agencies’ ability to obtain contractual indemnification from design professionals. The bill requires that all indemnity clauses be limited to claims that arise out of or relate to the negligence, recklessness or willful misconduct of the design professional. Previously, public agencies could obtain contractual indemnification from design professionals for claims that also involved the public agencies’ negligence or other fault.
AB 2914: Architectural Limited Liability Partnerships
Architects may continue to practice as limited liability partnerships (LLPs) based on the passage of Assembly Bill 2914. AB 2914 permits architects to continue to practice as LLPs until 2012; the previous deadline was 2007. The legislation also increases the minimum amount of professional liability insurance required of architects practicing as LLPs. Prior to 2007, the minimum limit of professional liability insurance required was $500,000 for firms with 5 or fewer licensed architects. AB 2914 increases this minimum limit to $1 million. The minimum amount of insurance required of larger firms (i.e., firms with more than 42 architects) will remain at $5,000,000.
AB 2160: Green Building
Assembly Bill 2160 adds to the existing requirement that new public buildings be designed, constructed and equipped as models of energy efficiency. The bill requires the Department of General Services to establish a life cycle cost analysis model for use with respect to certain state building design and construction decisions. AB 2160 also directs specified state entities to identify and develop financing and project delivery mechanisms for the facilitation of the state’s building energy and resource efficiency projects. Furthermore, in addition to identifying obstacles to private sector commercial energy and resource efficient projects, specified state entities and private entities together must, under the new bill, identify and recommend incentives to facilitate private sector commercial building energy and resource efficiency.
SB 1026, SB 535, AB 372: Continuation of Design-Build Procurement Trend
Senate Bills 1026 and 535, and Assembly Bill 372 continue a trend to enhance the ability of public entities to experiment with using design build as a project delivery for construction projects. With the passage of these bills, the Los Angeles County Metropolitan Transportation Authority, the City of Victorville, and an expanded category of transit operators will be able to utilize design build for project delivery. Public entities that were already allowed, prior to 2007, to use the design-build alternative as a project delivery method include the University of California, California State University, transit operators and selected cities and counties.
SB 667: University of California – Awarding Contracts Based on Best Value / Public Notice re Competitive Bidding
With the passage of Senate Bill 667, the University of California, for projects located at its San Francisco medical campus, may award construction contracts on a basis other than the traditional lowest responsive and responsible bidder standard. This legislation allows the University to award construction contracts, after following specified procedures, on a “best value” basis, which will allow the University to award contracts based on factors other than low bid. Under the legislation, “best value” means a procurement process whereby the lowest responsible bidder may be selected on the basis of objective criteria with the resulting selection representing the best combination of price and qualifications. The legislation is intended to serve as a pilot program, which is to end by January 2012.
Senate Bill 667 also made slight changes to the University of California’s requirements for publicly advertising contract contracts for public bid. After January 1, 2007, the University of California is required to give public notice of a project twice within the 60 days preceding the day bids are to be received. Previously, public notice could be given by the University once a week for at least two consecutive weeks before the date set for receiving of bids.
SB 1661: Health Facilities — Construction and Seismic Safety
Senate Bill 1661 allows the Office of State Health Planning and Development to grant an additional 2 year extension for acute-care hospitals to meet seismic standards. Prior to the passage of SB 1661, the deadline was 2008 for acute-care hospital to meet those standards, with hospitals being able to obtain five one year extensions. SB 1661 provides a 2 year extension of these deadlines under certain conditions.
SB 10: Transfer of Trial Court Facilities
Under the Trial Court Facilities Act of 2002, court facilities are to be transferred from the counties to the state. The transfers must occur by June 30, 2007. Prior to the transfers taking place, each court facility is to be assigned a seismic rating, and facilities with an “unacceptable” seismic rating are not to be transferred to the state until repaired by the county. SB 10 provides for the transfer of “unacceptable” facilities to the state, with the understanding that the county will still remain liable for seismic-related damages and injury to the same extent if the transfer had not occurred.
AB 162: School Facilities — Design Review
Assembly Bill 162 is intended to reduce the delays resulting from the Department of General Services’ review of design documents for issuing permits for school construction projects. (The Division of State Architect is the agency with the Department of General Services responsible for overseeing school construction.) AB 162 requires DSA to develop a design review program where DSA works collaboratively with the school’s architects and engineers during the early stages of the design phases to facilitate the early identification and resolution of technical issues. In addition, the bill calls for DSA to pre-qualify and retain consulting firms who could provide plan-check services on behalf of DSA for specific projects.
AB 2456: Prohibitions After Contractor’s License is Suspended Due to Outstanding Debt
With the passage of Assembly Bill 2456, a licensee whose license has been suspended for failure to resolve outstanding financial liabilities, and the personnel of record of such a licensee, are not allowed to serve in any supervising capacity on behalf of another contractor. The financial liabilities include taxes, penalties, interest and any fees that may be assessed by the Contractor’s State License Board, the Department of Industrial Relations (“DIR”), the Employment Development Department (“EDD”), or the Franchise Tax Board (“FTB”). This prohibition precludes the licensee from serving as responsible managing employee (“RME”) or responsible managing officer (“RMO”) for a contractor. Per the legislation, the person could serve as a non-supervising bona fide employee until the covered debts are satisfied. This legislation also places the contractor’s license at risk for employing such a supervising person whose license has been suspended.
AB 2897: Higher Penalties for Ignoring Revocation of Contractors’ Licenses
AB 2897 was enacted in order to strengthen the already existing penalties against contractors with revoked licenses who continue to conduct business under licenses issued to associates or family members. Because it was perceived that the imposition of administrative remedies was not enough to deter this conduct, AB 2897 was enacted to strengthen the provisions preventing such behavior by making it a misdemeanor for a licensee whose license was revoked to associate with a licensed contractor in any capacity other than as a supervised employee. The law also makes it a misdemeanor for a licensee to knowingly employ a licensee whose license has been revoked in any capacity other than as a supervised employee.
AB 1986: California State University – Auxiliary Organizations
Any construction project located on California State University (CSU) property, performed by an auxiliary organization of the CSU, and funded in whole or in part by public funds is subject to the same contract requirements applicable to CSU. Assembly Bill 1986 was passed to clarify an ambiguity as to whether all public contract requirements applied to auxiliary organizations implementing construction projects at CSU campuses.
AB 2256: Penalties For Violation of California Architects Board Requirements
Assembly Bill 2256 introduces new penalties for licensed architects who fail to report certain civil action judgments, settlements, arbitrations or administrative actions to the California Architects Board. Previously, licensees who failed to report such actions were subject to disciplinary action. Under AB 2256, they are now subject to civil penalties that range from $100 to $1000 as an additional intermediate sanction. If a licensee intentionally fails to comply with the reporting requirement, the fine could be as high as $20,000.
SB 1605: New Standards For Notification Of Differing Conditions In Excavation Projects
Senate Bill 1605 clarifies existing Public Contract Code Section 7104 concerning unforeseen conditions associated by trench or other excavation work that extends deeper than four feet below surface. Under Senate Bill 1605, it is now expressly stated that one source of baseline data concerning whether an unforeseen condition exists is whether the site differs from that indicated by information about the site made available to bidders prior to the deadline for submitting bids. Previously, the statute was unclear as to the baseline source for determining whether an unforeseen condition existed.
AB 2658: Suspended or Revoked Contractor’s License — Satisfaction of Outstanding Debts
Assembly Bill 2658 requires a contractor, whose license has been revoked or suspended under certain grounds, to satisfy any outstanding monetary obligation or debt unless the obligation or debt was formally discharged in a bankruptcy proceeding. Previously, as a condition of reinstatement, the contractor could avoid satisfaction of any outstanding monetary obligations or debts if those obligations or debts were merely “adjudicated” in a bankruptcy proceeding. This new law requires a formal discharge of the obligations and debts.
AB 2303: Modification to SB 800 Standards Governing Showers, Baths and Waterproofing Systems
In 2002, the Legislature enacted SB 800, which specified certain performance standards for new residential construction. Assembly Bill 2303 provides slight modifications to those standards concerning showers, baths, related waterproofing systems, as well as waterproofing systems behind or under ceramic tile and tile countertops.
AB 2073: Home Improvement — Exemption for Fire Alarm Installation
Assembly Bill 2073 creates an exemption for fire alarm installation from existing requirements concerning home improvement contracts. Presently, the sale, installation and servicing of fire alarms sold in conjunction with alarm systems is excluded from existing home improvement contract requirements if the cost of installing the fire alarm system is not more than $500 and other specific terms and conditions are met.