State contracting: subcontractors: prompt payment.

Plain English Breakdown

The bill summary and digest do not provide specific details on how the Department of General Services will monitor compliance.

State Contracting: Prompt Payment for Subcontractors

This law requires prime contractors who receive payment from the state to pay their subcontractors, suppliers, and other vendors within a specific time frame.

What This Bill Does

• Requires prime contractors to pay subcontractors, suppliers, and other vendors within 45 days after receiving payment from the state for contracts starting on or after January 1, 2027.
• For payments made before January 1, 2027, but not yet paid out by January 1, 2027, prime contractors must pay subcontractors and others by February 15, 2027.
• Sets up a system where the Department of General Services monitors if prime contractors follow these rules.
• Allows noncompliant prime contractors to lose eligibility for state contracts or have existing contracts reviewed and possibly rescinded.
• Requires prime contractors to confirm payments made to subcontractors when requested by the awarding agency.

Who It Names or Affects

• Prime contractors who receive payment from the state
• Subcontractors, suppliers, and other vendors working with prime contractors on state contracts

Terms To Know

prime contractor

The main company that gets a contract to do work for the government.

subcontractor

A smaller company hired by the prime contractor to help complete parts of the project.

Limits and Unknowns

• Does not specify what happens if subcontractors or suppliers are late in their payments.
• The exact penalties for noncompliance with the payment deadlines are not detailed.
• It is unclear how this law will affect small businesses specifically.

Official Summary Text

AB 2272, as amended, Caloza.
State contracting: subcontractors: prompt payment.
Existing law, the California Prompt Payment Act, requires a state agency that acquires property or services pursuant to a contract with a business to make payment to the person or business on the date required by the contract and as specified, or be subject to a late payment
penalty.
Existing
penalty. Existing
law requires state agencies to encourage claimants to promptly pay their subcontractors and suppliers, especially those that are small businesses.
This bill would recast those provisions to instead require prime contractors to pay, for payments by the state to prime contractors made on or after January 1, 2027, their subcontractors, suppliers, and other vendors within 45 days of receiving payment from the state. For payments made by the state to prime contractors made prior to January 1, 2027, but that have not been
remitted to subcontractors, suppliers, and other vendors as of January 1, 2027, the bill would require prime contractors to remit payment by February 15, 2027.
This bill would require the Department of General Services to monitor compliance with this requirement, as specified. The bill would impose a demerit system, in which noncompliant prime contractors lose eligibility for state contracts for a specified period of time, as described. For contracts entered into or renewed with the state on or after January 1, 2027, the bill would authorize the department to review and rescind a prime contractor’s existing contracts if the prime contractor repeatedly fails to comply. The bill would require the department to adopt rules and regulations to administer these provisions, and would make conforming changes.
This bill would authorize a subcontractor or supplier performing work under a state contract to request payment status information from the awarding state agency regarding invoices submitted by the prime contractor, and would require a prime contractor to provide confirmation to the awarding agency, upon the agency’s request, regarding payments made to subcontractors.

Current Bill Text

Download Bill PDF