Governor Signs Bill Adding New Construction Contract Requirements

August 2015

On August 17, 2015, Governor Brown signed Assembly Bill 566 (“AB 566”) requiring lease-leaseback projects to use a “skilled and trained workforce” and additional prequalification procedures.  AB 566 becomes effective on January 1, 2016.

AB 566, which adds section 17407.5 to the Education Code, includes the following:

  • Lease-leaseback contractors must provide the school district’s governing board with a commitment that the contractor and its subcontractors at every tier will use a “skilled and trained workforce” to perform all work on the project that falls within an apprenticeable occupation in the construction trades.
  • The term “skilled and trained workforce” means that all workers must be skilled journeypersons or apprentices in an apprenticeship program approved by the Chief of the Division of Apprenticeship Standards of the Department of Industrial Relations.
  • A certain percentage of the skilled journeypersons employed to perform work on the project by a contractor and its subcontractors at every tier must be graduates of the apprenticeship program, either approved by the Chief of the Division of Apprenticeship Standards or located outside California and approved pursuant to federal apprenticeship regulations.  This percentage must be at least 30 percent for 2016.  It increases by 10 percent annually to at least 60 percent in 2019.
  • A contractor’s commitment that a skilled and trained workforce will be used to perform the project may be established through monthly reports or through a project labor agreement.

AB 566 also requires that lease-leaseback agreements contain a provision stipulating that contractors constructing buildings must comply with prequalification procedures regardless of the funding source for the public project.  This is an extension of the requirements imposed by Assembly Bill 1581, enacted in 2014, which subjected many lease-leaseback projects to prequalification when they involved an expenditure of $1,000,000 or more using state school construction bond funds.

Finally, AB 566 clarifies section 20111.6 of the Public Contract Code regarding when public works project bidders must be prequalified.  AB 566 adds that bidders must be prequalified for projects that are “reimbursed” from future state school bond funds, not just when projects use funds “received” from state school construction bonds.

Some observers have commented that AB 566 may increase construction costs because it reduces the number of non-union contractors who bid for projects.  Others view AB 566 as a means for improving the quality of school construction work and reducing construction defect claims.

If you have any questions regarding AB 566 or any related issue, please call one of our six offices.

 F3 NewsFlash prepared by Kathleen J. McKee, Luke P. Boughen and John W. Norlin.
Kathleen is a Partner in the F3 San Diego office.
Luke is an Associate in the F3 San Diego office.
John is Special Counsel in the F3 San Diego office.

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