Public entities must update their standard construction contracts to incorporate new dispute resolution requirements effective January 1, 2017
November 2nd, 2016
Currently, state agencies are required to arbitrate construction claims in accordance with Public Contract Code sections 10240 et seq. Similarly, local public entities are subject to specific negotiation and alternative dispute resolution procedures for construction claims of $375,000 or less. Under a new Public Contract Code section 9204, effective January 1, 2017, local public entities and some state agencies will be required to review all construction claims under a specified claims process, including mediating claims that are not resolved through the mandated process for review of the claim by the public entity.
As with the current local process, section 9204 requires public entities to include either the exact statutory language or a summary of the requirements in their public works contracts. Many public entities currently choose to quote the statutory language. However, although the new process closely parallels the current local entity process, it is not identical, so that public entities cannot simply remove the $375,000 limitation from the current requirements. Because both the existing process and the section 9204 process will be in effect as of 2017, public entities effectively may be required to summarize and attempt to harmonize the two statutory schemes. Because section 9204 applies to contracts entered into on or after January 1, 2017, public entities now should be modifying their standard language to be prepared for the new requirements. Eileen Diepenbrock and Jennifer Dauer have been assisting their public entity clients with preparing to implement the new dispute resolution requirements.