Contracting Payments by Public Agencies

California’s Public Contract Code, in Division 2, Part 3, Chapter 1, Article 1.7 requires certain payments be made by local public agencies in construction contracting.

Section 20104.50 provides legislative intent to require all local governments to pay their contractors on time so that these contractors can meet their own obligations. In requiring prompt payment by all local governments, the Legislature finds and declares that the prompt payment of outstanding receipts is not merely a municipal affair, but is, instead, a matter of statewide concern.

In addition, any local agency which fails to make any progress payment within 30 days after receipt of an undisputed and properly submitted payment request from a contractor on a construction contract is required to pay interest to the contractor equivalent to the legal rate set forth in law.

Upon receipt of a payment request, each local agency is required to act in accordance with two specified provisions – review that it is proper and return with explanation if it is not proper. The number of days available to a local agency to make a payment without incurring interest pursuant to this section is reduced by the number of days by which a local agency exceeds the seven-day return requirement.

The terms “local agency” and “progress payment” are defined. A payment request must be considered properly executed if funds are available for payment of the payment request, and payment is not delayed due to an audit inquiry by the financial officer of the local agency. Each local agency must require that this article, or a summary, be set forth in the terms of any contract subject to this article.