Chapter 27.26

• 27.26.020 Conflict.

• 27.26.030 Standard contract provisions.

• 27.26.040 Progress payments.

• 27.26.050 Extra compensation.

• 27.26.060 Retention.

This Chapter sets forth the requirements for payment of compensation in Public Works Contracts.

(Ord. 30540.)

To the extent they differ, this Chapter's provisions are intended to conflict with California Public Contract Code Sections 7101, 7107 and 20104.50, as those sections may be amended, and with any other section(s) of the California Public Contract Code addressing progress payments and retention. (Ord. 30540.)

*Editor’s note— Ord. 30540, adopted April 5, 2021, amended Ch 27.26 in its entirety to read as set out herein. Formerly, Ch. 27.26 pertained to similar subject matter and derived from Ord. 30308.

• A. In accordance Section 27.04.020, entitled "Administrative Implementation," the Director of Public Works will establish standard provisions for Public Works Contracts relating to all aspects of compensation, including progress payments, retention, final payment and appropriate withholdings from any such payments.

• B. The standard compensation provisions established by the Director of Public Works must be consistent with the requirements this Chapter.

• (Ord. 30540.)

Public Works Contracts will include standard provisions for progress payments consistent with this Section 27.26.040.

• A. The City will review and act on progress payment requests submitted by a Contractor as soon as is practicable.

• B. The City will endeavor to notify a Contractor on or before seven (7) Calendar Days after receiving a progress payment request if the request is not proper or otherwise does not comply with the requirements of the Public Works Contract. The City's notification will be in writing and will identify any deficiencies in the progress payment request.

• C. The City will endeavor to make progress payments of undisputed amounts within thirty (30) Calendar Days of the Contractor's submission of a properly completed progress payment request that complies with the requirements of the Public Works Contract.

• D. The City will not be liable for interest or other charges or costs if it fails to meet any of the times set forth in this Section 27.26.040.

T27:28

PROCUREMENT OF PUBLIC WORKS

§ 27.26.070

• E. There is no requirement to include in Public Works Contracts a copy or summary of California Contract Code Section 20104.60.

• (Ord. 30540.)

• A. A Public Works Contract may include standard provisions for the payment of extra compensation to the Contractor for cost reduction changes in the plans and specifications made pursuant to a proposal submitted by the Contractor.

• B. Any provisions included pursuant to Subsection A of this Section 27.26.050 must provide for the Contractor and City to negotiate the amount of extra compensation, provided that the extra compensation cannot exceed fifty percent (50%) of the net savings in construction.

• (Ord. 30540.)

• A. Public Works Contracts will include appropriate provisions for the withholding of retention from payments made by the City of the Contractor.

• B. In accordance with California Public Contract Code Section 7201, as it may be amended, Public Works Contracts will not require retention to exceed five percent (5%) of a progress payment or total retention to exceed five percent (5%) of the contract price unless:

  1. Before the procurement, the City makes a written finding that the improvement being constructed is substantially complex and therefore requires a higher retention than five percent (5%); and

  2. The City includes in the procurement documents details explaining the basis for the finding and the actual retention amount.

• C. In accordance with California Public Contract Code Section 22300, as it may be amended, Public Works Contracts will allow a

Contractor to substitute securities for retention or to require the City to pay retention directly to an escrow agent.

• D. Subject to the City's right to make withholdings in accordance with Section 27.26.070, Public Works Contracts will require the release of retention to the Contractor following substantial completion of the work but not later than sixty (60) Calendar Days following the acceptance of the completed work by the City:

  1. Nothing in this Subsection D precludes a Public Works Contract that expressly provides for the City's acceptance of one or more portions of work before substantial completion of the entire project from expressly providing for the earlier release of retention related to the portion(s) of work accepted.

  2. The untimely release of retention will not be subject to interest, attorney's fees or costs.

• (Ord. 30540.)

Public Works Contracts will include appropriate provisions, consistent with this Section 27.26.070, regarding the City's withholding of amounts from any moneys due and owing the Contractor, including the release of retention, a progress payment and a final payment. Such provisions may include withholding any of the following amounts.

• A. Up to one hundred and fifty percent (150%) of the estimated cost for the City to complete any unfinished work or any other outstanding Contractor obligations in the Public Works Contract.

  1. The City will calculate the withholding based on an estimate of the cost for the City to complete unfinished work, including the City's administrative costs of contracting with another entity to perform the work.

  2. If the Contractor completes unfinished work for which the City has

T27:29

SAN JOSÉ CODE

§ 27.26.070

• withheld money, the City will release to the Contractor the moneys withheld for such work.

• B. Up to the amount of any third-party claim filed against the City based on any damage to property or Person caused by the Contractor. If no third-party claim has been filed, up to one hundred fifty percent (150%) of the estimated amount of any liability to the City for any damage to property or Person caused by the Contractor. Once the City's actual liability is determined, the City will release to the Contractor any excess moneys withheld for such liability.

• C. The amount of liquidated damages incurred and that will be incurred in the future, based on the City's reasonable estimate. Once the final amount of liquidated damages owed is determined, the City will release any excess amounts withheld.

• D. Sufficient amounts to satisfy any outstanding stop payment notices, to provide for the City's reasonable cost of any litigation pursuant to the stop payment notice, and to otherwise comply with any obligation regarding stop payment notices.

• E. The amount or estimated amount of any penalties, fines, charges, or assessments imposed, or likely to be imposed, by a public entity (including the City) or regulatory agency based on the Contractor's violation of any applicable law, statute, regulation, permit or other requirement.

• F. Any credits to which the City is entitled under the Public Works Contract.

• G. Up to one hundred and fifty percent (150%) of the amount involved in any dispute between the City and the Contractor.

• H. Any amount to cover the City's nullification, in whole or in part, of a previous payment based on subsequently discovered evidence.

  • I. The amount of any actual or estimated penalty, fine, assessment or payment deficiency resulting from an actual or alleged labor violation.

  • J. Any other amounts that the Director of Public Works determines should be included.

• (Ord. 30540.)