EdLawConnect Blog

In a recent decision, Pittsburg Unified School District v. S.J. Amoroso Construction Co., Inc. (December 22, 2014), the California Court of Appeal affirmed that public agencies have the right to unilaterally declare a default under a construction contract and demand a distribution of securities retained by escrow.  The Court based its decision on Public Contract Code section 22300, which provides that once a public agency sends a proper notice of default, it has the right to withdraw securities held in an escrow retention account “immediately upon its own determination” if it determines that a contractor has defaulted on the construction agreement. The key issue confirmed by the Court is that a public agency may unilaterally determine that a contractor defaulted on its obligations under a construction agreement without judicial determination, and thus, may unilaterally withdraw retention proceeds from an escrow account.

The new law becomes operative on January 1, 2015.  Therefore, any lease leaseback project that is awarded after January 1, 2015, involves a projected expenditure of $1,000,000 or more, and uses any money from the Leroy F. Greene School Facilities Act of 1998 or any future state school construction bond must comply with the mandatory prequalification procedures found at Public Contract Code section 20111.6.

Under Public Contract Code sections 20111 and 20651, school and community college districts must competitively bid and award a contract involving the expenditure of more than $50,000, adjusted for inflation, to the lowest responsible bidder. The threshold for the bidding requirement is increased annually to reflect the change in the Implicit Price Deflator for State and Local Government Purchases of Goods and Services for the United States, as published by the United States Department of Commerce for the 12-month period ending in the prior fiscal year. The adjustment is not the same as the revenue limit cost-of-living adjustment.

The Office of Public School Construction (OPSC), recognizing that it will continue to receive funding applications from school districts after existing bond authority is no longer available for New Construction and Modernization applications, has implemented new regulations to deal with funding requests. Section 1859.95.1 in Title 2 of the California Code of Regulations establishes how OPSC will ...