State contracting: subcontractors: prompt payment.

Existing law, the California Prompt Payment Act, requires a state agency that acquires property or services pursuant to a contract with a business to make payment to the person or business on the date required by the contract and as specified, or be subject to a late payment penalty. Existing law requires state agencies to encourage claimants to promptly pay their subcontractors and suppliers, especially those that are small businesses. This bill would recast those provisions to instead require prime contractors to pay, for payments by the state to prime contractors made on or after January 1, 2027, their subcontractors, suppliers, and other vendors within 45 days of receiving payment from the state. For payments made by the state to prime contractors made prior to January 1, 2027, but that have not been remitted to subcontractors, suppliers, and other vendors as of January 1, 2027, the bill would require prime contractors to remit payment by February 15, 2027. This bill would require the Department of General Services to monitor compliance with this requirement, as specified. The bill would impose a demerit system, in which noncompliant prime contractors lose eligibility for state contracts for a specified period of time, as described. For contracts entered into or renewed with the state on or after January 1, 2027, the bill would authorize the department to review and rescind a prime contractor's existing contracts if the prime contractor repeatedly fails to comply. The bill would require the department to adopt rules and regulations to administer these provisions, and would make conforming changes.