AN ACT Relating to public works subletting and subcontracting; adding a new chapter to Title 18 RCW; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that the practices of bid shopping and bid peddling in connection with the construction, alteration, and repair of public improvements often result in poor quality of material and workmanship to the detriment of the public, deprive the public of the full benefits of fair competition among prime contractors and subcontractors, and lead to insolvencies, loss of wages to employees, and other evils.

NEW SECTION. Sec. 2. Nothing in this chapter limits or diminishes any rights or remedies, either legal or equitable, which:

(1) An original or substituted subcontractor may have against the prime contractor, his or her successors, or assigns.

(2) The state or any county, city, body politic, or public agency may have against the prime contractor, his or her successors, or assigns, including the right to take over and complete the contract.

NEW SECTION. Sec. 3. The state or any municipality taking bids for any public work shall provide in the specifications prepared for the work or in the general conditions under which bids will be received, that any person making a bid or offer to perform the work, shall, in his or her bid or offer, set forth:

(1) The name and the location of the place of business of each subcontractor who: (a) Will perform work or labor or render service to the prime contractor in or about construction of the work, or (b) is licensed by the state of Washington and who, under subcontract to the prime contractor, specially fabricates and installs a portion of the work or improvement according to detailed drawings contained in the plans and specifications, in an amount in excess of one-half of one percent of the prime contractor's total bid, or (c) in the case of bids or offers for the construction of streets or highways, including bridges, bids in excess of one-half of one percent of the prime contractor's total bid or ten thousand dollars, whichever is greater.

(2) The portion of the work which will be done by each subcontractor under this chapter. The prime contractor shall list only one subcontractor for each portion as is defined by the prime contractor in his or her bid.

For purposes of this chapter, the terms "state," "municipality," and "public work" shall have the meanings given in RCW 39.04.010.

NEW SECTION. Sec. 4. Circumvention by a general contractor who bids as a prime contractor, of the requirement under section 3 of this act to list his or her subcontractors, by the device of listing another contractor who will in turn sublet portions constituting the majority of the work covered by the prime contract, shall be considered a violation of this chapter and shall subject that prime contractor to the penalties set forth in sections 12 and 13 of this act.

NEW SECTION. Sec. 5. If a prime contractor fails to specify a subcontractor or if a prime contractor specifies more than one subcontractor for the same portion of work to be performed under the contract in excess of one-half of one percent of the prime contractor's total bid, the prime contractor guarantees that he or she is fully qualified to perform that portion himself or herself, and that the prime contractor shall perform that portion himself or herself.

If after award of contract, the prime contractor subcontracts, except as provided for in section 6 or 11 of this act, any portion of the work, the prime contractor shall be subject to the penalties named in section 13 of this act.

NEW SECTION. Sec. 6. No prime contractor whose bid is accepted shall:

(1) Substitute any person as subcontractor in place of the subcontractor listed in the original bid, except that the awarding authority, or its duly authorized officer, may, except as otherwise provided in section 8 of this act, consent to the substitution of another person as a subcontractor in any of the following situations:

(a) When the subcontractor listed in the bid after having had a reasonable opportunity to do so fails or refuses to execute a written contract, or when that written contract, based upon the general terms, conditions, plans, and specifications for the project involved or the terms of that subcontractor's written bid, is presented to the subcontractor by the prime contractor;

(b) When the listed subcontractor becomes bankrupt or insolvent;

(d) When the listed subcontractor fails or refuses to meet the bond requirements of the prime contractor as set forth in section 10 of this act;

(e) When the prime contractor demonstrates to the awarding authority, or its duly authorized officer, subject to the further provisions set forth in section 8 of this act, that the name of the subcontractor was listed as the result of an inadvertent clerical error;

(f) When the listed subcontractor is not licensed pursuant to the registration of contractors law chapter 18.27 RCW; or

(g) When the awarding authority, or its duly authorized officer, determines that the work performed by the listed subcontractor is substantially unsatisfactory and not in substantial accordance with the plans and specifications, or that the subcontractor is substantially delaying or disrupting the progress of the work.

Prior to approval of the prime contractor's request for the substitution, the awarding authority, or its duly authorized officer, shall give notice in writing to the listed subcontractor of the prime contractor's request to substitute and of the reasons for the request. The notice shall be served by certified or registered mail to the last known address of the subcontractor. The listed subcontractor who has been so notified shall have five working days within which to submit written objections to the substitution to the awarding authority. Failure to file these written objections shall constitute the listed subcontractor's consent to the substitution.

If written objections are filed, the awarding authority shall give notice in writing, of at least five working days, to the listed subcontractor of a hearing by the awarding authority on the prime contractor's request for substitution.

(2) Permit any subcontract to be voluntarily assigned or transferred or allow it to be performed by anyone other than the original subcontractor listed in the original bid, without the consent of the awarding authority, or its duly authorized officer.

(3) Other than in the performance of "change orders" causing changes or deviations from the original contract, sublet or subcontract any portion of the work in excess of one-half of one percent of the prime contractor's total bid as to which his or her original bid did not designate a subcontractor.

NEW SECTION. Sec. 7. No subcontractor listed by a prime contractor under Section 3 of this act as furnishing and installing carpeting, shall voluntarily sublet his or her subcontract with respect to any portion of the labor to be performed unless he or she specified the subcontractor in his or her bid for that subcontract to the prime contractor.

NEW SECTION. Sec. 8. The prime contractor as a condition to assert a claim of inadvertent clerical error in the listing of a subcontractor shall within two working days after the time of the prime bid opening by the awarding authority give written notice to the awarding authority and copies of that notice to both the subcontractor he or she claims to have listed in error and the intended subcontractor who had bid to the prime contractor prior to bid opening.

Any listed subcontractor who has been notified by the prime contractor in accordance with this section as to an inadvertent clerical error shall be allowed six working days from the time of the prime bid opening within which to submit to the awarding authority and to the prime contractor written objection to the prime contractor's claim of inadvertent clerical error. Failure of the listed subcontractor to file the written notice within the six working days shall be primary evidence of his or her agreement that an inadvertent clerical error was made.

The awarding authority shall, after a public hearing as provided in Section 6 of this act and in the absence of compelling reasons to the contrary, consent to the substitution of the intended subcontractor:

(1) If (a) the prime contractor, (b) the subcontractor listed in error, and (c) the intended subcontractor each submit an affidavit to the awarding authority along with such additional evidence as the parties may wish to submit that an inadvertent clerical error was in fact made, provided that the affidavits from each of the three parties are filed within eight working days from the time of the prime bid opening; or

(2) If the affidavits are filed by both the prime contractor and the intended subcontractor within the specified time but the subcontractor whom the prime contractor claims to have listed in error does not submit within six working days, to the awarding authority and to the prime contractor, written objection to the prime contractor's claim of inadvertent clerical error as provided in this section.

If the affidavits are filed by both the prime contractor and the intended subcontractor but the listed subcontractor has, within six working days from the time of the prime bid opening, submitted to the awarding authority and to the prime contractor written objection to the prime contractor's claim of inadvertent clerical error, the awarding authority shall investigate the claims of the parties and shall hold a public hearing as provided in section 6 of this act to determine the validity of those claims. Any determination made shall be based on the facts contained in the declarations submitted under penalty of perjury by all three parties and supported by testimony under oath and subject to cross-examination. The awarding authority may, on its own motion or that of any other party, admit testimony of other contractors, any bid registries or depositories, or any other party in possession of facts which may have a bearing on the decision of the awarding authority.

NEW SECTION. Sec. 9. If a contractor who enters into a contract with a public entity for investigation, removal, or remedial action, or disposal relative to the release or presence of a hazardous material or hazardous waste fails to pay a subcontractor operating as a hazardous waste hauler pursuant to chapters 81.80 and 46.48 RCW within ten days after the investigation, removal or remedial action, or disposal is completed, the subcontractor may serve a stop notice upon the public entity.

NEW SECTION. Sec. 10. (1) It shall be the responsibility of each subcontractor submitting bids to a prime contractor to be prepared to submit a faithful performance and payment bond or bonds if so requested by the prime contractor.

(2) In the event any subcontractor submitting a bid to a prime contractor does not, upon the request of the prime contractor and at the expense of the prime contractor at the established charge or premium therefor, furnish to the prime contractor a bond or bonds issued by an admitted surety wherein the prime contractor shall be named the obligee, guaranteeing prompt and faithful performance of the subcontract and the payment of all claims for labor and materials furnished or used in and about the work to be done and performed under the subcontract, the prime contractor may reject the bid and make a substitution of another subcontractor subject to section 6 of this act. The bond or bonds may be required at the expense of the subcontractor only if the prime contractor in his or her written or published request for subbids (a) specifies that the expense for the bond or bonds shall be borne by the subcontractor and (b) clearly specifies the amount and requirements of the bond or bonds.

NEW SECTION. Sec. 11. Subletting or subcontracting of any portion of the work in excess of one-half of one percent of the prime contractor's total bid as to which no subcontractor was designated in the original bid shall only be permitted in cases of public emergency or necessity, and then only after a finding reduced to writing as a public record of the awarding authority setting forth the facts constituting the emergency or necessity.

NEW SECTION. Sec. 12. A prime contractor violating any of the provisions of this chapter violates his or her contract and the awarding authority may exercise the option, in its own discretion, of (1) canceling his or her contract or (2) assessing the prime contractor a penalty in an amount of not more than ten percent of the amount of the subcontract involved. The penalty shall be deposited in the fund out of which the prime contract is awarded. In any proceedings under this section the prime contractor shall be entitled to a public hearing and to five days' notice of the time and place thereof.

NEW SECTION. Sec. 13. Violation of this chapter by a licensee under chapter 18.27 RCW constitutes grounds for infraction action under chapter 18.27 RCW in addition to the penalties prescribed in section 12 of this act.

NEW SECTION. Sec. 14. The failure on the part of a contractor to comply with any provision of this chapter does not constitute a defense to the contractor in any action brought against the contractor by a subcontractor.

NEW SECTION. Sec. 15. As used in this chapter, the word "subcontractor" shall mean a contractor, within the meaning of the provisions of chapter 18.27 RCW who contracts directly with the prime contractor.

"Prime contractor" shall mean the contractor who contracts directly with the awarding authority.

NEW SECTION. Sec. 16. In counties with a population of .......... or more, the county council, when it is the awarding authority, may delegate its functions under sections 6 and 12 of this act to a hearing officer designated by the council.

The hearing officer shall make a written recommendation to the county council. The council may adopt the recommendation without further notice or hearing, or may set the matter for a de novo hearing before the council.

NEW SECTION. Sec. 17. Sections 1 through 16 of this act shall constitute a new chapter in Title 18 RCW.