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AB 2272

State contracting: subcontractors: prompt payment.

2025-2026 Regular Session Introduced by Jessica Caloza

Requires prime contractors receiving state payments to pay subcontractors within 45 days (post-2027), with demerit penalties and possible contract rescission for repeated noncompli

From committee: Do pass and re-refer to Com. on APPR. with recommendation: To Consent Calendar. (Ayes 14. Noes 0.) (June 23). Re-referred to Com. on APPR.
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Bill Summary · AB 2272

Summary of AB 2272 (2025-2026) – State contracting: subcontractors: prompt payment

Overview

AB 2272, introduced by Assembly Member Caloza and co-sponsored by Jessica Caloza, amends the California Government Code to overhaul the prompt payment regime in state contracting. The bill focuses on ensuring faster payment to subcontractors, suppliers, and other vendors by prime contractors that receive payments from the state, and sets up a demerit-based enforcement system administered by the Department of General Services (DGS).

  • Session: 2025-2026
  • Jurisdiction: California
  • Author: Assembly Member Caloza; Co-sponsor: Jessica Caloza
  • Amends: Government Code Section 927.10

Main purpose and intent

  • To require prime contractors that receive payments from the state to promptly pay their subcontractors, suppliers, and other vendors.
  • To incentivize timely payments through a demerit-based enforcement system and potential contract rescission for repeat noncompliance.
  • To shift focus from general “prompt payment encouragement” to a concrete 45-day payment requirement for post-2027 state payments, with a backstop payment deadline for pre-2027 payments not yet remitted.

Key provisions and changes

  1. Payment timing (post-2027 payments)

    • For all payments the state makes to prime contractors on or after January 1, 2027:
      • Prime contractors must pay their subcontractors, suppliers, and other vendors within 45 days of receiving payment from the state.
    • For payments the state makes to prime contractors prior to January 1, 2027 but not remitted to subcontractors, suppliers, or other vendors as of January 1, 2027:
      • Prime contractors must remit such payments by February 15, 2027.

  2. Expedited payment processes and inquiries

    • State agencies must use expedited payment processes to speed up payments from prime contractors to downstream payees.
    • Agencies must promptly respond to inquiries from subcontractors, suppliers, or vendors regarding payment status.

  3. Compliance monitoring and penalties (DGS role)

    • The Department of General Services (DGS) shall monitor compliance with the payment requirements.
    • A demerit system is established for noncompliant prime contractors, with penalties affecting eligibility for state contracts.

  4. Demerit-based penalties

    • Five noncompliant payments within a three-year period: prime contractor is prohibited from renewing or entering into state contracts for six months.
    • Ten noncompliant payments within a three-year period: prime contractor is prohibited from renewing or entering into state contracts for one year.

  5. Contract rescission for repeated noncompliance (post-2027 contracts)

    • For contracts entered into or renewed with the state on or after January 1, 2027, the DGS may review and rescind a prime contractor’s existing contracts if the contractor repeatedly fails to comply.

  6. Administrative rules

    • DGS must adopt rules and regulations to administer the provisions, including the demerit tracking system and coordination with state agencies for enforcement.

  7. Right to information (subcontractor access to status)

    • A subcontractor or supplier performing work under a state contract may request payment status information from the awarding state agency regarding invoices submitted by the prime contractor.
    • The prime contractor must provide confirmation to the awarding agency, upon request, regarding payments made to subcontractors.

Affected parties

  • Prime contractors that receive payments from the state under contracts entered into or renewed after January 1, 2027.
  • Subcontractors, suppliers, and other vendors paid by prime contractors who work under state contracts.
  • State agencies administering contracts and managing payment processes and inquiries.
  • Department of General Services (DGS) responsible for monitoring compliance, implementing the demerit system, and potentially rescinding contracts for repeated noncompliance.

Procedural and timeline aspects

  • Effective baseline policy: The bill updates the core payment standard to 45 days (post-2027 payments).
  • Backstop deadline for pre-2027 payments not yet remitted: February 15, 2027.
  • Compliance monitoring and demerit penalties begin after enactment and apply to payments deemed noncompliant within a rolling three-year window.
  • For contracts entered into or renewed on or after January 1, 2027, DGS has authority to rescind contracts after repeated noncompliance.
  • DGS to adopt implementing regulations to operationalize the demerit system and enforcement.

Net impact

  • Strengthened protections for subcontractors and downstream vendors by imposing clearer payment deadlines and penalties for noncompliance.
  • Increased administrative oversight by DGS to ensure timely payments and accountability across state contracting.
  • Potentially higher costs or adjustments for prime contractors who must manage downstream payment timing to avoid demerits.

Compiled from official sources — confirm details with the bill’s official record.

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