Public Works Contracts

Public works — projects paid for with public funds — come with a layer of rules that private jobs don’t have. The exam tests the money rules (prevailing wage, certified payroll, retention) and the remedies that replace the mechanics lien (stop notices and payment bonds).

Prevailing wages

On any public works project of more than $1,000, workers must be paid the prevailing wage — the rate set for each craft and locality by the Director of the Department of Industrial Relations (DIR). The awarding body gets those rates from the DIR and writes them into the contract. Underpaying triggers back-wage liability and penalties.

Registering with the DIR

Before a contractor can bid on, be listed in a bid for, or perform a public works contract, it must be registered with the DIR. There is a small-project exemption from registration:

Certified payroll and the eight-hour day

Every contractor and subcontractor must keep certified payroll records showing each worker’s classification, hours worked, and wages paid. Failing to produce them carries a penalty of $100 per worker per day.

On public works, 8 hours is a legal day’s work. Working someone more than 8 hours a day (or 40 a week) without paying overtime costs $25 per worker per day in penalties.

Apprenticeship

Public works contracts of $30,000 or more carry apprenticeship obligations. The contractor gives award notice to the apprenticeship committees on DAS Form 140 and requests apprentices with DAS Form 142, generally employing one apprentice hour for every five journeyman hours.

Bidding, retention, and prompt payment

Public works are awarded to the lowest responsible bidder, and bids usually require bid security of at least 10% of the bid. Once the job is running:

• Retention withheld from payments is generally capped at 5%.
• After completion, the public entity must release retention within 60 days.
• A prime must pay subcontractors within 7 days of receiving a progress payment, and pass a sub’s retention share through within 7 days of receiving it. Late payment runs a 2% per month penalty.

No mechanics lien — use a stop notice

A mechanics lien is a claim against the property itself, and you cannot lien land owned by the state, a county, a city, or a public district. On public works, a stop notice is often the only lien-type remedy available. It does not attach to the property; it reaches the construction funds the agency still holds, which the agency then withholds from the prime to cover the claim.

Memory hook: on a state job, go to the director of the department that started the contract. On any other public work, go to whoever holds and disburses the money.

The payment bond

A payment bond is required on a public works contract of more than $25,000, in an amount of at least 100% of the contract price. It protects against lien-type claims by substituting the bond as security in place of the real property — because claimants can’t reach public property, the bond stands in for it. An unpaid sub or supplier can claim against the payment bond instead of, or in addition to, serving a stop notice.

Participation goals on government bids

Some government bids require contractors to address minority, women, and disabled veteran business enterprise (DVBE) participation goals. If a question asks where a contractor gets help meeting them, the answer is the Department of General Services, Office of Small Business and DVBE Services (OSDS).

What to remember

• Prevailing wages on public works over $1,000; the DIR Director sets the rates.
• Register with the DIR to bid/work (exempt: ≤$25,000 construction/repair, ≤$15,000 maintenance — but prevailing wage still applies).
• Certified payroll penalty $100/worker/day; eight-hour-day overtime penalty $25/worker/day.
• Apprenticeship on contracts $30,000+ (DAS 140 / 142).
• Lowest responsible bidder; 10% bid security; 5% retention cap; 60-day retention release; 7-day prompt payment.
• No mechanics lien on public property — use the stop notice and the payment bond (required over $25,000, ≥100%).