Modular Contracting Legislation Moves Forward

Published On: April 22, 2022

California’s history of failed IT projects is undeniable.  For years, the Sacramento technology community has read stories about large-scale projects with major budget overruns, going far beyond schedule, or being altogether canceled, costing taxpayers hundreds of millions of dollars.

New legislation is the most recent attempt to fix the problem by taking a more incremental approach to procurement and project management through modular contracting.

Assemblymembers Rudy Salas (D-Bakersfield) and Devon Mathis (R-Visalia) have introduced Assembly Bill 1806, which calls for the use of modular contracting by the California Department of Technology (CDT) for large-scale projects, those with a budget above $2.5 million.  The approach would be mandatory “to the extent practicable,” according to the latest version of the bill, amended on April 21.

The legislation advanced this week and is scheduled to be presented in the Assembly Committee on Accountability and Administrative Review on April 27.

As defined by the bill, modular contracting refers to “dividing investments into smaller parts in order to reduce investment risk, deliver capabilities more rapidly, and permit easier adoption of newer and emerging technologies.”

Projects are divided into increments that include their own cost estimate, budget, timetable, performance expectations, key deliverables, and most notably, its own contract. The contracting of one increment would not bind CDT to any future increments.

Modular contracting has been adopted by CDT dating back as early as 2012, but its use has not yet been enforced for large-scale projects.

The modular approach is becoming a popular alternative to the multi-year “waterfall” approach for structuring large-scale IT projects.

According to the bill, large-scale is defined as “possessing a combination of elements that will function together to produce the capabilities required to realize an information technology acquisition.”

“Although a seemingly reasonable assumption, practical evidence and private sector experience has shown that large and complex IT implementations often encounter cost and schedule overruns, as the painstaking process of requirements gathering too frequently takes years to complete,” says an analysis of the bill.

CDT is currently running a pilot program that is testing and evaluating adaptive contracting. While the pilot project will finish in June 2023, the Assembly Committee on Privacy and Consumer Protection has pondered whether or not the bill should be passed before it can review the data and findings from the test run.

AB 1806 holds similarities to AB 2558, also authored by Assemblymember Devon Mathis. AB 2558 would require CDT to establish and implement a framework for oversight of modular modernization by January 1, 2025.

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About the Author: Will Keys

Will Keys writes about technology issues for the GovReport. He is a graduate of the Reynolds School of Journalism at the University of Nevada, Reno. He can be reached at will at