CA Pub Cont Code Section 9201

(a)

A public entity shall have full authority to compromise or otherwise settle any claim relating to a contract at any time.

(b)

The public entity shall include provisions in a public works contract for timely notification of the contractor of the receipt of any third-party claim, relating to the contract.

(c)

The public entity shall be entitled to recover its reasonable costs incurred in providing the notification required by subdivision (b).