Chapter 9
California Public Works Laws
California Public Works Law
Summary:
Long ago, California passed legislation to eliminate corruption, get good value from private firms and advance other important civic purposes. Historically, this has been achieved through the long established policy of awarding public projects to the lowest “responsible” bidder. There are growing exceptions to this historic rule of public bidding. An overview of the Public Contract Code is broken down into three sections and the section’s contents explained and reviewed. The practical impact of other California Codes and U.S. Federal law on state and local public works are evaluated and discussed. Each and every public works project in California is unique. To complicate matters further, the majority of public entities in California have separate rules regarding construction projects.
§ 9.1 Agency Authority
There is a vast body of law that affects California infrastructure projects. Every public project is unique, both in the physical work and the legal environment. That is certainly the experience of any general contractor or lawyer who travels the state working on these types of projects. They are legally and administratively very different from private projects built within the state. They follow rules substantially different from those undertaken for the U.S. federal government or by other states.
As a practical matter, every public entity in California has its own rules regarding construction projects. No two are the same. Fortunately, 95 percent of those rules follow the California Public Contract Code.
However, like airplane pilots, it’s the 5 percent of the situations that can make you edgy. (That is what makes California public works law so challenging, fun and at times, nightmarish.) While this book provides an overview of the typical legal issues that arise, every public agency and every individual project must be closely researched for special rules and procedures. In the law, they are called the “local rules,” or in the courtroom of specific judges, the “local, local rules.”
There exist more than 7,000 public entities in California, including the State of California, counties, cities and myriad types of special districts. It is important to note that while many of these entities are required to adhere in some aspect to the Public Contract Code, almost all of them also have agency-specific regulations, ordinances, and charters, as well as a variety of internal (written and unwritten) procedures governing public works contracts and dispute resolution.
Regardless of the exact rules employed by the specific public entity, virtually all address the same exact issues that must be covered in typical government contracts. They just treat them uniquely (and not always in a good way). There are substantial differences between the administration of public projects and those in the private sector. Public projects are run with public funds that are administered through public bodies and agencies eventually overseen by elected officials.
The main purpose of public procurement statutes is to provide the public with the best quality of project at the best price through a fair, efficient and clear bidding process. Public agencies and administrators are not given unfettered discretion as to the award and administration of public projects, and contractors are committed to exacting standards of performance once a project is underway.
In the not so distant past, the political process was substantially affected by targeted campaign contributions tied to the promotion and award of specifically public projects. Bribery of at least one California Congressmen to obtain earmarks for specific defense projects has resulted in a lengthy prison term. However, as a result of historical public outcries for financial and political accountability in federal, state, and local public works projects, major legal reforms occurred that now comprise the core of public contract law and procurement administration.
The most comprehensive compilation of these statutes is found in the California Public Contract Code. Although numerous other statutes affect the construction industry, the Public Contract Code was specifically drafted to protect public taxpayer funds from fraud and abuse and to provide for fair and efficient administration of public works projects.
The Public Contract Code consists of two volumes and is supplemented annually. Under the Public Contract Code, projects conducted through State of California and local agency contracts are typically fully designed with approved plans and specifications, and contracts are awarded after competitive bidding by large general contractors with surety bonds guaranteeing their performance and payment obligations. The general and fundamental rule of California public works contracting is awarding the contract to the lowest responsible and responsive bidder after open competitive bidding.
While the techniques of design-build, multiple prime contracts, performance specifications, force account and other contracting methods are authorized for special circumstances; these techniques are still exceptions to the rule. However, in the past twenty years, the California State Legislature has passed numerous specialized statutes providing exceptions to the lowest responsible bidder rule. One of the principal exceptions to the rule, the design-build approach, is discussed in Section 8.5, above.
The policy of awarding public projects to the lowest responsible bidder has three purposes: (1) to eliminate favoritism, fraud, and corruption by political officials and their staffs in the awarding of public contracts; (2) to obtain highly competitive prices for public improvements; and (3) to provide a “level playing field” so that all qualified and bonded contractors in the State of California may bid on projects for which they are qualified.
The following summarizes the most important aspects of the California Public Contract Code.
§ 9.2 California Public Contract Code
The Public Contract Code is broken down into three sections: (1) administrative provisions, consisting of definitions of specific terms and the purpose of the Public Contract Code; (2) contracting by state agencies (CalTrans, Department of Water Resources, etc.); and (3) contracting by local agencies, including school districts, general law cities and counties, and special districts. These three sections are organized as follows:
§ 9.2.1 Administrative Provisions
The Public Contract Code states that the purpose of public contract law is to clarify and ensure full compliance with competitive bidding requirements, but also “to eliminate favoritism, fraud, and corruption in the awarding of public contracts.”90 Public Contract Code § 102 encourages uniformity in public contract law to encourage competition for public contracts and to aid public officials in administering these contracts. § 102 is extremely useful regarding the applicability of actions and interpretations of other public agencies as precedent. Public agencies are strongly encouraged to review the reported decisions for guidance.
The Public Contract Code applies to contracting by a “public entity.” The definition of “public entity” includes “… the state, county, city, city and county, district, public authority, public agency, municipal corporation, or any other public subdivision or public corporation in the state.”91 A “Public Works Contract” is defined as “an agreement for the erection, construction, alteration, repair, or improvement of any public structure, building, road, or other public improvement of any kind.”92
As stated earlier, not all aspects of the Public Contract Code apply to every public agency. In fact, a good bit of the effort and analysis of public contract disputes involves determining which provisions apply to the specific agency in question.
The Public Contract Code permitts local agencies to set guidelines regarding minority, women and disabled enterprise participation goals and good faith efforts,93 and certification of minority and women business enterprises,94 all of which were intended to foster equal opportunity.
It appears that most state and local agencies will continue to seek opportunities to promote the success of minority-owned and woman-owned businesses by direct and indirect encouragement.
City of Richmond v. J. A. Croson Co. (1989) 488 U.S. 469, introduces a large group of cases that includes Adarand Constructors, Inc. v. Pena (1995) 515 U.S. 200. The principal cases in California are Hi-Voltage Wire Works, Inc. v. City of San Jose (2000) 24 Cal.4th 537 and Monterey Mechanical Co. v. Wilson (9th Cir 1997) 125 F.3d 702. Further discussion of Affirmative Action Programs is found in Section 9.2.2.
So that only legally qualified contractors bid on a project, the Public Contract Code requires a public agency to specify the necessary contractor’s license classification in its bid invitations.95 (See Chapter 11 for further discussion of this topic.)
In preparing its bid documents, a public agency is permitted to request a brand name or specific product manufacturer in the bidding documents. However, to foster competition, the contractor may generally request an exception to specified brand names. Special provisions (so-called “Or Equal” provisions) govern the circumstances under which contractors may substitute materials or equipment for those specified.96 The most important provision is that a contractor is allowed to substitute the particular named product only with a product of equal quality and likeness.97
Many disputes arise over the definition of an “equal” product. The owner and architect generally determine whether or not the substituted product is equal to the one named in the bidding documents. Whenever possible, a contractor should offer any substitutions prior to its bid for approval by the owner.
After all the bids are submitted, a substitution request may become a battle between a general contractor or subcontractor seeking a lower-cost alternative and an owner or architect who may see the substitution as an inferior product or technique. In limited instances, an agency may specify an exact brand or “sole source” for the product or service.
The Public Contract Code also addresses subletting and subcontracting requirements, which are intended to protect subcontractors and the public bidding process from unethical substitution or browbeating by the general contractor after submission and acceptance of the bid by the public agency. The Subletting and Subcontracting Fair Practices Act includes provisions relating to bid shopping and bid peddling, listing of subcontractors in the bid, substitution, assignment and subletting of subcontractors, clerical errors in the listing of subcontractors, and many other important provisions.
Other provisions of the Public Contract Code relate to relief of bidders for certain mistakes,99 requirements for the awarding of contracts,100 contract sanctions for the employment of illegal aliens,101 and even sanctions for out-of-state contractors from states that provide bidding penalties against nonresident (meaning California) contractors.102
§ 9.2.2 Contracting by State Agencies
Contracting by state agencies is governed by the State Contract Act;102 however, the act is not applicable in every situation. For example, contracts for the purchase of certain materials and supplies by the Department of General Services are specifically excluded.103 The eight provisions discussed below are of particular importance in the administration of contracts by state agencies. Other general provisions of lesser importance relating to state contracts are set forth in Public Contract Code §§ 10102-10110.
§ 9.2.2(a) Minority Business Enterprise (MBE)/Women’s Business Enterprise (WBE)/Disabled-Veteran Business Enterprise (DV BE)
Provisions aiding the interests of minority, women and disabled veteran business enterprises are codified in Public Contract Code §§ 10115-10116. The provisions require contracts awarded by any state agency to provide participation goals of at least 15 percent for minority business enterprises, 5 percent for women business enterprises, and 3 percent for disabled veteran business enterprises. Public Contract Code § 10115.13
Such good faith efforts and affirmative action programs have been highly controversial, and legal cases involving these programs have had mixed results before U.S. federal courts and the California Supreme Court.
In a 1994 case involving Domar Electric, Inc., the Court upheld a City of Los Angeles charter requirement that bidders make good faith efforts to comply with the city’s subcontractor outreach program.104 The program was designed to give minorities, women and other groups an equal opportunity to participate in the performance of city contracts. In a second case involving Domar Electric, a contractor that submitted the lowest bid on a city public works project was not awarded the contract because it failed to document its compliance with the city’s subcontractor outreach program.105 The contractor challenged the decision to award the contract to another bidder on the grounds that the outreach program violated the city’s charter, Public Contract Code § 2000 (award of a public contract to the lowest responsible bidder meeting minority participation requirements), and the equal protection clause of the U.S. Constitution, Amendment 14. The trial court denied the requested relief.106 The court of appeal reversed the trial court’s judgment, holding that the outreach program violated the city’s charter, but the Supreme Court reversed the judgment of the court of appeal and remanded the matter. On remand, the court of appeal affirmed the trial court’s judgment. The city’s outreach was judged to be not a “municipal affair” of competitive bidding, and thus was subject to Public Contract Code § 2000. The court further held that the outreach program did not violate Public Contract Code § 2000, subd. (a) (2) a public contract may be awarded to a bidder showing a good faith effort to obtain the participation of women and minorities, irrespective of the attainment of such participation), and it excluded the type of program described in § 2000, subd. (a)(1) (a bidder must have achieved a set number, percentage, or quota of participation or demonstrate a good faith [but unsuccessful] effort to encourage such participation.)
As previously stated, the major purposes of using unfettered competitive bidding are to guard against favoritism, improvidence, extravagance, fraud and corruption and to protect against insufficient competition so that the government gets the most work for the least money. Although mandatory set-asides and bid preferences work against this goal by narrowing the range of acceptable bidders solely on the basis of their particular classifications, requiring prime contractors to reach out to all types of subcontractors broadens the pool of participants in the bid process and thereby guards against the possibility of insufficient competition.
§ 9.2.2(b) Award to Lowest Responsible Bidder
All work on any state project must be performed under a contract awarded to the lowest responsible bidder.107 See Chapter 12 for further discussion of this topic.
§ 9.2.2(c) Bid Advertisement
The Public Contract Code states that requests for bids must be advertised by public agencies and sets forth the requirements for such advertising.108 See Chapter 12 for a more detailed discussion of this area.
§ 9.2.2(d) Bidding Requirements
Numerous requirements are applicable to those who bid on state public works contracts. Among the more important requirements are disclosure of financial statements indicating the “bidder’s financial ability and experience in performing public works” projects,109 submission of the sealed bids accompanied by bidder’s security,110 and withdrawal of bids prior to the time designated for opening of the bids.111
§ 9.2.2(e) Contract Award
The Public Contract Code makes provisions relating to the opening of bids publicly, awarding of the contracts, and rejection of bids by public entities.112 Provisions are also made relating to administration of contracts, including bond requirements,113 damages for delay,114 changes in plans and specifications,115 and compliance with other agencies’ procedures.116
§ 9.2.2(f) Resolution of Claims and Arbitration
The Public Contract Code provides for the resolution of contract claims, including arbitration, as the exclusive remedy for disputes involving State of California contracts disputes. Specific procedures must be followed to initiate arbitration. The time limit for initiating arbitration is 90 days under Public Contract Code 10240.1. (See Chapter 18 for further discussion of this area).117
§ 9.2.2(g) Changes and Extra Work
This aspect of public works contracting results in disputes between the involved parties. The provisions governing contract modifications (including changes and extra work provisions), performance, and payment must be carefully reviewed as they are important when dealing with or attempting to avoid potential claims.118
§ 9.2.2(h) University Rules
The University of California has competitive bidding requirements for projects exceeding $50,000.119 The University of California generally takes the position that it is not bound by the provisions of the Public Contract Code pertaining to State of California contracts. It often refers to its status under the California Constitution as a separate branch of government, owing to issues of campus academic independence and freedom. However, the Public Contract Code does contain provisions relating specifically to California State University contracting.120
§ 9.2.3 Contracting by Local Agencies
The provisions governing contracting by local agencies (school districts, general law counties and cities and other special districts) are referred to collectively as, the Local Agency Public Construction Act.121 The provisions summarized below are of particular importance. Other provisions relating to specific local agencies are set forth in Public Contract Code §§ 20105-22300.
§ 9.2.3(a) School Districts
Contracts for school projects must be awarded through competitive bidding.122 The bids must be sealed when submitted and accompanied by a form of bidder’s security.123 The Public Contract Code also contains other provisions that govern bidding and letting of contracts by school districts.124
§ 9.2.3 (b) Contracting by Community College Districts
Local Community Colleges follow procedures similar to those of the University of California. However, there is one unique provision regarding community college district contracting processes, a 10 percent limit on change orders granted through an original contract. While the intent of this provision is to prohibit Community Colleges from extending contracts through change orders, rather than engage in competitive bidding, it has been erroneously asserted as a shield against construction claims beyond that limit even when the college has breached its contract obligations and design warrantees.
The purpose of this section was to limit the authority of the Districts, not provide them with immunity from their own breaches of contract. However, failure to supply site access or provide adequate plans or specifications would not be subject to any type of limit on the damages that a contractor may suffer from the breach of a contractual relationship for a project, once established.
§ 9.2.3(c) General Law Counties and Cities
A general law county or city “has the powers expressly conferred by the state legislature.”125 Its power stems from the laws passed by the legislature; therefore, it has no power independent of the state legislature. Many provisions of the Public Contract Code govern public works contracts awarded by general law counties, including publication of advertisements for bids, award of contracts, modifications to the scope of work, rejection of bids, extra work and method of payment.126 Separate provisions apply to public works contracts awarded by counties with populations of less than 500,000.127 The provisions for the majority of general law counties and cities are governed by the same sections of the code, except for special provisions that affect very large counties (generally pertaining only to Los Angeles County).128
§ 9.2.3(d) Transit, Utility, and Special Districts
Numerous sections of the Public Contract Code relate to various aspects of public works construction by specific transit, utility, and other districts.129 A thorough investigation of each district’s unique requirements is recommended.
§ 9.2.4 Chartered Cities and Counties
A charter city or county is one that is self-governing and has formally adopted a city or county charter. Under prior law, charter cities and counties were, in theory, not subject to many provisions of the Public Contract Code. Instead, the city or county was thought subject only to the public works procurement provisions contained in its charter. As a rule, it had complete and total power over all its affairs.130
In the case of Redwood City v. Moore (1965) 231 Cal.App.2d 563, the Court found that when a municipality is carrying out municipal affairs, such affairs may not be held to be circumscribed except as expressly limited by the charter provisions. The Court in Redwood City went on to describe factors by which the state legislature, in an individual case, might make an issue both a municipal affair and a statewide concern.
That view was overruled in Bishop v. City of San Jose (1969) 1 Cal.3d 56, 63, which stated that the legislature had no such power. Thus, the overruling of Redwood City had the effect of further strengthening the autonomous power of cities over municipal affairs.
It was well established that chartered cities and general law cities were not subject to the same requirements for similar projects.131 Further, the courts have held that charter cities are not subject to the competitive bidding requirements of the Public Contract Code.132
In one case, a labor union sought to enjoin work being done by city employees on a city-owned pier on the grounds that state law and the city’s charter required competitive bidding. The Court held that the mode of contracting work by a charter city is a municipal rather than a statewide concern, and that state bidding procedures did not apply.133
In another labor case, Labor Code § 1782 requiring charter cities to pay prevailing wages to receive financial assistance did not violate “home rule.” City of El Centro v. Lanier (2016) 245 Cal.App.4th 1494. However, as a practical matter, the legislature has now severely limited the latitude of charter cities and counties. In enacting Public Contract Code § 1100.7, the legislature stated that the Code is “…the basis of contracts between most public entities in this state and their contractors and subcontracts. With regard to charter cities, this code applies in the absence of an express exemption or a city charter provision or ordinance that conflicts with the relevant provision of this code” (added 2002).
Practice Pointer: Of course, federal laws have always been fully enforceable in charter cities and counties.
Before bidding on any public works project, a contractor should determine whether the public entity involved is a charter or general law entity. If it is a charter entity, the contractor should carefully read the entity’s charter provisions regarding the letting and administration of public works contracts.
§ 9.2.5 Other Applicable California Codes
Depending upon the public project and public entity contracting for the project, other California codes often apply to public works contracting, including the Agriculture Code, Government Code, Streets and Highways Code, Water Code, Education Code and Public Utilities Code. Contractors should be familiar with applicable codes for the work they typically perform.
§ 9.3 Regulated Contract Provisions
The California Legislature has specified certain required or allowable clauses to be included in public works contracts. In addition, the California Public Contract Code prohibits or limits the use of certain types of clauses that the state legislature has found violate public policy.
Below are the major examples:
§ 9.3.1 Allowed Clauses
Two allowed clauses are “value engineering” and “differing site conditions” clauses. A public entity may provide for the payment of extra compensation to a contractor for cost reduction changes in the plans and specifications. As an incentive to make technical changes in the work that result in a better project, at less cost, the contractor may be given a share of the cost savings under a value engineering contract provision. This is termed the “value engineering” clause. Value engineering clauses are allowed to offer up to 50 percent of the savings to the contractor.134
The differing site conditions clause pertains to public works projects that require trenches or excavations over four feet in depth. Agreements for such projects must provide for contractor notice and owner payment for (1) hazardous waste generated during the project, (2) physical conditions at the site differing from those outlined in the contract, and (3) unknown and unusual physical conditions.135
§ 9.3.2 Prohibited or Limited Clauses
The code limits the use by public agencies of so-called “no damage for delay” clauses. When the owner creates an unreasonable delay, the contract may not preclude recovery of damages by the contractor or subcontractor.136
A “release of claims” clause is also prohibited. This type of clause requires the release of any claims by a contractor in order to be paid undisputed contract amounts. However, a contract provision making the payment of an undisputed amount contingent upon the contractor providing to the public entity a release of claim form for that undisputed amount is not against public policy and thus is proper to include in a contract.137
Public contracts may not require contractors to be responsible for the cost of repairing damage to a project that is more than 5 percent of the contracted amount if the damage is caused by an act of God. Such a requirement is called a “force majeure” clause. The term “Act of God” is very broad and difficult to define. Two obvious examples are extreme weather and earthquakes. However, what one party to the contract believes to be an Act of God may not be true for another party.138
The former use of “pay if paid” clauses in subcontracts has also been found to be against public policy. These clauses allowed a general contractor to delay paying its subcontractors when there was a pending claim or delay problem. It also gave the general contractor the ability to argue that it was not liable to the subcontractors in the event of the default or bankruptcy of the owner. The relevant case139 was decided by the Supreme Court on June 26, 1997. Four subcontractors entered into agreements with the general contractor on a commercial building project. The subcontracts included “pay if paid” provisions, which made payment by the building owner to the general contractor a condition precedent to the general contractor’s obligation to pay the subcontractors. Three of the four subcontracts purported to preserve the subcontractors’ mechanic’s lien rights. However, the general contractor obtained a payment bond from an insurer to protect the owner from mechanic’s lien claims. After substantial work had been completed on the project, the building owner stopped making payments to the general contractor, who then declined to pay the subcontractors. The subcontractors recorded mechanic’s liens and filed actions against the surety. The trial court granted judgment for the subcontractors and against the surety.140 The court of appeal,141 affirmed the decision of the trial court. The Supreme Court then affirmed the judgment of the court of appeal and remanded the case for further proceedings, holding that the surety was liable to the subcontractors on the payment bond and that a general contractor’s liability to a subcontractor may not be made contingent on the owner’s payment to the contractor.142
Although a “pay if paid” provision is not precisely a waiver of mechanic’s lien rights, this type of provision has the same practical effect as an express waiver of those rights. Since all but one of the subcontracts purported to preserve the mechanic’s lien rights and remedies, enforcement of the “pay if paid” provisions would not have been consistent with the intent of the contracting parties.
In most cases, a general contractor is forced to enter into “liquidation agreements” with its subcontractors. These agreements, entered into after a dispute arises, allow the general contractor to delay paying the subcontractors, especially claim amounts, until the claim is resolved with the owner.
§ 9.3.3 Required or Otherwise Key Public Works Clauses
Many general provisions are required to be included in a public works contract document. Provisions relating to bonds, insurance, and licensing requirements are but a few of the provisions to consider inserting. These and other required provisions are discussed below.
• Public entities are required to identify public works contracts, or they can face actions from contractors for the additional cost of complying with prevailing wage requirements, fines or penalties. Labor Code §§ 1726, 1781.
• A contractor who is awarded a public works contract must post a payment bond with the public entity if the contract exceeds $25,000.143
• Typically, the public entity will require the contractor to submit proof of liability insurance, with the public agency named as an additional insured. The AIA General Conditions forms contain standard insurance provisions.144 Before entering into a public works contract, each party should speak with a knowledgeable broker specializing in construction insurance, as many general agents may be unaware of important coverage issues specific to the construction industry.
• Contractor licensing provisions along with minority/disability business solicitation requirements must be included in every public works contract. These requirements are more fully discussed in other areas.
• Contractors performing work on a public works project are required to pay prevailing wage rates, which are specified by the public entities in the bidding documents, as well as the contracts themselves.168 In addition, clauses relating to permits and fees, conformity with applicable codes, site access and inspection, and scheduling requirements, must be included in the public works contracts.
• Labor and materials provisions, extra work or change clauses (giving either party authority to modify or change the contract),145 notice requirements, and delay and extensions clauses are essential in all public works contracts.
• Warranty provisions are essential as well, and both express and implied warranty issues should be considered. The duration of a warranty in the construction industry is typically one year. However, the expiration of a warranty period does not apply to defective construction, which amounts to a breach of contract. Such situations are governed by the statute of limitations, which is four years for breach of a written contract.146
• Indemnification,147 claims procedures, termination and default on the contract, liquidated damages, arbitration and attorneys’ fees clauses148 are other provisions that are included in the AIA General Conditions forms.
• Under Public Contract Code § 20103.6, any local agency must disclose for any procurement of architectural services over $10,000, any contract provision that would require the contracting architect to indemnify and hold harmless the local agency against any and all liability, whether or not caused by the activity of the contracted architect.
• As stated above, bond provisions are required in all public works contracts. Bonding requirements are important in that liens cannot be filed against public property. Prime contractors are required to post performance and payment bonds, which guarantee the faithful performance of the contract by the prime contractor and act as security for any claim which may arise from an unpaid subcontractor or material supplier.149
§ 9.4 California Public Records Act
When public works disputes arise, private parties often seek information and documents from public entities through the Public Records Act.150 The act, which is analogous to the federal Freedom of Information Act,151 provides for the right of every person to inspect public records and receive copies.152 “Public records” include writings that relate to the conduct of the public’s business that are retained by any state or local agency.
Certain records are exempt from disclosure, such as notes and interoffice memoranda, personnel records, medical records whose release would constitute an invasion of privacy, and confidential information.153 However, if a public entity discloses a record that is otherwise exempt from disclosure such action constitutes a waiver of the exemption by the public agency.154
The most significant exemption under the Public Records Act regarding disputes is the litigation privilege.155 This privilege exempts from disclosure records pertaining to pending litigation to which the public agency is a party, or to claims made pursuant to Division 3.6 (commencing with § 810) of Title 1 of the Government Code, until such litigation or claim has been finally adjudicated or otherwise settled. This provision is often used by public entities to withhold information. However, public entities must carefully analyze the provisions in this section so as not to subvert the purpose of the Public Records Act which is to allow citizens access to the ordinary records of their government.
§ 9.5 Federal Law Considerations
A substantial number of construction projects in the State of California are performed by federal agencies. These include the Department of the Navy in San Diego and San Francisco Bay areas, the U.S. Army Corps of Engineers’ ports and waterways, flood control and irrigation improvements, and federal courthouses.
However, the vast majority of public works contracts issued by California public agencies are not governed by federal contracting law. The major exceptions are federally-funded mass transit (particularly rail transportation projects), flood control projects, highway improvements, airport projects, (especially those performed under FAA grants), and other construction projects funded by locally administered federal grants.
The standard agreements governing federal public works are set forth in the Federal Acquisition Regulations (FARS),156 which are the primary regulations of federal agencies for construction contract procurement. FARS sets forth bidding procedures and requires public contracts to be awarded to the lowest responsible and responsive bidders.
One important aspect to consider when dealing with a federal agency is that a “fair proportion” of federal contracts should be awarded to small businesses.157 This requirement is similar to state contract minority and women business enterprise requirements, discussed above. Generally, the U.S. Small Business Administration establishes the criteria used to determine whether a contractor qualifies as a small business.
Many federally instigated provisions are contained in the project’s construction contracts and bidding documents. The sources of many of these provisions are: the grant agreement between the California public agency involved and the federal agency administering the grant, the rules and regulations associated with the federal grant, and the appropriations act for the funds. Government provisions are also included, both in congressional legislation, and federal regulations.
Contractors and their attorneys must be highly familiar with the conditions of the granting agencies, including the substantive requirements for grant payments. Additionally, practitioners must have a working knowledge of the grant agencies’ procedures for protesting bids, administration of disputes, and adjudication of legal disputes.
§ 9.6 Governmental Immunities
In California, Business and Professions Code § 5536.27, added in 1990, grants immunity to an architect for personal injury, wrongful death, or property damage caused by his or her good faith but negligent inspection, for structural integrity or nonstructural elements affecting life and safety, of a structure used for human habitation or owned by a public entity, when the inspection is conducted at the scene of a declared emergency caused by a major earthquake and is performed voluntarily and without compensation at the request of a public official, public safety officer, or building inspector acting in an official capacity. Such immunity applies only to inspections occurring within 30 days of the earthquake and does not cover gross negligence or willful misconduct. California Business and Professions Code § 6706, also added in 1990, grants identical immunity to engineers.
In addition, California Government Code § 830.6 provides neither a public entity nor a public employee is liable for an injury caused by the plan or design of a construction of, or an improvement to, public property when such plan or design has been approved in advance by the legislative body of the public entity or by some other body or employee exercising discretional authority to give such approval or when such plan or design is prepared in conformity with previously approved standards. The trial or appellate court can determine there is substantial evidence upon which a reasonable public employee could have adopted the plan or design or the standards therefore, or a reasonable legislative body or other body or employee could have approved the plan or design or the standards therefore.
In order for the State to establish design immunity as a defense, the State must show: (1) a causal relationship between the plan and the accident; (2) discretionary approval of the plan prior to construction; and (3) substantial evidence supporting the reasonableness of the design.158
Ordinarily, the opinion of a civil engineer as to the reasonableness of a design constitutes any substantial evidence sufficient to support a design immunity defense under § 830.6.159 However, by force of its very terms, the design immunity of § 830.6 is limited to a design-caused accident. It does not immunize from liability caused by negligence independent of design, even though the independent negligence is only a concurring, proximate cause of the accident.160
§ 9.7 Contact with Public Officials
California attorneys generally have an ethical responsibility not to contact opposing parties who are represented by counsel.161 However, the rules are different when it comes to public works projects, where the ultimate decision makers are elected public officials. Elected public officials are expected to communicate with and be responsive to members of the public, including taxpayers and vendors who do business with public agencies. Thus, despite the existence of city attorneys and county counsel, parties in disputes with public agencies regarding public works construction regularly contact mayors, members of the city council, and county supervisors, as well as other elected officials.162
Contractors, therefore, have an advantage in certain situations that they would not have in the private sector (e.g., if a contractor’s attorney directly contacted members of a board of directors or other representatives of a corporation, he or she would be in violation of disciplinary rules). However, litigation matters are often discussed by city attorneys or county counsel in closed sessions, where public officials are customarily discouraged from engaging in direct discussions with adverse parties or the press during the course of litigation involving the public entity.