Case Name: DOMAR ELECTRIC, INC., Plaintiff and Appellant, v. CITY OF LOS ANGELES, Defendant and Respondent; BAILEY CONTROLS COMPANY, Intervener and Respondent
Court: Supreme Court of California
Jurisdiction: California
Decision Date: 1994-12-28
Citations: 9 Cal. 4th 161
Docket Number: No. S036526
Parties: DOMAR ELECTRIC, INC., Plaintiff and Appellant, v. CITY OF LOS ANGELES, Defendant and Respondent; BAILEY CONTROLS COMPANY, Intervener and Respondent.
Judges: 
Reporter: California Reports
Volume: 9
Pages: 161–188

Head Matter:
[No. S036526.
Dec. 28, 1994.]
DOMAR ELECTRIC, INC., Plaintiff and Appellant, v. CITY OF LOS ANGELES, Defendant and Respondent; BAILEY CONTROLS COMPANY, Intervener and Respondent.
Counsel
Kamine, Steiner & Ungerer, Bernard S. Kamine and Phyllis M. Ungerer for Plaintiff and Appellant.
James K. Hahn, City Attorney, Pedro B. Echeverría, John F. Haggerty and Christopher M. Westhoff, Assistant City Attorneys, for Defendant and Respondent.
Louise H. Renne, City Attorney (San Francisco), Mara E. Rosales, Joseph S. Avila, Bill Lann Lee, Constance L. Rice and Kevin S. Reed as Amici Curiae on behalf of Defendant and Respondent.
Jones, Day, Reavis & Pogue, Gerald W. Palmer and Patricia W. Davies for Intervener and Respondent.

Opinion:
Opinion
BAXTER, J.
We granted review in this case to determine whether a city charter requirement that contracts subject to competitive bidding be awarded to the "lowest and best regular responsible bidder" prevents the charter city and its agencies from requiring potential contractors to comply with a subcontractor outreach program that involves no bid preferences, set-asides or quotas. Our examination of the relevant charter provisions and the purposes underlying the goals of competitive bidding leads us to conclude that the outreach program does not violate the charter. Accordingly, we reverse the judgment of the Court of Appeal and remand the matter to allow that court to address other issues not previously reached.
I. Factual and Procedural Background
The City of Los Angeles (hereafter the City) is governed by a charter which ordinarily requires competitive bidding on contracts involving the expenditure of more than $25,000. (L.A. City Charter, § 386(b).) With exceptions not applicable here, the charter provides that such contracts "shall be let to the lowest and best regular responsible bidder." (§ 386(f).)
On March 29,1983, the City's mayor issued Executive Directive No. 1-B, which declared it was the policy of the City "to utilize Minority and Women-Owned Business Enterprise[s] [MBE's and WBE's] in all aspects of contracting relating to procurement, construction, and personal services." The directive explicitly declared that the City, "through the City Council and it's [sic] respective Boards and Commissions, will ensure that Minority Business Enterprises have the maximum opportunity to participate in the performance of contracts and subcontracts. In this regard, the City will take all responsible steps to ensure that Minority and Women-Owned Business Enterprises have the maximum opportunity to compete for and perform contracts and services." The directive also contained general guidelines for implementing this policy.
Subsequently, the United States Supreme Court decided Richmond v. J. A. Croson Co. (1989) 488 U.S. 469 [102 L.Ed.2d 854, 109 S.Ct. 706], which involved a challenge to a municipality's program that required prime contractors awarded city construction contracts to subcontract at least 30 percent of the dollar amount of each contract to minority firms. In that case, the high court found that the mandatory set-aside for minority subcontractors violated the equal protection clause of the United States Constitution because there was no direct evidence of past discrimination. Thereafter, on March 6, 1989, the Mayor of the City issued Executive Directive No. 1-C,. which was "intended to clarify the implementation of Executive Directive 1-B in light of the Richmond v. Croson decision. . . ."
Although Executive Directive No. 1-C declared that the previous directive "remains intact and in force," it revised the intended policy of the City, as follows: "It is the policy of the City of Los Angeles to provide Minority Business Enterprises (MBEs), Women Business Enterprises (WBEs) and all other business enterprises an equal opportunity to participate in the performance of all city contracts. Bidders and proposers shall assist the city in implementing this policy by taking all reasonable steps to ensure that all available business enterprises, including local MBEs and WBEs, have an equal opportunity to compete for and participate in city contracts." (Italics added.) Under Executive Directive No. 1-C, contracting agencies of the City were directed to evaluate the good faith efforts made by bidders and proposers in their outreach to MBE's, WBE's and other business entities according to nine factors. Subsequent guidelines issued by the mayor's office clarified that a tenth factor, which purported to measure a bidder's good faith with reference to certain anticipated levels of MBE and WBE subcontractor participation, should no longer be considered in evaluating bids.
The Los Angeles Board of Public Works (hereafter the Board) established an outreach program patterned after Executive Directive No. 1-C. Under the Board's program, the adequacy of a bidder's good faith in conducting subcontracting outreach efforts to MBE's, WBE's and other business enterprises (OBE's) is to be determined by utilizing the factors listed in the mayor's directive, including evaluations of the bidder's efforts to identify and select specific work items in projects for subcontracting out to MBE's, WBE's and OBE's, to conduct advertising on selected work, and to provide information to and negotiate in good faith with interested subcontractors. Although the Board provides estimates of the level of MBE and/or WBE participation which might be achieved in each particular bid situation (1 percent in the instant project), the program makes clear that the failure to meet the anticipated participation level shall not by itself disqualify any bidder from consideration for a contract award nor result in a determination of lack of reasonable MBE/WBE participation. Thus, a bidder gains no advantage from meeting the anticipated participation level nor a disadvantage from not meeting it.
In October 1991, the Board issued a request for bids on a contract to provide a computer control system for the Hyperion Secondary Sewage Treatment Plant. The bid package specified that bidders would be required to submit documentation of their compliance with the outreach program. In particular, the package contained a document called a "bidder's checklist" which detailed all pages of the bid required to be submitted for the bid to be considered responsive. This checklist included the statement: " 'Good Faith Effort Documentation Checklist': I have used this checklist, initialed each step and have signed the form. I will submit this checklist along with required documentation no later than three (3) City working days following the close of Board business the day bids are received." Additionally, at the bottom of the bidder's checklist was the following statement: "I have carefully read and completed each and every applicable page of the Proposal. I am aware that the failure to submit the appropriate pages of the Proposal, properly completed and signed, may render my bid non-responsive and subject to rejection by the Board of Public Works." This statement was followed by a line for the bidder's signature.
Three companies submitted bids for the project. Of these, Domar Electric, Inc. (hereafter Domar) submitted the apparent lowest monetary bid of $3,335,450. However, the bid was declared nonresponsive due to Domar's failure to timely provide the required good faith effort documentation within the three-day deadline. The Board awarded the contract to Bailey Controls Company, which had submitted the next lowest monetary bid of $3,987,622.
Domar filed a petition for a writ of mandate and/or prohibition in the superior court seeking, among other things, to prevent the City from entering a contract on the subject project with any contractor other than itself. After an alternative writ was issued, the superior court denied Domar's petition, finding that "the requirement of the MBE/WBE outreach program attachment is not illegal and/or unconstitutional or precluded by case authorities. The requirement serves an important and significant public policy which does not set any quotas or improper goals." Domar's petition for a writ of mandate in the Court of Appeal was denied, as was its petition for review.
After a final judgment was entered, Domar appealed on the grounds that: (1) the outreach program violates the City's charter; (2) the program violates Public Contract Code section 2000, which permits compliance with an outreach program to be predicated on either demonstrating good faith in seeking MBE and WBE participation or meeting specific goals and requirements for such participation; and (3) the program is unconstitutionally race-conscious in violation of the federal equal protection clause and the holding in Richmond v. J. A. Croson Co., supra, 488 U.S. 469. The Court of Appeal, in a split decision, reversed the superior court judgment. After finding that authorization for the outreach program was not expressly set forth in the charter, the appellate court determined that the Board's rejection of Domar's bid based on the failure to submit outreach documentation violated charter section 386(f), which requires that contracts be awarded to the "lowest and best regular responsible bidder." Because it found a charter violation, the court did not reach the other two contentions. We granted the City's petition for review.
II. Discussion
The procedures and requirements relating to the competitive bidding of municipal contracts are set forth in large part at section 386 of the City's charter. Those relevant to this case are described below.
With certain exceptions not pertinent here, section 386(b) provides that the City "shall not be, and is not bound by any contract involving the expenditure of more than twenty-five thousand dollars ($25,000) unless the . . . board . . . authorized to contract shall first have complied with the procedure for competitive bidding established by this section." Notices of requests for bids must be published at least once in a daily newspaper printed and published in the City, and such notices must specify the amount of the bond to be given for the faithful performance of the contract. (§ 386(c).) "Bidders may be required to submit with their proposals detailed specifications of any item to be furnished, together with guarantees as to efficiency, performance, characteristics!;,] operating cost, useful life, time of delivery, and other appropriate factors. Such notice shall specify the time and place such bids will be received." (Ibid.) Bids must be accompanied by a cashier's check for an amount not less than 10 percent of the aggregate sum of the bid, or, in lieu thereof, a satisfactory surety bond in like amount, guaranteeing that the bidder will enter into the proposed contract if the contract is awarded to the bidder. (§ 386(d).) The bid must also be supported by an affidavit of noncollusion. (Ibid.)
Section 386(f) pertains to the award of contracts, and provides in pertinent part: "At the time specified for opening of said bids, . the contract shall be let to the lowest and best regular responsible bidder furnishing satisfactory security for its performance. This determination may be made on the basis of the lowest ultimate cost of the items in place and use; and where the same are to constitute a part of a larger project or undertaking, consideration may be given to the effect on the aggregate ultimate cost of such project or undertaking. Notwithstanding any other provision of this Charter to the contrary and to the extent permitted by law, the City and its various awarding authorities, including those City departments which exercise independent control over their expenditure of funds, shall not enter into or renew any contract, . . . unless the bidder is in compliance with, or the contract has been excluded or exempted from any anti-apartheid policy adopted by the City by ordinance . In addition, irrespective of the provision of this subsection requiring award to the lowest and best regular responsible bidder, a bid preference can be allowed in the letting of contracts for California or Los Angeles County firms and, in addition, the bid specifications can provide for a domestic content requirement; the extent and nature of such bid preference, domestic content requirement and any standards, definitions and policies for their implementation shall be provided for by ordinance adopted by the Council . The bid of any bidder previously delinquent or unfaithful in the performance of any former contract with the City may be rejected." (Italics added.)
The issue in this case is whether the charter precludes the Board from requiring bidders on public works projects to undertake good faith efforts in compliance with its subcontractor outreach program as part of the competitive bid process. At the outset, we observe that the charter contains no provision expressly allowing the City or its contracting agencies to adopt a subcontractor outreach program, Accordingly, we shall first consider whether the program is void in the absence of explicit charter authorization.
We begin with the cardinal principle that the charter represents the supreme law of the City, subject only to conflicting provisions in the federal and state Constitutions and to preemptive state law. (See Harman v. City and County of San Francisco (1972) 7 Cal.3d 150, 161 [101 Cal.Rptr. 880, 496 P.2d 1248].) In this regard, "[t]he charter operates not as a grant of power, but as an instrument of limitation and restriction on the exercise of power over all municipal affairs which the city is assumed to possess; and the enumeration of powers does not constitute an exclusion or limitation. [Citations.]" (City of Grass Valley v. Walkinshaw (1949) 34 Cal.2d 595, 598-599 [212 P.2d 894] (City of Grass Valley); see also Johnson v. Bradley (1992) 4 Cal.4th 389, 396-397 [14 Cal.Rptr.2d 470, 841 P.2d 990].) The expenditure of city funds on a city's public works project is a municipal affair. (Loop Lumber Co. v. Van Loben Seis (1916) 173 Cal. 228, 232 [159 P. 600] [street and sewer work]; see Vial v. City of San Diego (1981) 122 Cal.App.3d 346, 348 [175 Cal.Rptr. 647]; Smith v. City of Riverside (1973) 34 Cal.App.3d 529, 534-537 [110 Cal.Rptr. 67].)
"[B]y accepting the privilege of autonomous rule the city has all powers over municipal affairs, otherwise lawfully exercised, subject only to the clear and explicit limitations and restrictions contained in the charter." (City of Grass Valley, supra, 34 Cal.2d at p. 598; see Johnson v. Bradley, supra, 4 Cal.4th at pp. 396-397.) Charter provisions are construed in favor of the exercise of the power over municipal affairs and "against the existence of any limitation or restriction thereon which is not expressly stated in the charter .'' (City of Grass Valley, supra, 34 Cal.2d at p. 599; Taylor v. Crane (1979) 24 Cal.3d 442, 450-451 [155 Cal.Rptr. 695, 595 P.2d 129].) Thus, "[restrictions on a charter city's power may not be implied." (Taylor v. Crane, supra, 24 Cal.3d at p. 451)
Applying these principles, we conclude that the mere failure of the City's charter to expressly grant the power to require bidders to conduct subcontractor outreach does not render the outreach program void. However, our analysis does not stop here. Even though the absence of express authorization is not fatal to the program, it is well settled that a charter city may not act in conflict with its charter. (City and County of San Francisco v. Cooper (1975) 13 Cal.3d 898, 923-924 [120 Cal.Rptr. 707, 534 P.2d 403]; Currieri v. City of Roseville (1970) 4 Cal.App.3d 997, 1001 [84 Cal.Rptr. 615]; Brown v. City of Berkeley (1976) 57 Cal.App.3d 223, 230-233 [129 Cal.Rptr. 1].) Any act that is violative of or not in compliance with the charter is void. (Ibid.)
In holding that the outreach program is invalid, the Court of Appeal found that the program "unquestionably purports to establish a noncharter exception to the competitive bidding requirements and exceptions set forth in section 386(f). As such, it does not conform to, is not subordinate to, conflicts with, and exceeds the charter." Domar essentially agrees with this reasoning, arguing that the requirements and exceptions enumerated in the charter are intended to be exclusive.
In determining whether the implementation of the outreach program conflicts with the charter, we employ the following rules of charter construction. First, we construe the charter in the same manner as we would a statute. (C.J. Kubach Co. v. McGuire (1926) 199 Cal. 215, 217 [248 P. 676]; Currieri v. City of Roseville, supra, 4 Cal.App.3d at p. 1001.) Our sole objective is to ascertain and effectuate legislative intent. (City of Huntington Beach v. Board of Administration (1992) 4 Cal.4th 462, 468 [14 Cal.Rptr.2d 514, 84l P.2d 1034].) We look first to the language of the charter, giving effect to its plain meaning. (Burden v. Snowden (1992) 2 Cal.4th 556, 562 [7 Cal.Rptr.2d 531, 828 P.2d 672].) Where the words of the charter are clear, we may not add to or alter them to accomplish a purpose that does not appear on the face of the charter or from its legislative history. (Ibid.)
Section 386 contains two subsections that specifically authorize the City to impose certain requirements upon bidders as part of the competitive bid process. Section 386(c) expressly states that "[bjidders may be required to submit with their proposals detailed specifications of any item to be furnished, together with guarantees as to efficiency, performance, characteristics [,] operating cost, useful life, time of delivery, and other appropriate factors." Section 386(f) requires that bids shall be let to the "lowest and best regular responsible bidder," but explicitly states that irrespective of this requirement, a local bidder preference may be allowed and a domestic content requirement may be included in bid specifications if provided for by ordinance adopted by the city council. Similarly, section 386(f) provides that notwithstanding any other provision of the charter to the contrary and to the extent permitted by law, the City shall not enter into any contract unless the bidder is in compliance with, or the contract has been excluded or exempted from, any anti-apartheid policy adopted by the City by ordinance.
Since neither section 386(c) nor section 386(f) expressly authorizes or forbids the City to adopt a requirement relating to subcontractor outreach, the validity of such a requirement must be ascertained with reference to the purposes of competitive bidding, which are "to guard against favoritism, improvidence, extravagance, fraud and corruption; to prevent the waste of public funds; and to obtain the best economic result for the public" (Graydon v. Pasadena Redevelopment Agency (1980) 104 Cal.App.3d 631, 636 [164 Cal.Rptr. 56], citing 10 McQuillin, Municipal Corporations (3d ed.) § 29.29), and to stimulate advantageous market place competition (Konica Business Machines U.S.A., Inc. v. Regents of University of California (1988) 206 Cal.App.3d 449, 456 [253 Cal.Rptr. 591] [interpreting statutory competitive bid requirements]).
As one leading treatise explains: "The provisions of statutes, charters and ordinances requiring competitive bidding in the letting of municipal contracts are for the purpose of inviting competition, to guard against favoritism, improvidence, extravagance, fraud and corruption, and to secure the best work or supplies at the lowest price practicable, and they are enacted for the benefit of property holders and taxpayers, and not for the benefit or enrichment of bidders, and should be so construed and administered as to accomplish such purpose fairly and reasonably with sole reference to the public interest. These provisions are strictly construed by the courts, and will not be extended beyond their reasonable purpose. Competitive bidding provisions must be read in the light of the reason for their enactment, or they will be applied where they were not intended to operate and thus deny municipalities authority to deal with problems in a sensible, practical way." (10 McQuillin, Municipal Corporations (3d rev. ed. 1990) § 29.29, p. 375, fns. omitted.) Thus, charters requiring competitive bidding are not to be given such a construction as to defeat the object of insuring economy and excluding favoritism and corruption. (Los Angeles Dredging Co. v. Long Beach (1930) 210 Cal. 348, 354 [291 P. 839, 71 A.L.R. 161], citing Harlem Gaslight Co. v. Mayor etc. of New York (1865) 33 N.Y. 309, 329.)
We perceive no conflict between the outreach program and the purposes of competitive bidding. It has been generally recognized that competitive bidding requirements "necessarily imply equal opportunities to all whose interests or inclinations may impel them to compete at the bidding." (64 Am.Jur.2d (1972) Public Works and Contracts, § 37, p. 889, fn. omitted.) This is precisely what the outreach program aims to do in requiring prime contractors to provide MBE's, WBE's and OBE's an equal opportunity to compete for and participate in the performance of all city contracts. Moreover, in mandating reasonable good faith outreach to all types of subcontractor enterprises, the program in effect seeks to guard against favoritism and improvidence by prime contractors, and to increase opportunity and participation within the competitive bidding process. Consequently, not only are the program's objectives consistent with the goals of competitive bidding, but the program seeks to advance those goals by stimulating advantageous marketplace competition. In implementing its outreach program, the Board could reasonably have concluded that the program will assist the City in securing the best work at the lowest price practicable.
Domar disagrees with this assessment, arguing that the instant record contains no evidence to support the conclusion that the outreach program will actually promote competition or reduce prices. Moreover, while Domar does not assert that the outreach program increases contract prices or that it requires efforts that are unreasonable or costly, Domar suggests that MBE and WBE programs generally do not lead to lower prices for public projects because they encourage bidders to use less competitive but more costly MBE and WBE firms. Domar contends that such programs do not expand the public contracts market; rather, they simply cause the market to shift from non-MBE and non-WBE firms to MBE and WBE firms and drive the former out of their existing market share.
We are not persuaded by these arguments. Despite the lack of empirical evidence, it is not unreasonable for the Board to conclude that, in the absence of mandated outreach, prime contractors will tend to seek out familiar subcontractors when bidding for projects, and that therefore their bids may or may not reflect as low a price had reasonable outreach efforts been made. Indeed, Domar is unable to cite to anything in the record that might detract from such a conclusion. Under these circumstances, the Board's action is entitled to deference. (See Social Services Union v. City and County of San Francisco (1991) 234 Cal.App.3d 1093, 1101 [285 Cal.Rptr. 905]; see also San Mateo City School Dist. v. Public Employment Relations Bd. (1983) 33 Cal.3d 850, 856 [191 Cal.Rptr. 800, 663 P.2d 523].)
Moreover, the outreach program here poses none of the particular evils identified by Domar. The program does not require bidders to contract with any particular subcontractor enterprise, nor does it compel them to set aside any percentage of a contract award to MBE's or WBE's in order to qualify for a municipal contract. And even though the Board's outreach program provides an estimate that a participation level of 1 percent by MBE's and WBE's may be anticipated by the exercise of good faith efforts, a bidder gets no advantage or disadvantage from meeting or not meeting the specified participation level. Thus, the program provides no incentive to a bidder to use MBE's or WBE's if they are inferior in cost or ability, and the market for public contracts among subcontractors remains a level playing field.
Hence, mindful as we must be of the principle that a charter must not be given such a construction as to defeat the objectives of competitive bidding (Los Angeles Dredging Co. v. Long Beach, supra, 210 Cal. at p. 354; see 10 McQuillin, supra, § 29.29, p. 375), we conclude that the outreach program is not void under the charter. By working to ensure that bids for municipal projects reflect the lowest prices practicable, the program is fully compatible with the charter requirement that contracts be awarded to the lowest and best regular responsible bidders.
Since the City and its agencies may validly require bidders to conduct the specified outreach without violating the charter, it follows that the Board may validly reject a bid based on the bidder's failure to demonstrate compliance with this requirement. If bidders had the option to disregard the outreach requirement because the Board was without power to enforce it, the program itself would be undermined. Moreover, even though awarding the instant contract to Bailey Controls Company may not save the City money on this particular project, the Board could reasonably have concluded that consistent enforcement of the outreach requirement will lead, in the long term, to lower contract prices. Finally, the Board's action in rejecting Domar's bid due to the absence of the required good faith effort documentation is consistent with the general rule that bidding requirements must be strictly adhered to in order to avoid the potential for abuse in the competitive bidding process. (Konica Business Machines U.S.A., Inc. v. Regents of University of California, supra, 206 Cal.App.3d at p. 456 [strict adherence with bidding requirements is applied "even where it is certain there was in fact no corruption or adverse effect upon the bidding process, and the deviations would save the [public] entity money"].)
(7) Contrary to Domar's assertions, the charter's enumeration of various exceptions to the lowest and best regular responsible bidder restriction in section 386(f) does not compel a different result. Unlike the outreach program, virtually all of the exceptions listed in section 386(f) tend to be anticompetitive in nature. For instance, antiapartheid restrictions suppress competition by disqualifying potential contractors on the basis of their connections with South Africa without regard to their potential for offering the lowest price practicable. Similarly, local bidder preferences generally inhibit competition in that they prohibit potential contractors from competing on an equal basis. Finally, domestic content requirements discriminate against the use of foreign products and may thereby substantially increase the cost of a project, thus undermining the goal of securing the best bargain for the public. That the charter expressly authorizes the City and its contracting agencies to consider these anticompetitive factors during the bid process (pursuant to lawfully enacted ordinances) does not logically lead to the conclusion that bid requirements intended to stimulate and promote competition may not be considered.
Additionally, Domar's reliance on Associated General Contractors of California, Inc. v. City and County of San Francisco (9th Cir. 1987) 813 F.2d 922 (Associated General Contractors) and Neal Publishing Co. v. Rolph (1915) 169 Cal. 190 [146 P. 659] is misplaced. Those cases are factually distinguishable and do not support Domar's position.
Associated General Contractors, supra, 813 F.2d 922, dealt with an ordinance of the City and County of San Francisco that: (1) required each city department to set aside 10 percent of its purchasing dollars for MBE's and 2 percent for WBE's; (2) gave a 5 percent bidding preference to MBE's, WBE's and locally owned business enterprises (LBE's); (3) required each city department to establish a yearly goal for the percentage of contracting dollars to go to MBE's, WBE's and LBE's and required prospective prime contractors to submit bids that met or exceeded such goals; and (4) established as an overall goal that 30 percent of the city's contracting dollars shall go to MBE's and 10 percent to WBE's. (813 F.2d at p. 924.) In that case, the Ninth Circuit concluded that the ordinance violated a city charter provision requiring that all contracts worth more than $50,000 be awarded to the "lowest reliable and responsible bidder." (Id., at pp. 924-928.)
Even if the competitive bidding scheme contained in the San Francisco charter is the same or similar to the one here, there are significant differences between the set-asides, bid preferences and contracting goals enacted in San Francisco and the good faith outreach required here. As the United States Court of Appeals for the Ninth Circuit recognized, perhaps the most important goal of competitive bidding is to protect against "insufficient competition to assure that the government gets the most work for the least money." (Associated General Contractors, supra, 813 F.2d at p. 926.) Mandatory set-asides and bid preferences work against this goal by narrowing the range of acceptable bidders solely on the basis of their particular class. In stark contrast, requiring prime contractors to reach out to all types of subcontracting enterprises broadens the pool of participants in the bid process, thereby guarding against the possibility of insufficient competition. In light of these differences, Associated General Contractors, supra, 813 F.2d 922, does not persuade us to find the outreach program violative of the City's charter.
Neal Publishing Co. v. Rolph, supra, 169 Cal. 190, is likewise unhelpful to Domar. That case involved a contract for the furnishing of printed forms which the mayor refused to sign after the board of supervisors had awarded the contract to the plaintiff as the successful bidder. The mayor contended, inter alia, that awarding the contract to the plaintiff would have violated a board resolution requiring that all printing jobs be awarded to unionized printers. (169 Cal. at p. 196.) The mayor's arguments did not prevail. After noting that the resolution preceded the enactment of charter provisions requiring competitive bidding, this court held that the resolution was merely directive in nature and that it was not binding on the board itself in awarding contacts. (Id., at pp. 196-197.) Although there is language in the case to the effect that, in any event, the board of supervisors could not impose additional conditions to those imposed by the charter for competitive bidding without violating the provision requiring contracts to be awarded to the lowest bidder (id., at p. 197), such dicta must be understood in light of the union requirement claimed there. That requirement was clearly anticompetitive in that contractors were rendered ineligible for a bid award based solely on their nonunion status. The case does not aid Domar under the instant facts.
Finally, the parties and various amici curiae dispute whether our decision in City of Inglewood, supra, 7 Cal.3d 861, supports Domar's position. In that case, a civic center authority awarded a contract to a contractor who was not the lowest monetary bidder, even though former Government Code section 25454 (now Pub. Contract Code, § 20128) required that contracts be awarded to the "lowest responsible bidder." The authority had based the award, not on a finding that the lowest bidder was not responsible, but on a determination that the higher bidder was relatively superior in ability to perform the work. In ruling to set aside the award, we reasoned that the statute provided no basis for applying a relative superiority concept. (7 Cal.3d at p. 867.) Rather, it required the authority to award the contract to the lowest bidder unless the bidder was found not responsible, i.e., not qualified to do the particular work under consideration. (Ibid.)
Although our decision in City of Inglewood, supra, 7 Cal.3d 861, makes clear that a competitive bidding scheme with a lowest responsible bidder restriction ordinarily requires a contract to be awarded to the bidder who submits the lowest monetary bid and is responsible, the case does not concern the issue presented here, i.e., whether a public entity may, consistently with its charter, impose certain requirements upon bidders as part of the bid specifications for a project. Unlike the instant case, City of Inglewood, supra, did not involve a challenge to the validity of a particular bid requirement, nor did it concern a situation where the lowest monetary bidder had failed to comply with all advertised bid requirements.
Accordingly, we hold that the Board's outreach program does not violate the competitive bidding provisions set forth in the City's charter.
III. Disposition
The judgment of the Court of Appeal is reversed and the matter is remanded to allow that court to address whether Domar may otherwise be entitled to relief based on the alternative grounds identified in its notice of appeal.
Lucas, C. J., Mosk, J., Kennard, J., George, J. and Werdegar, J., concurred.
Unless otherwise indicated, all further section references are to the Los Angeles City Charter.
In a footnote, the directive defined minority-owned business enterprises (MBE's) and women-owned enterprises (WBE's) as "any business, bank or financial institution which is owned and operated by a minority group member or woman, or such business, bank or financial institution of whom 50% or more of it's [sic] partners or stockholders are minority group members or women. If the business is publicly owned, the minority members or stockholders must have at least 51% interest in the business and possess control over management capital earnings."
The Board's program defines "OBE" to mean "any subcontractor which does not otherwise qualify as a Minority or Women Business Enterprise."
The Board's program lists 10 factors in the following order: "[¶] (1) The bidder has made a good faith effort to obtain sub-bid participation by MBEs, WBEs and OBEs [other business enterprises] which could be expected by the Board to produce a reasonable level of participation by interested business enterprises, including the MBE and WBE percentages set forth by paragraph B herein. [In this case, paragraph B states: 'The subcontracting outreach policy requires the bidder to make a "Good Faith Effort" to obtain sub-bid participation by MBEs, WBEs and OBEs which can be expected by the Board of Public Works to produce a level of participation by interested business, including 1 percent MBE and/or WBE.'] [¶] (2) The bidder has attended the pre-bid meeting scheduled by the Board to inform all bidders of the requirements for the project for which the contract will be awarded. The Board may waive this requirement only if the bidder certifies in writing it was already informed as to those project requirements prior to the pre-bid meeting. [¶] (3) The bidder has identified and selected specific work items in the project to be performed by sub-bidder/subcontractors in order to provide an opportunity for participation by MBEs, WBEs and OBEs. Upon making this determination, the bidder subdivided the total contract work requirements into smaller portions or quantities to permit maximum active participation of MBEs, WBEs and OBEs. [¶] (4) Not less than ten (10) calendar days prior to the submission of bids, the bidder advertised for sub-bids from interested business enterprises in one or more daily or weekly newspapers, trade association publications, minority or trade oriented publications, trade journals, or other media specified by the Board. [¶] (5) The bidder has provided written notice of its interest in receiving sub-bids on the contract to those business enterprises, including MBEs and WBEs having an interest in participation in the selected work items. All notices of interest shall be provided not less than ten (10) calendar days prior to the date the bids are required to be submitted. In all instances, bidder can document that invitations for sub-bid/subcontracting was sent to available MBEs, WBEs and OBEs for each item of work to be performed. [¶] (6) The bidder has documented efforts to follow-up initial solicitations of sub-bid interest by contacting the affected business enterprises to determine with certainty whether said enterprises were interested in performing specific portions of the project work. [¶] (7) The bidder has provided interested sub-bid enterprises with information about the plans, specifications and requirements for the selected sub-bid/subcontracting work. [¶] (8) The bidder requested assistance from organizations that provide assistance in the recruitment and placement of MBEs, WBEs and OBEs not less than 15 calendar days prior to the submission of bids. It should be noted that any legitimate association concerning MBE/WBE/OBE activities not on the following list may also be contacted for this purpose. [¶] (9) The bidder has negotiated in good faith with interested MBEs, WBEs and OBEs and did not unjustifiably reject as unsatisfactory the sub-bids prepared by any enterprise. As documentation, the bidder can submit a list of all sub-bidders for each item of work for which bids were solicited, including dollar amounts of potential work for MBEs, WBEs and OBEs. [¶] (10) The bidder has documented efforts to advise and assist interested MBEs, WBEs and OBEs in obtaining bonds, lines of credit, and insurance required by the Board or contractor."
" 'The term "lowest responsible bidder" has been held to mean the lowest bidder whose offer best responds in quality, fitness, and capacity to the particular requirements of the proposed work.' " (City of Inglewood-L.A. County Civic Center Auth. v. Superior Court (1972) 7 Cal.3d 861, 867-868, fn. 5 [103 Cal.Rptr. 689, 500 P.2d 601] (City of Inglewood), citing West v. Oakland (1916) 30 Cal.App. 556, 560-561 [159 P. 202], italics omitted.) The parties have not suggested that there is any significance in the difference between the charter's phrase "lowest and best regular responsible bidder" and the above term or other similar terms.
In addition to those contained in section 386(f), Domar contends that other charter exceptions to the lowest bidder requirement include: (1) when the contract involves an expenditure of less than $25,000 (§ 386(b)); (2) when the contract is for patented products (§ 386(a)(2)); (3) when a declaration of "urgent necessity" authorizing the contract is approved by the city council and the mayor (§ 386(a)(4)); (4) when, during war or national emergency, the city council by a two-thirds vote suspends all or part of the competitive bidding system (§ 386.1); (5) when the bid is not accompanied by a certified check or bid bond of 10 percent of the bid (§ 386(d)); and (6) when the bid is not accompanied by a noncollusion affidavit (ibid.). We conclude that these other so-called charter exceptions are irrelevant to the issue of whether the City may validly impose a particular bidding requirement not explicitly authorized by the charter. The first, second, third and fourth identified items merely represent situations or types of contracts for which competitive bidding is not required at all. The fifth and sixth items lack relevance because their purpose is to deprive the City of any authority to contract with bidders who have not supplied the charter-mandated check, bid bond or noncollusion affidavit.
Notwithstanding Domar's failure to make such assertions, the dissent argues that "both the good faith efforts and the documentation involve considerable time, effort, and expense, all of which represents a considerable monetary loss for the unsuccessful bidders" and which may be added to bids as part of the bidder's overhead. (Dis. opn. of Arabian, J., post, at p. 187.) Not surprisingly, the dissent cites no evidence in the record to support these arguments.
It is important to keep in mind that, although Domar's bid was approximately $650,000 lower than the next lowest bid, the differential was not due to the fact that Domar made no attempt to conduct the required good faith outreach, while the other bidders did. Indeed, at oral argument Domar contended that it did comply with the outreach program, but simply failed to submit the required documentation in a timely manner.
In asserting that the Board's program is invalid, the dissent at times appears to assume that the program requires bidders to achieve a minimum participation level of MBE's and WBE's and that it mandates solicitation efforts that focus exclusively on a narrow field of contractors. (See dis. opn. of Arabian, J., post, at pp. 181, fn. 1, 184-186.) However, as the record makes clear, the program has a broad focus, requiring outreach to all types of subcontracting enterprises—MBE's, WBE's and OBE's.
Domar makes no contention that it was not afforded due process on the matter of its late submission of documentation. (See Taylor Bus Service, Inc. v. San Diego Bd. of Education (1987) 195 Cal.App.3d 1331, 1343 [241 Cal.Rptr. 379].) Consequently, it is not an issue in the case.
The sole exception is the provision that allows rejection of a bidder previously delinquent or unfaithful in the performance of any former contract.
Of course, if a bidder were to demonstrate that the Board in fact considered MBE or WBE participation levels in awarding a bid, the legal reasoning of Associated General Contractors, supra, 813 F.2d 922, might have more force.
Consistent with the holding of City of Inglewood, supra, 7 Cal.3d 861, the City concedes that the lowest responsible monetary bidder that meets the Board's minimum standards for demonstrating good faith outreach efforts must be awarded a bid over the next lowest responsible monetary bidder that exceeds the minimum standards.
In its answer brief on the merits, Domar argues that the outreach program is void for the additional reason that the mayor of the City acted in excess of his mayoral authority under the charter in issuing Executive Directive Nos. 1-B and 1-C. We need not consider this argument since it was not raised below. In any event, the point is not well taken. As the relevant charter provisions make clear, the Board "shall have and exercise all the powers and duties possessed by the City under this Charter . . . relating to: [¶] (a) The advertising for and inviting of proposals or bids for doing any work or making any improvement . . . ; [¶] (b) The examining, considering and preparing of such proposals or bids; [¶] (c) The awarding, letting, reletting, entering into and signing of contracts on behalf of the City for doing any said work or making of any said improvements . . . ." (§ 233.) Thus, even though the outreach program at issue was adopted by the Board in response to the mayor's directives, the validity of the program does not depend on whether the charter allows the mayor to issue directives of the sort involved here.