Opinion ID: 1160921
Heading Depth: 1
Heading Rank: 5

Heading: Whether the PSA is consistent with competitive bidding law

Text: Because the relevant language of the state and local competitive bidding laws, quoted in the immediately preceding paragraph, does not dispositively address the question before us, our analysis must focus on whether the PSA is consistent with the general principles underlying the competitive bidding law. As will appear, because the PSA requirement does not bar or substantially discriminate against a class of contractors, we conclude in the affirmative. Given that determination, in the next part of this opinion we address whether the record contains substantial evidence that the PSA furthers a legitimate governmental interest that is consistent with the competitive bidding law and thus supports the Commission's decision to require agreement to the PSA as a condition of contractors' participation in the project. Recently, in Domar, supra, 9 Cal.4th 161, 36 Cal.Rptr.2d 521, 885 P.2d 934, we enumerated the purposes of competitive bidding: `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' [citations], and to stimulate advantageous market place competition [citation]. ( Id. at p. 173, 36 Cal. Rptr.2d 521, 885 P.2d 934.) We went on to observe: 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.) ( Ibid. ) The term lowest responsible bidder has been construed 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, italics omitted, citing West v. Oakland (1916) 30 Cal.App. 556, 560, 159 P. 202 [holding, despite use of the term best, that the lowest responsible bidder must be selected without consideration of relative superiority vis-à-vis other bidders].) Notably, this definition emphasizes the element of responsiveness. A responsible bid thus is one that responds to all proper bid specifications, and, in setting such, the public agency must be accorded considerable latitude. (E.g., Domar, supra, 9 Cal.4th at p. 174, 36 Cal.Rptr.2d 521, 885 P.2d 934.) By necessary implication, therefore, the direct cost of the project need not be the agency's sole consideration in setting bid specifications. Rather, any requirements reasonably relating to the quality, fitness and capacity of a bidder to satisfactorily perform the proposed work ( City of Inglewood-L.A. County Civic Center Auth. v. Superior Court, supra, 7 Cal.3d at p. 867, 103 Cal.Rptr. 689, 500 P.2d 601) generally are permissible. Our first step is to consider the PSA in light of the purposes of the competitive bidding laws to determine whether it serves those purposes, or instead has the anticompetitive effect of excluding from the project, or denying equal opportunity to, any categories of potential bidders. (See Domar, supra, 9 Cal.4th at p. 173, 36 Cal.Rptr.2d 521, 885 P.2d 934.) ABC complains the imposition of the PSA is anticompetitive in that it deters non-union contractors from bidding because it requires contractors to sign an agreement with the union and use only union supplied labor, pay into union benefit funds and adopt union wage rates. [2] (Underscoring in original.) ABC further argues the PSA violates the competitive bidding law because it contains various provisions that are unrelated to the quality, cost, or timeliness of the work and that, therefore, do not serve the purposes of the competitive bidding law. ABC's arguments fail to persuade us, because they lack support in the record and, at bottom, constitute an invitation to reweigh the considerations presented to the Commission. [C]ompetitive bidding requirements `necessarily imply equal opportunities to all whose interests or inclinations may impel them to compete at the bidding.' [Citation.] ( Domar, supra, 9 Cal.4th at p. 173, 36 Cal.Rptr.2d 521, 885 P.2d 934.) Here, all prospective bidders must agree to be bound by the terms of the PSA, and the prevailing wage law further serves to place bidders on a similar footing. Thus, all prospective bidders enjoy equal opportunity, within the meaning of the competitive bidding law, to compete for contracts on the project. That some of ABC's members may be disinclined to accept the terms of the PSA does not imply any favoritism on the Commission's part toward those bidders that do not share that disinclination. As ABC expressly acknowledges, the PSA, by its terms, excludes no contractor, union or nonunion, from bidding on the airport project. Further, the PSA exacts from contractors no commitment toward the unions on any other project, has no effect on a contractor's parent companies, subsidiaries or affiliates, and does not apply to a contractor's managerial, supervisorial, executive or clerical employees. ABC relies on Neal Publishing Co. v. Rolph (1915) 169 Cal. 190, 196-198, 146 P. 659, in which we held that a specification restricting bids for printing jobs to union shops was anticompetitive and unlawful. Neal Publishing, however, is distinguishable; here, nonunion contractors are in no way excluded from bidding on the airport project. Nothing in the Neal Publishing decision supports ABC's assertion that the printer in that case could simply have joined the union for the duration of the contract, as may a contractor, in order to qualify for work on the airport project, choose to agree to the PSA. Indeed, the Neal decision notes the union, for reasons not revealed, had revoked the printer's union status. ( Id. at p. 192, 146 P. 659.) ABC asserts there is not, and could never be, sufficient record evidence to justify a public body's excluding every nonunion construction contractor from working on a public works project. This assertion has no relevance to the PSA at issue here. Similarly unavailing is ABC's reliance on Assoc. Gen. Contr. of Cal. v. City & County of S.F. (9th Cir.1987) 813 F.2d 922, 925-927, in which the federal Court of Appeals for the Ninth Circuit invalidated an ordinance creating mandatory set-asides and bid preferences for women and minority contractors, on the ground such accommodations lessened competition by narrowing the range of acceptable bidders based solely on their membership in a particular class. Here, by contrast, no bidder is disqualified for being a nonunion contractor. Provided the contractor submits a responsive bid, i.e., agrees to abide by the terms of the PSA, its bid stands on an equal footing with all others. As for the PSA's requirement that contractors engage new employees through the union hiring hall, it must be recalled that the PSA permits a contractor to use every member of its core work force, defined as persons on the contractor's active payroll for 60 of the preceding 100 days, in performing work under the project before requiring resort to the union hiring hall. Federal law, moreover, requires union hiring halls to refer both union members and nonmembers to available jobs. ( Woelke & Romero Framing, Inc. v. NLRB (1982) 456 U.S. 645, 664-665;, 102 S.Ct. 2071, 72 L.Ed.2d 39829 U.S.C. § 158(a)(3), (b)(2).) In this respect, as well, the asserted anticompetitive effect of the PSA is difficult to discern. ABC suggests the PSA deters nonunion contractors from bidding on master plan contracts by intruding into the employer-employee relationship beyond the extent permitted or mandated by federal or state labor laws. It fails, however, to demonstrate that the PSA, which is a form of prehire agreement permitted under the NLRA, violates such laws. (See 29 U.S.C. § 158(e), (f).) The PSA, moreover; includes a management rights clause apparently designed to ensure that contractors on the project retain control over the manner in which the work is done. As ABC acknowledges, the prevailing wage law, not the PSA, is the source of the applicable wage rates. (See S.F. Charter, appen. A, § A7.204 [Every contract for any public work or improvement ... must provide: [¶] ... [¶] (b) that any person performing labor thereunder shall be paid not less than the highest general prevailing rate of wages in private employment for similar work; ...].) We have observed that prevailing wage laws are designed in part to permit union and nonunion contractors to compete on an even footing for public contracts. ( Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 987, 4 Cal.Rptr.2d 837, 824 P.2d 643.) ABC fails to explain persuasively how the wage and benefit requirements in the PSA place ABC or its members at a competitive disadvantage. It suggests its workers prefer to receive the value of benefits directly, and thus to obtain a larger paycheck, rather than participate in union benefit plans; this circumstance, ABC urges, means it will be unable to attract its preferred workers. ABC fails entirely to establish, however, that union contractors will thereby enjoy an advantage over ABC in attracting these or any other available workers, or in the bidding process generally. The same reasoning compels rejection both of ABC's complaint that the PSA makes it more difficult to attract desired employees, because it forces nonunion workers to pay union dues, and of its assertion, raised for the first time in this court and supported by no citation to authority, that at the conclusion of the project ABC would be unfairly subjected to withdrawal liability pursuant to the Multiemployer Pension Plan Amendments Act of 1980 (29 U.S.C. § 1381 et seq.). Any such features of the PSA and of federal pension law would apply to all prospective bidders equally and result in the exclusion of none. Hence, the PSA is not anticompetitive merely because certain bidders would see some of its features as less attractive. ABC suggests the PSA will raise the costs of the project because nonunion contractors would be able to use semiskilled or unskilled workers in place of some of the journeymen required to staff projects in union shops. No facts in the record support this suggestion, which appears to be potentially contrary to both state and federal law applicable to prevailing wage public works jobs. (See Lab.Code, § 1777.5 [only apprentices in approved apprenticeship programs who are paid at standard apprentice wage may be employed on public works]; cf. 29 C.F.R. § 5.5(a)(4)(i), (ii) (1998) [wage requirements for apprentices and trainees on federally funded public works projects].) Moreover, a bidder is not at liberty to lower its costs by substituting unskilled helpers for any skilled workers demanded by the contract specifications; ABC does not contend the contracting agency lacks discretion to specify standards for the performance of the work under contract. As the Court of Appeal aptly observed, If ABC chooses not to bid, that is its right, the exercise of which is strictly within its control. ABC members' election not to bid on the airport project, out of a desire to avoid dealing with unions or for whatever other reasons, does not make the PSA anticompetitive. Judicial decisions in other jurisdictions are largely in accord with this conclusion, and those few that invalidate project labor agreements either do so under competitive bidding laws that, unlike those applicable to this case, emphasize unfettered competition over more generalized public interest considerations, or employ a less deferential standard of review of agency decisionmaking than obtains in this state. In Enertech Elec. Inc. v. Mahoning County Com'rs (6th Cir.1996) 85 F.3d 257, for example, the Ohio competitive bidding law, similar to that applicable in the present case, aimed `to provide for open and honest competition in bidding for public contracts and to save the public harmless, as well as bidders themselves, from any kind of favoritism or fraud in its varied forms.' [Citation.] ( Id. at p. 260.) The federal court of appeals concluded the county did not abuse its discretion by determining the best bidder would be one willing to ratify a project labor agreement designed to secure labor harmony on the project, such a requirement being consistent with the Ohio competitive bidding policy. Thus, although the contractor challenging the requirement was the lowest bidder, it was determined not to be the best bidder due to its refusal to agree to the project labor agreement. ( Ibid. ) An Ohio intermediate appellate court likewise upheld a project labor agreement in State ex rel. Assoc. Builders & Contractors v. Jefferson Cty. Bd. (1995) 106 Ohio App.3d 176 [665 N.E.2d 723], reasoning the agreement did not conflict with the purpose of the competitive bidding statutes, namely to enable a public contracting authority to obtain the best work at the lowest possible price while guarding against favoritism and fraud. ( Id. at p. 181 [665 N.E.2d at p. 727].) Similarly, a federal court rejected a challenge to a project labor agreement under Minnesota's competitive bidding laws, which required contracts be awarded to the lowest responsible bidder. ( Minn. Chapter of Assoc. Builders v. St. Louis Cty. (D.Minn.1993) 825 F.Supp. 238.) The court noted: The county has an interest in avoiding delays resulting from labor difficulties, and the Project Labor Agreement is a rational way to address this interest. Furthermore, there is no evidence before the court that the project would cost less without the requirement that contractors sign the Project Labor Agreement. Contractors presumably would have to pay the prevailing wage with or without the labor agreement, so the cost to the state might not prove to be more as a result [of] the Project Labor Agreement. It might be that the avoidance of delays guaranteed by the Project Labor Agreement would ultimately save county money. ( Id. at p. 244.) The same considerations supported the adoption of the PSA in this case. The Alaska Supreme Court reached the same conclusion in rejecting a challenge to a project labor agreement under local procurement laws, which enunciated a policy of maximum practicable competition. ( Laborers' Local No. 942 v. Lampkin (Alaska 1998) 956 P.2d 422.) The court broadly interpreted practicable to encompass other factors besides cost, such as the need to complete the project (the renovation of a high school) with a minimum of disruption. ( Id. at p. 434.) In N.Y. State Chapter v. Thruway Authority (1996) 88 N.Y.2d 56, 666 N.E.2d 185, 643 N.Y.S.2d 480 ( Thruway ), the New York Court of Appeals considered competitive bidding law challenges to project labor agreements on two projects, one a four-year project to improve the Tappan Zee Bridge and the other a five-year project to modernize the facilities of a cancer institute. The New York high court observed that project labor agreements are neither absolutely prohibited nor absolutely permitted in public construction contracts under New York procurement law. Rather, such agreements are valid in New York where the record supporting the determination to enter into such an agreement establishes that the PLA was justified by the interests underlying the competitive bidding laws. ( Id. at p. 65, 666 N.E.2d at pp. 187-188.) The court concluded the project labor agreement for the bridge project did not violate competitive bidding laws because it was directly tied to competitive bidding goals: The Thruway Authority's detailed focus on the public fiscboth cost savings and uninterrupted revenuesthe demonstrated unique challenges posed by the size and complexity of the project, and the cited labor history collectively support the determination that this PLA was adopted in conformity with the competitive bidding statutes. ( Id. at p. 71, 666 N.E.2d at p. 191.) In contrast, the court concluded the project labor agreement for the cancer institute project ran afoul of the principles underlying the competitive bidding laws because the responsible agency failed to show any cost savings ... or any unique feature of the project which necessitated a PLA. ( Thruway, supra, 88 N.Y.2d at p. 74, 643 N.Y.S.2d 480, 666 N.E.2d at p. 193.) Something more was required, according to the New York Court of Appeals, than a generalized desire for labor stability. ( Id. at p. 74, 643 N.Y.S.2d 480, 666 N.E.2d at pp. 193-194.) In the Thruway case, the New York Court of Appeals evidently employed a standard of review that placed the burden on the agency to demonstrate the appropriateness of the project labor agreement as a bid specification, rather than (as under our law) on the party challenging the specification to show the agency acted arbitrarily and capriciously in adopting the requirement. (Compare 88 N.Y.2d at p. 69, 643 N.Y.S.2d 480, 666 N.E.2d at p. 190 [the agency operating under a competitive bidding law bears the burden of showing that the decision to enter into the PLA had as its purpose and likely effect the advancement of the interests embodied in the competitive bidding statutes] with WSPA, supra, 9 Cal.4th at p. 574, 38 Cal.Rptr.2d 139, 888 P.2d 1268.) The Thruway decision, therefore, must be read with this significant distinction in mind. The only other cases ABC cites in which courts have held a project labor agreement to violate competitive bidding laws arise under New Jersey law. In George Harms Const. v. Turnpike Auth. (1994) 137 N.J. 8, 644 A.2d 76, the New Jersey high court acknowledged that project labor agreements serve important purposes on major long-term construction projects, including preventing the expiration of collective bargaining agreements of different crafts during the term of the construction contract or resolving disputes among the several crafts, and for this reason have been used on such projects as the Cleveland sports complex in northern Ohio, Minneapolis's Glenwood Bridge, the Massachusetts Central Artery/Third Harbor Tunnel, and the Boston Harbor sewage treatment facility construction. Nevertheless, the court concluded the project labor agreement at issue in that case was inconsistent with New Jersey's paramount policy fostering unfettered competition in public contracts, a policy it could not reconcile with what it viewed as the agreement's sole-source restriction on labor. ( Id. at p. 44, 644 A.2d at p. 95.) The latter restriction allegedly precluded the contractor from using its own employees, who belonged to a union not affiliated with the local Building and Construction Trades Council of the AFLCIO, a party to the project labor agreement along with the turnpike authority. Moreover, in George Harms the project labor agreement requirement was added after the bids were submitted and resulted in invalidation of the admittedly lowest bidders, who refused to agree to this new term. The belated addition of a material specification raised the specter of favoritism and corruption, which are among the ills against which the competitive bidding laws seek to guard. ( Id. at pp. 15, 36-38, 644 A.2d at pp. 79-80, 90-91.) Such a danger does not exist in the present case. Subsequently, however, in Tormee Const. v. Mercer County Imp. (1995) 143 N.J. 143, 669 A.2d 1369 ( Tormee ), the New Jersey Supreme Court made clear that project labor agreements are not per se illegal under the laws of that state, although it appeared to conclude such agreements may be required only in exceptional circumstances. ( Id. at pp. 149-151, 669 A.2d at pp. 1372-1373.) The court noted that New Jersey Governor Christine Todd Whitman had signed an executive order contemplating that state agencies might include a project labor agreement in a public works project on a `project by project basis where it has been determined that such project agreement will promote labor stability and advance the state's interest in cost, efficiency, quality, safety and/or timeliness.' ( Id. at p. 150, 669 A.2d at p. 1372.) Without specifying the textual basis for its interpretation, a majority of the New Jersey high court nevertheless read the executive order as not contemplat[ing] the use of PLAs on routine construction projects, of which the Mercer County project was, it determined, one. ( Ibid. ) The majority appeared to conclude that only exceptional circumstances would warrant adoption of a project labor agreement. ( Id. at p. 149, 669 A.2d at p. 1372.) [3] ABC directs us to no authority supporting the existence of a policy of unfettered competition underlying the competitive bidding law of California. While Public Contract Code section 10115 (located in an article creating minority and women participation goals for state contracts) extols the value of free competition in the American economic system, that statute does not alter the policies underlying the competitive bidding laws, as set forth in Domar, supra, 9 Cal.4th at page 173, 36 Cal.Rptr.2d 521, 885 P.2d 934, and reiterated above. Indeed, as mentioned, the competitive bidding laws 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.' ( Ibid. ) Moreover, it appears the New Jersey Supreme Court employs a standard of review of administrative agency quasi-legislative decisionmaking that is much less deferential than that prevailing in this state. (See Tormee, supra, 143 N.J. at p. 160 [669 A.2d at p. 1377] (dis. opn. of Handler, J.) [The majority also betrays, in this case, a distrust of local government that goes beyond the obligation to demonstrate that a PLA is reasonably related to the satisfactory completion of the library project.].) In light of these considerations, we find the New Jersey decisions unpersuasive. More recently, the Supreme Court of Nevada upheld the validity, under state competitive bidding laws, of the imposition of a project labor agreement in connection with the Southern Nevada Water Authority's capital improvement plan. ( Associated Bldrs. v. So. Nev. Water Auth. (Nev. 1999) 979 P.2d 224.) The Nevada high court determined the agreement at issue in that case served the purposes of the state's competitive bidding laws by providing equal access to projects to both union and nonunion contractors and indirectly saving public funds by protecting the project from costly delays due to labor unrest. ( Id. at p. 229.) ABC observes that the language of the Nevada competitive bidding statute differs from that of both the San Francisco ordinance and the state competitive bidding laws, but we note that the Nevada Supreme Court identifies as the purposes underlying the Nevada statute the same ones we, interpreting California law, identified in Domar: to secure competition, save public funds, and guard against favoritism, improvidence and corruption. (See Domar, supra, 9 Cal.4th at p. 173, 36 Cal.Rptr.2d 521, 885 P.2d 934; cf. Associated Bldrs. v. So. Nev. Water Auth., supra, 979 P.2d at p. 229.) We therefore conclude the Nevada high court's decision is relevant and persuasive. ABC complains that, contrary to the argument of the Trades Council, a contractor may not necessarily be able to comply with the PSA requirement if that contractor's employees have previously rejected the pertinent union in an election, or if the contractor either has signed a collective bargaining agreement or is in negotiation with a different labor organization, as in the George Harms case, supra, 137 N.J. 8, 644 A.2d 76. The contractor's compliance with the PSA in such circumstances, ABC contends, would constitute an unfair labor practice, because it would interfere with its workers' right to choose their bargaining representative pursuant to section 7 of the NLRA (29 U.S.C. § 157). The merits of ABC's contention are difficult to assess, as it cites no authority on point or clearly mandating such a conclusion. Nothing in the record, moreover, suggests such a scenario potentially exists in this case, and ABC cites no example of such a problem among its membership, much less represents it may have played a role in any contractor's decision not to bid on the project. No reason appears why any such concern, if it existed, could not have been brought to the Commission's attention before the adoption of the PSA bid specification, as the identity of the signatory unions was no secret during the public hearings leading thereto. Neither ABC nor any other interested person, however, did so. ABC therefore fails to demonstrate the Commission invalidly imposed the PSA bid requirement on this basis.