Court Opinion

ID: 9537216
Source: CourtListenerOpinion
Date Created: 2023-08-07 07:14:20.058062+00
Date Added: 2024-06-11T14:56:12.038556
License: Public Domain

Dore, J.
Seattle's Women's and Minority Business Utilization Ordinance (hereinafter WMBE ordinance) is designed to offer to women and minorities the opportunity to improve their ability to participate in the construction *599industry. Seattle Municipal Code (SMC) 20.46. Contractors are required to utilize women and minority subcontractors at certain specified percentages, with the purpose of giving these disadvantaged persons the needed experience to compete in this business. As the United States Department of Transportation stated in reference to highway construction:
many majority contractors owe their success to the experience gained as a subcontractor/protege. This concept offers tremendous potential to develop and expand the [minority] contracting opportunities in highway construction.
Report of Proceedings, vol. 2 (13.6), at 3.
The Seattle Board of Public Works found that appellant Gary Merlino Construction Company violated this act by underutilizing minority contractors, thereby denying them the beneficial experience which this act seeks to promote. Merlino appeals this finding of underutilization, as well as the Board's sanction that it be prohibited from bidding or working on city contracts for 1 year.
Facts
In early 1984, Merlino was the general contractor for a street improvement project for the City of Seattle. As part of its contractual and statutory obligations under the WMBE ordinance, Merlino was required to utilize women's business enterprises on 3 percent of the contract amount, and minority business enterprises on 15 percent of the contract amount. Section l.A of the WMBE bid specifications stated that "utilization [of Women and Minority enterprises] may be through contracting, subcontracting, joint ventures, procurement of supplies, materials or equipment
The Seattle Human Rights Department approved the use of subcontractor TNT Concrete, a minority owned business, as part of Merlino's construction bid. Nevertheless, while the project was underway, the Human Rights Department initiated an investigation of Merlino's compliance with WMBE commitments. This investigation focused *600on the alleged underuse of TNT Concrete because Merlino loaned it employees and ordered and paid for the concrete which TNT Concrete was supposed to supply. On May 4, 1984, after the project had been completed, the Human Rights Department issued a "Determination of Cause to Believe Contractor Has Not Complied with WMBE Requirements." The Human Rights Department met with Merlino and TNT Concrete on May 18, but failed to resolve their differences.
On May 21, the Human Rights Department issued a "finding of non-compliance with WMBE Requirements." Merlino and TNT Concrete were advised that the Board of Public Works was going to consider the Human Rights Department's findings and decide what, if any, sanction was appropriate. Public hearings were conducted on June 8 and 15, 1984, and the Board unanimously decided that Merlino had underutilized TNT Concrete. The Board also decided to debar Merlino for 1 year.
Merlino promptly filed a writ of certiorari to the Superior Court asking for a review of the Board's proceedings and the 1-year debarment. On February 6, 1985, the trial court affirmed the Board's decision. Merlino appeals. Throughout these proceedings, the order of debarment has been stayed.
Sufficiency of Evidence
On appeal of a superior court order in a certiorari proceeding, this court makes a de novo review of the agency's record to determine whether the administrative decision was arbitrary and capricious or contrary to law. Thomsen v. King Cy., 39 Wn. App. 505, 694 P.2d 40 (1985). After a de novo review, we find that the Board did not err in determining that Merlino had violated the WMBE ordinance.
The crux of this case is whether or not TNT Concrete performed a commercially useful function, or was merely a prop for Merlino to do the work itself while appearing to comply with the WMBE ordinance. If TNT Concrete did not perform its subcontracted work, then it did not gain the *601valuable experience which the WMBE ordinance was designed to promote.
Several facts were presented to the Board which convinced it, and us, that TNT Concrete did not perform a commercially useful function. The TNT Concrete subcontract required it to supply the concrete, as well as perform the paving work. TNT Concrete's credit rating was such, however, that it did not believe it could order enough concrete to complete the job. Rather than find a way for TNT Concrete to overcome this difficulty, with the obvious benefit to its credit rating, Merlino made arrangements for the acquisition of the concrete. Merlino paid the concrete suppliers except for one company, Salmon Bay Sand and Gravel, and issued them a joint check payable to both Salmon Bay and TNT Concrete.
The trial judge, in reviewing the record, made the following observation:
[I]t isn't simply [Merlino's] saying I'll take care of it, and it isn't (and/or) the making of the phone calls in the morning. It's the whole scenario. The testimony does not show, or fails to show that [TNT Concrete] made any of the arrangements for any aspects of the purchasing of the materials which were . . . inappropriately handled by Mr. Merlino.
Brief of Respondent, at 20. We concur. The evidence shows that TNT Concrete did not perform a commercially useful function and failed to gain the valuable experience or the improved credit rating which the WMBE ordinance was designed to provide. We believe the Board's determination was correct, and was not arbitrary and capricious.
Administrative Rulemaking
Seattle Municipal Code 20.46.060(A) provides that "the Director [of Public Works] shall ... (3) [a]dopt rules and regulations . . . establishing standards and procedures for effectively carrying out this chapter . . ."At the time that Merlino received the street improvement contract, no such rules had been promulgated. Merlino argues this failure to adopt rules voided any subsequent proceedings, as it had *602no notice as to what conduct would be considered in violation of the WMBE ordinance. We disagree. The invitation Merlino received to bid on the street improvement contract specifically stated:
The Contractor may count toward its MBE or WBE set-aside only expenditures to MBEs and WBEs that perform commercially useful functions in the work of a contract. An MBE or WBE is considered to perform a commercially useful function when it is responsible for execution of a distinct element of the work of a contract and carrying out its responsibilities by actually performing, managing, and supervising the work involved.
(Some italics ours.) Report of Proceedings, vol. 3 (13.7), at 2(l)(D)(d)(l) (WMBE Bid Specifications). This bid provided ample notice to Merlino of which subcontracted work could be set aside, and Merlino cannot complain that it did not know that its conduct in relation to TNT Concrete would violate the WMBE ordinance requirements.
Due Process
Merlino makes a variety of due process challenges to the procedure the Board used at the WMBE noncompliance hearings. While we note that the transcript of the hearing before the Board shows that it was conducted in an unruly manner, and that the Board should make a more concerted effort to maintain an orderly proceeding, we do not believe, judging from the entire record, that Merlino was denied a fair hearing. Merlino raises a number of other challenges.
A
Federal Debarment Procedures
Merlino argues that its 1-year debarment from bidding on city contracts should be reversed because the Board did not follow federal debarment regulations. See 49 C.F.R. §§ 29.41-.55. Federal debarment rules, however, apply only to proceedings conducted by an agency defined as an "operating administration." 49 C.F.R. § 29.13. The Seattle Board of Public Works is not an operating administration as *603defined by the federal regulations, 49 C.F.R. § 29.130), and therefore, those regulations do not apply.
B
Findings of Fact
Merlino asserts that the Board's failure to issue findings of fact was erroneous, and that this court should remand the case to the Board for entry of these findings before we review the case. We note, however, that the WMBE ordinance does not explicitly require such findings and Merlino never requested them.
Findings of fact can serve a number of useful functions. They can aid the court in determining whether the evidence supported facts on which the administrative agency relied to make its decision. They can help the courts avoid judicial usurpation of the agency's fact finding function. We are aware, however, of no case in Washington which overturned an administrative decision because no findings of fact were issued when none were statutorily required.
The closest a court in this state has come to that position is the decision in Pentagram Corp. v. Seattle, 28 Wn. App. 219, 622 P.2d 892 (1981). In Pentagram, the Court of Appeals held that findings of fact were useful to protect the applicant from arbitrary acts, to prevent discrimination and to facilitate judicial review. However, the decision in Pentagram did not reverse an administrative body for failure to issue findings of fact, but instead held that absent such findings, the usual presumption of reasonableness does not attach to an administrative body's decision. Pentagram, at 229-30.
Nevertheless, in this case, regardless of whether or not a presumption of reasonableness attaches to the Board's decision, it is abundantly clear that Merlino violated the provisions of the WMBE ordinance. Findings of fact, which would ordinarily aid this court in making a de novo review of the administrative record, would be of little use in this *604case. We agree with the Board that Merlino violated the WMBE ordinance, and the Board's failure to issue findings of fact is not reversible error.
C
Sworn Testimony
Merlino claims that the Board should have required witnesses to be sworn before testifying. It claims that failure to administer an oath was a denial of due process. Nevertheless, Merlino did not request sworn testimony when given the opportunity to do so, and we therefore decline to consider this issue on review. See Leschi Imp. Coun. v. State Hwy. Comm'n, 84 Wn.2d 271, 274, 525 P.2d 774 (1974).
D
Opportunity To Be Heard Regarding the Appropriate Sanction
Merlino also contends that the Board did not give it a meaningful opportunity to be heard regarding the proper sanction. Specifically Merlino claims that the Board's refusal to continue the hearing for 1 week after a violation had been found, but before a sanction had been determined, violated its due process rights. We disagree.
The decision of how to conduct a meeting is left to the discretion of the Board. SMC 3.44.030. The record does not indicate that the Board abused its discretion, as Merlino was given ample opportunity to be heard and to present arguments about the propriety of any sanctions during all stages of the proceedings.
SMC 20.46.080(A)(4) authorizes five sanctions once the Board finds a violation of the WMBE ordinance. Four of those relate to violations detected before or during the pendency of the contract, and the fifth, debarment, is the only one available after the contract has been fully executed. The Human Rights Department urged the Board to adopt a 2-year debarment, the longest sanction possible pursuant to SMC 20.46.080(A)(4)(e). The Board considered this recommendation as well as one for 6 months before *605finally agreeing on a 1-year debarment. Report of Proceedings, vol. 2 (13.5), at 71-84. The Board's decision was the product of careful reflection, and the failure to grant a continuance was neither an abuse of its discretion nor a due process violation.
Moreover, throughout the hearings, Merlino had the opportunity to discuss alternate sanctions. From the very beginning of a dispute regarding WMBE ordinance violations, if the Director of Public Works believes a violation of the WMBE ordinance has occurred, he is obliged to attempt to resolve the dispute by conciliation. SMC 20.46-.130. This conciliation had taken place, and neither side could agree on whether a violation had occurred or what sanction should be imposed. Even at this stage, Merlino had the opportunity to present alternate views about the propriety of the sanctions proposed. Furthermore, at the point the Board of Public Works had decided to sanction Merlino, the chairman asked:
[Chairman]: Mr. Godsil [attorney for Merlino], . . . are you prepared on. behalf of your client or is your client prepared to discuss the matter of sanctions today?
Mr. Godsil: Well, I could only say that it doesn't look to us from our point of view here there's much to discuss.
Report of Proceedings, vol. 2 (13.5), at 65-66. Thus, despite ample opportunity to do so, Merlino chose not to propose other types of sanctions and the Board considered the violations and ordered a reasonable sanction. There was no due process violation.
E
Other Issues
Merlino's remaining objections are without merit. Merlino was represented by competent counsel, had adequate notice and an opportunity to respond, could present evidence, and had sufficient opportunity to examine witnesses. Furthermore, its challenge to the evidentiary rulings is not well founded as administrative agencies are not required to follow strict or technical rules of evidence. Nisqually Delta *606Ass'n v. DuPont, 103 Wn.2d 720, 696 P.2d 1222 (1985). The Board's hearing complied with due process requirements.
Equal Protection
Merlino also argues that the Seattle WMBE ordinance violates equal protection guaranties. To the extent it makes this argument on the grounds that these types of set-aside ordinances generally discriminate against nonminority male contractors, we adhere to our earlier decision in Southwest Wash. Chapter, Nat'l Elec. Contractors Ass'n v. Pierce Cy., 100 Wn.2d 109, 667 P.2d 1092 (1983), in which we upheld a virtually identical set-aside ordinance adopted by Pierce County.
We reject Merlino's contention that the Seattle ordinance is not sufficiently flexible to fulfill the legislation's remedial purpose. In Electrical Contractors, we followed the United States Supreme Court decision in Fullilove v. Klutznick, 448 U.S. 448, 65 L. Ed. 2d 902, 100 S. Ct. 2758 (1980), which requires that the means selected in an affirmative action plan be narrowly tailored to address the discrimination which has occurred. "It must sweep no more broadly than necessary to counter the problem upon which its justification rests and must be flexible enough to adjust on a case-by-case basis." Electrical Contractors, at 122.
In this case, we believe the ordinance has the needed flexibility and is not overbroad. The plan lists five nonexclusive sanctions for persons violating the ordinance. SMC 20.46.080(A)(4). It compels the Director of Public Works to mediate in the event a perceived violation has occurred. SMC 20.46.130(A). Furthermore, the entire set-aside procedure can be waived if a city contracting authority believes it necessary to do so. SMC 20.46.120. The ordinance does not offend equal protection guaranties.
Furthermore, it is not pertinent that TNT Concrete was not sanctioned in this case. There was no evidence presented that Merlino received disparate treatment because of the race of its owners, and therefore, this equal protection argument is groundless.
*607Other Issues
Merlino raises a number of other issues which we find to be without merit. The fact that the Human Rights Department and the Board approved the use of TNT Concrete as a subcontractor and did not question the method of set aside contemplated by Merlino and TNT Concrete did not amount to a waiver of the Board's right to later challenge the set-aside method actually used. The WMBE ordinance does not violate applicable city low bid requirements, as the ordinance and city charter sections in question require that city contracts be awarded to the best bidder and factors other than lowest price must be considered. City of Seattle Charter, art. 7, § 4; SMC 3.44.040.
Conclusion
This case represents the first time this court has been called on to decide the propriety of a sanction under an affirmative opportunity program existing in this state. The purpose of these ordinances is to give disadvantaged persons the opportunity to obtain needed experience in these fields, and we will not tolerate schemes to circumvent these beneficial aims. Merlino underutilized minority contractors on a city project in violation of the WMBE ordinance. A 1-year debarment is an appropriate sanction for this violation.
We affirm the Superior Court order affirming the Board of Public Works debarment of Merlino for 1 year.
Pearson, C.J., Brachtenbach, Dolliver, Andersen, and Goodloe, JJ., and Hamilton, J. Pro Tern., concur.