Court Opinion

ID: 9792950
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:39:53.530431+00
Date Added: 2024-06-11T08:02:01.979087
License: Public Domain

ARABIAN, J.
I respectfully dissent. Accepting the proposition that a home rule charter city has broad powers to conduct its municipal affairs free of outside interference, city agencies nonetheless are without authority to act in any manner that conflicts with express charter provisions. While I certainly have no quarrel with the laudatory and undoubtedly long overdue goals of the minority- and women-owned business enterprise outreach program, the unvarnished fact is that it is intended to promote social policy, not competition. More importantly and to the point, conditioning acceptance of otherwise qualified prime contractor bids on documentation of good faith outreach efforts is incompatible with the mandate of Los Angeles City Charter section 386(f) that contracts for city work “shall be let to the lowest and best regular responsible bidder.” Neither the record before this court nor intuitive logic supports the majority’s conclusion that the outreach program is necessary to or does in fact “eliminate favoritism, fraud and corruption; avoid misuse of public funds; [or] 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].) Indeed, as this case empirically documents, it runs directly counter to the purpose and goals of the competitive bidding process.
Notwithstanding the breadth of its plenary powers, the City of Los Angeles through its various agencies is restricted in the exercise of municipal authority by any and all express limitations contained in the city charter. (City of Grass Valley v. Walkinshaw (1949) 34 Cal.2d 595, 599 [212 P.2d 894].) A necessary corollary to this principle is that “ ‘an ordinance [or executive equivalent] must conform to, be subordinate to, not conflict with, and not exceed the [city’s] charter, and can no more change or limit the *180effect of the charter than a legislative act can modify or supersede a provision of the constitution of the state.’ [Citations.]” (Currieri v. City of Roseville (1970) 4 Cal.App.3d 997, 1001 [84 Cal.Rptr. 615], quoting 5 McQuillin, Municipal Corporations (3d ed. 1969 rev.) Nature, Requisites and Operation of Municipal Ordinances, § 15.19, pp. 79-80.)
Subject only to enumerated exceptions, Los Angeles City Charter section 386(f) requires that contracts “shall be let to the lowest and best regular responsible bidder furnishing satisfactory security for its performance” and thus constitutes an specific and categorical restriction on the city’s contracting authority. (See Associated General Contractors of California v. City and County of San Francisco (9th Cir. 1987) 813 F.2d 922, 927; see also Los Angeles Dredging Co. v. Long Beach (1930) 210 Cal. 348, 353 [291 P. 839, 71 A.L.R. 161] [“the mode of contracting, as prescribed by the municipal charter, is the measure of the power to contract; and a contract made in disregard of the prescribed mode is unenforceable”].) In this context, “California courts have uniformly construed the term Tow responsible bidder’ [and its variants] to mean the bidder who can be expected to successfully complete the contract for the lowest price.” (Associated General Contractors of California v. City and County of San Francisco, supra, 813 F.2d at p. 926, fn. omitted.) The concept is not one of relative superiority but “has reference to the quality, fitness and capacity of the low bidder to satisfactorily perform the proposed work. [Citation.] Thus, a contract must be awarded to the lowest bidder unless it is found that he is not responsible, i.e., not qualified to do the particular work under consideration.” (City of Inglewood-L.A. County Civic Center Auth. v. Superior Court (1972) 7 Cal.3d 861, 867 [103 Cal.Rptr. 689, 500 P.2d 601]; West v. Oakland (1916) 30 Cal.App. 556, 560-561 [159 P. 202].)
Any deviation from acceptance of the lowest and most capable bidder operates in derogation of the charter mandate and is therefore void. (San Francisco Fire Fighters v. City and County of San Francisco (1977) 68 Cal.App.3d 896, 902-903 [137 Cal.Rptr. 607].) It follows that additional qualifications to the competitive bidding process not contained in the charter itself must relate directly to a bidder’s “experience and financial and material resources necessary to” perform the contract. (Steelgard, Inc. v. Jannsen (1985) 171 Cal.App.3d 79, 93 [217 Cal.Rptr. 152].) Thus, while a bid must be “responsive,” i.e., comply with any specifications contained in the call for *181bids, those specifications must be relevant to a determination of whether the bidder is “responsible.”1
The majority attempts to bring the requirement of documenting compliance with the minority- and women-owned business enterprise (M/WBE) outreach program within the foregoing framework by finding that it enhances competition and promotes the goals of public sector competitive bidding; therefore, it does not conflict with the charter’s “lowest and best regular responsible bidder” mandate. After careful consideration of the analysis, I am unpersuaded outreach compliance was intended to or does accomplish this purpose. The majority’s rationalization is essentially created out of whole cloth. In point of fact, with its extensive good faith effort and documentation requirements, the program potentially narrows the field of qualified bidders, undermines meaningful competition, and can only lead to the city’s fiscal detriment by contributing to higher contractual costs.
Most critically, the majority conspicuously fails to identify any relationship between documentation of good faith outreach efforts and the question of whether a prime contractor has “the quality, fitness and capacity ... 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.) Nor would such a demonstration be possible since documentation compliance concerns only whether a bidder is “responsive,” not whether it is “responsible.” (See Am. Combustion v. Minority Business Opportunity (D.C.App. 1982) 441 A.2d 660, 671; Gilbert Cent. Corp. v. Kemp (D.Kan. 1986) 637 F.Supp. 843, 848-849; see also, ante, fn. 1.) Thus, as a threshold proposition, if the outreach requirement operates to eliminate, as it did here, capable lowest bidders, it conflicts with the charter mandate whether or not it enhances competitiveness.
*182Moreover, the “long and well-established rule” is that the public bidding process “must be free of any restrictions tending to stifle competition. [Citations.]” (Baldwin-Lima-Hamilton Corp. v. Superior Court (1962) 208 Cal.App.2d 803, 821 [25 Cal.Rptr. 798].) To the extent a mandatory good faith outreach effort, including the extensive documentation requirements, tends to discourage or disqualify prime bidders otherwise “qualified to do the particular work under consideration” (City of Inglewood-L.A. County Civic Center Auth. v. Superior Court, supra, 7 Cal.3d at p. 867), it narrows the field of acceptable proposals rather than expands it, thus “defeating the real objectives of competitive bidding.” (Baldwin-Lima-Hamilton Corp. v. Superior Court, supra, 208 Cal.App.2d at p. 822; Konica Business Machines U.S.A., Inc. v. Regents of University of California, supra, 206 Cal.App.3d at p. 456.) This case plainly proves the point: Domar Electric, Inc., was prequalified by the city to bid on the Hyperion project and apparently at all times has been considered “responsible” as mandated by the charter. Of note to the taxpayers, it submitted the lowest bid, which was rejected solely for failure to timely document good faith outreach efforts. (Cf. R & A Vending Services, Inc. v. City of Los Angeles (1985) 172 Cal.App.3d 1188, 1193 [218 Cal.Rptr. 667] [Lowest bidder’s proposal “ ‘was unrealistic and contained admitted inaccuracies.’ ”].) In my view, this anticompetitive result provides a strong indication the city has run afoul of the charter’s express limitation on the letting of city contracts.
The outreach program is suspect in many other respects as well. To begin with, nothing in the record suggests any aspect of the program, including documentation of good faith efforts, was intended to spur competition in the bidding on city contracts.2 Neither of the mayor’s executive directives (Nos. 1-B and 1-C) identifies any perceived deficiency in the level of competition for public works or other city business. In fact, the tenor of both indicates the outreach program was formulated solely as an affirmative action measure to generate wider involvement of M/WBE’s in city projects. The original directive announced that the city’s policy was “to utilize [M/WBE’s] in all aspects of contracting relating to procurement, construction, and personal services” and was “fully committed to substantially increasefd] [M/WBE] utilization and participation in all phases of the City’s . . . contracting,” *183with no reference to improving the broader competitive bidding process. In addition, the city’s “Affirmative Action Officers,” among others, were directed to assist in “developing, managing, and implementing” the policy and program; the 5 percent preference allowed under the city’s Small Local Business Program was to be used “to the maximum extent possible” to involve M/WBE’s; and city departments were to report monthly the extent of implementation including “dollar amounts of contracts awarded” M/WBE’s.3
Most tellingly, in direct response to the decision by the United States Supreme Court in Richmond v. J. A. Croson (1989) 488 U.S. 469 [102 L.Ed.2d 854, 109 S.Ct. 706], invalidating a race- and gender-conscious set-aside program on equal protection grounds, the mayor “clarified” his original directive to explain that a bidder’s “failure to meet [the expected levels of M/WBE participation set by the awarding authority] shall not itself be the basis for disqualification of the bidder . . . .” The city also commissioned a study, consistent with the dictates of Croson, to determine the incidence, if any, of intentional discrimination against M/WBE’s in city contracting. (See generally, id., at pp. 498-506 [102 L.Ed.2d at pp. 884-890]; see also Concrete Works of Colorado, Inc. v. City & County of Denver (10th Cir. 1994) 36 F.3d 1513, 1523-1530.) At the same time, the new directive reiterated the earlier policy statements and directed city agencies to continue to condition acceptance of bid proposals from otherwise qualified contractors on documentation of good faith outreach efforts measured by nine specific criteria. This obvious concern that the outreach program not fall prey to an equal protection challenge, coupled with efforts to satisfy the constitutional restrictions imposed on race- and gender-conscious public contracting practices under Croson, places an unmistakable social policy stamp on the program, unrelated to any articulated need or intent to enhance competitive bidding for the general benefit of the city. (See generally, Concrete Works of Colorado, Inc. v. City & County of Denver, supra, 36 F.3d at pp. 1520-1522.)
Moreover, the city has essentially admitted its social policy agenda. At this point, an awarding agency’s only concern in determining a bidder’s responsiveness is documentation of good faith outreach efforts; actually securing M/WBE participation is irrelevant if not accompanied by the appropriate paperwork. For example, in this case although Domar has qualified with the California Department of Transportation as a WBE, the city *184rejected its low bid for failure to timely provide M/WBE outreach documentation. As explained in Associated General Contractors of California v. City and County of San Francisco, supra, interjecting considerations into the bidding process that do not implicate a contractor’s qualifications to do the work in question is contrary to “the charter’s mandate that contracts be awarded to the lowest bidder.” (813 F.2d at p. 926, fn. omitted; cf. Konica Business Machines U.S.A., Inc. v. Regents of University of California, supra, 206 Cal.App.3d at p. 456; Baldwin-Lima-Hamilton Corp. v. Superior Court, supra, 208 Cal.App.2d at p. 822.)
Notwithstanding the indisputable evidence the city instituted the outreach program for reasons wholly extrinsic to the “lowest and best regular responsible bidder” injunction and its underlying goals and purpose, the majority finds the good faith documentation requirement valid because it promotes market competition. Implicitly, this inaccurate predicate rests on the unexamined, and on this record unsubstantiated, premise that the city could have reasonably determined “more is better,” i.e., that increasing the number of subcontractors considered by each prime in submitting its final bid will produce the most economical, highest quality results for the city. For the reasons that follow, I find no empirical or intuitive support for this assumption.
First, nothing in the record suggests the city had any concern that its standard bidding procedures were not adequately serving their intended purpose: “to protect against a variety of ills that might befall the government procurement process: sloth, lack of imagination or carelessness on the part of those who award public contracts; inadequate notice to potential bidders; causing contracting officers to act on the basis of ignorance or misinformation; and, perhaps most important of all, insufficient competition to assure that the government gets the most work for the least money. [Citation.]” (Associated General Contractors of California v. City and County of San Francisco, supra, 813 F.2d at p. 926.) If the city had in fact identified some inadequacy, an elaborate outreach program replete with documentation requirements seems an ill-suited remedy. The logical expedient would be to set a minimum number of subcontractor bids for designated portions of the work on any given project. (See, post, fn. 4.) Moreover, even though prime contractors are not limited to considering M/WBE’s, mandating solicitation efforts that tend to focus exclusively on a narrow field of subcontractors cannot reasonably enhance competition and may well have the opposite *185effect.4 (Cf. Baldwin-Lima-Hamilton Corp. v. Superior Court, supra, 208 Cal.App.2d at p. 822.)
The record is equally devoid of any evidence from which rationally to conclude that implementing the M/WBE outreach program as presently formulated would as a practical matter enhance competition.5 Several factors warrant a contrary conclusion. Looking at the structure of the program itself, the authorizing agency is to evaluate good faith efforts by determining if the bidder’s efforts “could be expected ... to produce” a specified level of M/WBE participation; the level is set by the agency and varies from contract to contract. Here, the Los Angeles Board of Public Works set the level of M/WBE participation on the Hyperion project at 1 percent. Even assuming the outreach program would in some manner augment competitiveness, such an insignificant proportion of activity could have no more than negligible impact on the prime contractor’s ultimate bid.6 In other words, any financial advantage to the city was likely to be nil.
In reality, however, the consequence was even worse: In this case alone, the “benefit” of “stimulating” market competition by mandating documentation of good faith outreach efforts was an increased cost to the city and its taxpayers of more than $650,000, the amount by which Bailey Controls Company’s bid exceeded Domar’s. The majority’s attempt to justify this departure from the charter mandate on the somewhat blithe as well as unsustainable supposition that “consistent enforcement of the outreach requirement will lead, in the long term, to lower contract prices” (maj. opn., ante, at p. 175) is legally and factually untenable, and reflects quintessential *186“pie in the sky” thinking. The record contains no evidence that “over time” M/WBE subcontractors can or will provide less costly goods and services of acceptable quality. More importantly, Los Angeles City Charter section 386(f) commands that the city and its agencies award each and every contract to the lowest responsible bidder. This language is clear, precise, and unequivocal. It does not accommodate the kind of “averaging” the majority’s analysis superimposes. Any touted competitive value attributable to the outreach program is strictly hypothetical; and documentation compliance in fact reduces competition in direct conflict with the charter’s mandate. As this court agreed more than 20 years ago, “ ‘To permit a local public works contracting agency to expressly or impliedly reject the bid of a qualified and responsible lowest monetary bidder in favor of a higher bidder deemed to be more qualified frustrates the very purpose of competitive bidding laws and violates the interest of the public in having public works projects awarded without favoritism, without excessive cost, and constructed at the lowest price consistent with the reasonable quality and expectation of completion.’ ” (City of Inglewood-L.A. County Civic Center Auth. v. Superior Court, supra, 1 Cal.3d at p. 867.)
In addition, the process by which city agencies determine good faith outreach efforts invites the very subjectivity, arbitrariness, and cronyism that competitive bidding is intended to eliminate. (Cf. Konica Business Machines U.S.A., Inc. v. Regents of University of California, supra, 206 Cal.App.3d at p. 457.) Here, the Los Angeles Board of Public Works informed each prequalified bidder that it required a “positive and adequate demonstration to the satisfaction of the Board” of good faith efforts according to 10 enumerated criteria. The only measure of this “positive and adequate demonstration” was the board’s apparently ad hoc assessment of whether the bidder’s outreach effort was sufficient “to obtain [M/WBE] sub-bid participation . . . which can be expected by the Board of Public Works to produce a [1 percent] level of participation by interested businesses . . . .” While each criterion was assigned a specific number of possible points totaling a maximum of 100, the record reveals no rational basis on which the assignments were made. Moreover, many criteria are themselves less than precise. For example, a bidder must have “negotiated in good faith with interested [M/W/OBE’s] and ... not unjustifiably rejected] as unsatisfactory the sub-bids prepared by any enterprise”; but none of these provisions is quantified or defined in objective terms. Taken in conjunction with the vague standard by which the overall good faith effort was evaluated, the entire process was rife with the potential for abuse to the detriment of the competitive bidding process, thereby heightening public suspicion of city affairs. (See Ertle v. Leary (1896) 114 Cal. 238, 241-242 [46 P. 1].)
*187The majority’s conclusion that documentation of good faith outreach efforts is consistent with the goals of competitive bidding also ignores some critical economic realities. First, any increase in the bureaucracy associated with submitting bids on city contracts will inevitably increase their cost. (Cf. 44 U.S.C. § 3501 et seq. [citing in part minimizing burden on small businesses and cost as purpose of federal Paperwork Reduction Act].) By their nature, 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. (Cf. Gilbert Cent. Corp. v. Kemp, supra, 637 F.Supp. at p. 850 [14 letters and 5 telephone calls with generic information about city project held insufficient to demonstrate “good faith effort”].) So much for the encouragement of a healthy business climate. Furthermore, those prime contractors not inhibited by this possibility may recoup some or all of the additional overhead expense by increasing their bids, which the city will eventually have to absorb when it awards the final contract.
Satisfying some outreach criteria also tends to discourage cost-effective practices by prime contractors. For example, to demonstrate good faith compliance, a bidder must “subdivide the total contract work requirements into smaller portions or quantities to permit maximum active participation of [M/W/OBE’s].” Such subdivision is likely to preclude a prime contractor from taking advantage of economies of scale offered by larger suppliers, relying on its own in-house facilities at a lower cost, or otherwise benefiting from the ability to maintain a consolidated operation. Moreover, a prime contractor must have confidence that any subcontractors it considers possess the technical acumen, efficiency, and financial stability to perform the project in a competent and timely manner, just as the city itself did in this case when it prequalified the bidders. As with documentation, substantiating a subcontractor’s qualifications takes time, effort, and expense.7 Whether or not this requirement promotes competition, it is unlikely to reduce the overall price the city pays for goods and services.
Conclusion
While generally courts will not consider the motive of legislative or executive officers in construing their actions (see, e.g., County of Los Angeles v. Superior Court (1975) 13 Cal.3d 721, 726-727 [119 Cal.Rptr. *188631, 532 P.2d 495]), on occasion the underlying purpose or goal may be highly relevant to determining the intent of a particular enactment and thus a proper subject for assessing its validity. (Cf. Village of Arlington Heights v. Metropolitan Housing Corp. (1977) 429 U.S. 252, 265-266 50 L.Ed.2d 450, 464-465, 97 S.Ct. 555] [recognizing relevance of discriminatory purpose in assessing validity of rezoning decision].) The express terms of the mayor’s executive directives make it indisputably clear that the City of Los Angeles promulgated the M/WBE outreach program in an effort to remedy perceived discrimination against these enterprises in city contracting, not to enhance the competitive bidding process. While the city is generally at liberty to enact whatever measures it finds appropriate to implement social policy, it is nevertheless bound to do so within the express limitations of its own governing charter. In this case, the requirement that prime contractors bidding on city projects document good faith M/WBE outreach efforts narrows rather than expands the field of bidders capable of performing the work in question, thereby stifling, not increasing, competition. It thus plainly contravenes the mandate that contracts “shall be let to the lowest and best regular responsible bidder.''’ (L.A. City Charter, § 386(f), italics added.)
For the reasons stated, I would affirm the judgment of the Court of Appeal.
Appellant’s petition for a rehearing was denied February 23, 1995. Arabian, J., was of the opinion that the petition should be granted.

 For example, the “General Instructions and Information for Bidders” on the Hyperion project contained numerous specifications in addition to the outreach program. With limited exceptions, they all related to the bidder’s qualifications to do the work in a competent and financially sound manner without risk to the city, including bonding and insurance, construction schedules, and liquidated damages. (See also L.A. City Charter, § 386(c) & (d).) Other than the outreach program, the only exceptions were matters governed by superseding state and federal law, such as prevailing wage, apprenticeship utilization, and nondiscrimination obligations. The materials also contain information regarding the city’s employment and training policy, which requires bidders to submit a declaration of compliance. This program appears to be an effort to facilitate job placement of disadvantaged youth and adults residing in the city. The only obligation on the part of a bidder is to identify potential openings for these individuals and consider them for employment to the extent they are qualified. Unlike the outreach program, no minimum participation level is set, no outreach is mandated, and no further documentation is required. Accordingly, it does not appear inconsistent with the charter’s “lowest and best” limitation.

 The majority claims that the outreach program has the effect of “stimulating advantageous market place competition” and hypothesizes that therefore “the Board [of Public Works] could reasonably have concluded that the program will assist the City in securing the best work at the lowest price practicable.” (Maj. opn., ante, at p. 174.) In fact, the record contains no evidence that the board incorporated the outreach program into its bid specifications for reasons independent of the mayor’s directives or that it did so for any purpose other than implementation of the city policy as set forth in those documents, which contain no reference to enhancement of competition.

 information supplied to bidders in this case similarly states: “It is the policy of the City of Los Angeles to provide [M/WBE’s] an equal opportunity to participate in the performance of all City contracts. Bidders shall assist the City in implementing this policy by taking all reasonable steps to ensure that any qualified available business enterprise including [M/WBE’s] have an equal opportunity to compete for and participate in City contracts.”

 The majority notes that the mayor’s second directive expanded the outreach program to include “other business enterprises,” (OBE’S), i.e., non-M/WBE’s. (Maj. opn., ante, at p. 175, fh. 8.) This addition appears as much an effort to distract from the program’s potential constitutional weakness following Croson as an attempt further to enhance competitiveness. At least with respect to this particular case, the practical effect of including “other business enterprises” appears negligible since the bid material provided by the Los Angeles Board of Public Works still continued to emphasize M/WBE’s, in particular in setting the expected level of participation. Moreover, if the city actually sought to increase competition among subcontractors rather than promote social policy, simply requiring a minimum number of sub-bids would accomplish that purpose without the compulsion of specific mandatory outreach efforts that can only encumber the process and add to the prime contractor’s overall expense.

 Since the city is still awaiting the results of its commissioned study on the extent, if any, of discrimination against M/WBE’s in public contracting, there is no support for another key assumption of the majority’s analysis: that these enterprises are not presently participating in the bidding process in adequate numbers. Moreover, even if they had been excluded, the record contains no evidence such exclusion has actually impaired the competitive process or resulted in inflated contractual prices for the city.

 To put these numbers in concrete terms, 1 percent of Domar’s bid was $33,000.

 Since a bidder is subject to disqualification for having been “previously delinquent or unfaithful in the performance of any former contract with the City” (L.A. City Charter, § 386(f)), which would include any subcontractor deficiencies, prime contractors cannot take this task too lightly.