Domar Electric, Inc. v. City of Los Angeles

• Decision Date: 28 December 1995
• Docket Number: No. B073387,B073387
• Citation: 48 Cal.Rptr.2d 822,41 Cal.App.4th 810
• Court: California Court of Appeals Court of Appeals
• Parties: , 96 Cal. Daily Op. Serv. 99, 96 Daily Journal D.A.R. 34 DOMAR ELECTRIC, INC., Plaintiff and Appellant, v. CITY OF LOS ANGELES, Defendant and Respondent; Bailey Controls Company, Intervener and Respondent.

Page 822

48 Cal.Rptr.2d 822

41 Cal.App.4th 810, 96 Cal. Daily Op. Serv. 99,

96 Daily Journal D.A.R. 34

DOMAR ELECTRIC, INC., Plaintiff and Appellant, v. CITY OF LOS ANGELES, Defendant and Respondent Bailey Controls Company, Intervener and Respondent.

No. B073387.

Court of Appeal, Second District, Division 1, California.

Dec. 28, 1995.

As Modified Jan. 25, 1996.

[41 Cal.App.4th 813] Kamine, Steiner & Ungerer, Bernard S. Kamine, Phyllis M. Ungerer and Maurya

Hogan, Los Angeles, for plaintiff and appellant.

James K. Hahn, City Attorney, Pedro B. Echeverria, Senior Assistant City Attorney, John F. Haggerty and Christopher M. Westhoff, Assistant City Attorneys, for defendant and respondent.

Louise H. Renne, City Attorney (San Francisco), Mara E. Rosales, Airports General Counsel, G. Scott Emblidge, Deputy City Attorney, San Francisco, Theodore Hsien Wang, Portland, OR, William C. McNeill III, Judith Kurtz, San Francisco, and Kevin Baker, Newport Beach, as amici curiae on behalf of defendant and respondent.

Jones, Day, Reavis & Pogue, Gerald W. Palmer and Patricia W. Davies, Los Angeles, for intervener and respondent.

MASTERSON, Associate Justice.

Domar Electric, Inc. ("Domar") submitted the lowest monetary bid on a public works project in the City of Los Angeles ("the City"). It was not awarded the contract because it failed to document that it had complied with a subcontractor outreach program. Domar challenged the decision to award the contract to another bidder on the grounds that the outreach program violated the City's charter, Public Contract Code section 2000, and the equal protection clause of the United States Constitution.

In an opinion filed in October 1993, this court held that the outreach program violated the City's charter. The City successfully petitioned for review. The Supreme Court, finding no inconsistency between the outreach program and the City's charter, reversed our judgment and remanded the matter to permit us to consider Domar's remaining contentions. (Domar Electric, Inc. v. City of Los Angeles (1994) 9 Cal.4th 161, 168-169, 179, 36 Cal.Rptr.2d 521, 885 P.2d 934 ["Domar I"].) We do so now, and find both to be lacking in merit.

BACKGROUND

We place Domar's challenges to the outreach program in the historical context from which they arise:

Public works contracts awarded under state law must generally be let to the "lowest responsible bidder." (See, e.g., Pub.Contract Code, §§ 20128, 20162.) Similarly, the City's charter requires that its contracts "be let to the lowest and best regular responsible bidder." ¹ (L.A. City Charter, § 386(f).)

In 1980, the Ninth Circuit considered a challenge to an affirmative action policy adopted by the San Francisco Board of Education which required that bidders on construction contracts either be minority prime contractors or utilize minority subcontractors for 25 percent of the dollar amount of the contract work. (Associated Gen., etc. v. San Francisco Unified Sch. (9th Cir.1980) 616 F.2d 1381, 1383.) The policy was struck down because it was inconsistent with the statutory requirement that a contract be let to the "lowest responsible bidder," as defined by the California Supreme Court in City of Inglewood-L.A. County Civic Center Auth. v. Superior Court, supra, 7 Cal.3d 861, 103 Cal.Rptr. 689, 500 P.2d 601. (616 F.2d at p. 1385.)

In March 1983, the City's mayor issued executive directive No. 1-B, which stated that 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." ² The directive further declared that agencies of the City "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 its implementation. ³

In March 1985, the United States District Court for the Northern District of California considered a challenge to an Alameda County affirmative action program pursuant to which prime contractors were required to make a good faith effort to achieve 10 percent minority subcontractor participation in their bids. (M.G.M. Const. Co. v. Alameda County (N.D.Cal.1985) 615 F.Supp. 149, 150.) The plaintiff in that case had submitted the lowest monetary bid on a project, but had not been awarded the job because minority subcontractors comprised less than 1 percent of its bid. (Ibid.) Relying on the "lowest responsible bidder" language of Public Contract Code section 20128 and the decisions in City of Inglewood-Los Angeles County Civic Center Auth. v. Superior Court, supra, 7 Cal.3d 861, 103 Cal.Rptr. 689, 500 P.2d 601, and Associated Gen., etc. v. San Francisco Unified Sch., supra, 616 F.2d 1381, the M.G.M. court had "no difficulty concluding that the action ... denying the ... contract to the plaintiff violated state law." (615 F.Supp. at pp. 150-151.)

Two months later, in response to the M.G.M. decision, Alameda County sponsored an amendment to Assembly Bill No. 1464 which added Public Contract Code section 2000. (See Assem.3d reading of Assem. Bill No. 1464 (1984-1985 Reg.Sess.) as amended May 15, 1985.) As enacted, section 2000 created various exceptions to the "lowest responsible bidder" rule, including the following: "(a) Notwithstanding any other provision of law requiring a local agency to award contracts to the lowest responsible bidder, any local agency may require that a contract be awarded to the lowest responsible bidder who also does either of the following: [p] (1) Meets goals and requirements established by the local agency relating to participation in the contract by minority business enterprises and women business enterprises. If the bidder does not meet the goals and requirements established by the local agency for that participation, the local agency shall evaluate the good faith effort of the bidder to comply with those goals and requirements as provided in paragraph (2). [p] (2) Makes a good faith effort, in accordance with the criteria established pursuant to subdivision (b), prior to the time bids are opened, to comply with the goals and requirements established by the local agency relating to participation in the contract by minority or women business enterprises." ⁴

In January 1989, the United States Supreme Court rendered its decision in Richmond v. J.A. Croson Co. (1989) 488 U.S. 469, 109 S.Ct. 706, 102 L.Ed.2d 854. As characterized by our Supreme Court, Croson "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." (Domar I at p. 166, 36 Cal.Rptr.2d 521, 885 P.2d 934.)

In March 1989, the City's mayor issued Executive Directive No. 1-C, which was "intended to clarify the implementation of Executive Directive No. 1-B in light of the Richmond v. Croson decision...." ⁵ Although Directive No. 1-C declared that Directive No. 1-B "remains intact and in force," it further stated: "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 [OBEs] 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." 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 OBE's (other business enterprises) according to 10 factors which parallel the 10 criteria listed in Public Contract Code section 2000, subdivisions (b)(1)-(b)(10). ⁶

In 1990, the Los Angeles Board of Public Works ("the Board") established an outreach program for contracts greater than $100,000 that was patterned after Executive Directive No. 1-C. ⁷ Under the Board's program, a bidder's good faith in conducting outreach efforts to MBE, WBE and OBE subcontractors ⁸ is to be evaluated by criteria which parallel the mayor's directive. ⁹ Although the directive and the outreach program include blank spaces for the percentage of participation of MBE's and WBE's which might be expected to result from the outreach efforts in each particular bid situation (1 percent for the project at issue here), the directive makes clear that achievement of the expected level of participation is only one of ten indicators of good faith, and that the failure to achieve that level does not by itself disqualify any bidder from consideration for a contract award nor result in a determination of lack of reasonable MBE/WBE participation. (See Domar I at p. 175, 36 Cal.Rptr.2d 521, 885 P.2d 934.)

In a letter dated June 5, 1991, the City's mayor informed the president of the Public Works Commission that the good faith effort guidelines of Executive Directive No. 1-C had been revised to eliminate consideration of the item pertaining to the achievement of an expected level of MBE and WBE participation in evaluating the adequacy of a bidder's outreach efforts. ¹⁰ The letter further requested that the Commission move expeditiously to adopt the revised guidelines.

In October 1991, the Board issued a request for bids on a contract to provide a...