Schram Const., Inc. v. Regents of the Univ. of Cal.

• Decision Date: 15 December 2010
• Docket Number: No. A125808.,A125808.
• Citation: 187 Cal.App.4th 1040,114 Cal.Rptr.3d 680
• Court: California Court of Appeals Court of Appeals
• Parties: SCHRAM CONSTRUCTION, INC., Plaintiff and Appellant, v. The REGENTS OF THE UNIVERSITY OF CALIFORNIA et al., Defendants and Respondents; Southland Industries, Real Party in Interest and Respondent.

187 Cal.App.4th 1040

114 Cal.Rptr.3d 680

SCHRAM CONSTRUCTION, INC., Plaintiff and Appellant,

v. The REGENTS OF THE UNIVERSITY OF CALIFORNIA et al., Defendants and Respondents;Southland Industries, Real Party in Interest and Respondent.

No. A125808.

Court of Appeal, First District, Division 5, California.

Aug. 24, 2010.

As Modified on Denial of Rehearing Sept. 22, 2010.

Review Denied Dec. 15, 2010.

Leonidou & Rosin, Janette G. Leonidou and A. Robert Rosin, Mountain View, for Plaintiff and Appellant.

Charles F. Robinson, Stephen P. Morrell, Oakland, David E. Bergquist, University

of California, Office of the General Counsel for Defendant and Respondent The Regents of the University of California.

Allen Matkins Leck Gamble Mallory & Natsis, Raymond M. Buddie, Rick W. Grady, San Francisco, for Defendant and Respondent DPR Construction, Inc.

Woodruff, Spradlin & Smart, M. Lois Bobak, Costa Mesa, for Real Party in Interest and Respondent.

JONES, P.J.

Respondent Regents of the University of California (University) awarded a general contract to respondent DPR Construction, Inc. (DPR) for the design and construction of a medical center at the University of California, San Francisco's Mission Bay campus. On the University's behalf, DPR solicited bids for the mechanical, plumbing, and electrical (MEP) work on the project. Subcontractors were invited to bid on six individual packages (BP1-BP6) and three alternative combination packages (BP ALT-1, 2; BP ALT-3, 5; BP ALT-4, 5). After learning which subcontractors had bid on each package, DPR and the University decided to award a contract on combination package BP ALT-1, 2 instead of BP1 and BP2 individually. Real party in interest Southland Industries (Southland) was determined to be the lowest responsible bidder on BP ALT-1, 2. Appellant Schram Construction, Inc. (SCI), which had submitted bids on BP1 and BP2,but not on BP ALT-1, 2, filed a petition for a writ of mandate challenging the award of the contract to Southland. The trial court denied SCI's petition. SCI appeals from the trial court's denial order, contending the University: (1) violated Public Contract Code section 10506. 7 ¹ by failing to award this contract to the "best value contractor"; and (2) failed to "adopt and publish procedures and required criteria that ensure that all selections are conducted in a fair and impartial manner," as required by section 10506.4, subdivision (c). We find no violation of section 10506.7, but reverse the order denying SCI's petition, as we conclude that the University's bid package selection procedure violated section 10506.4, subdivision (c). The matter is remanded to the trial court for issuance of a writ of mandate.

FACTUAL AND PROCEDURAL BACKGROUND

DPR is the prime contractor on a University project for the design and possible construction of the UCSF Medical Center at Mission Bay, which includes an energy center, an outpatient building, and a 289-bed hospital.

The Initial Bidding

In August 2008, DPR solicited bids for the MEP work on the project, which was to be awarded in two phases: (1) an immediate subcontract for design-assist preconstruction services, and (2) a subsequent change order for construction services, to be awarded if the University decided to proceed with actual construction. Subcontractors were invited to bid on six individual bid packages and one alternative combination package:

BP1	Energy Center: Heating, Ventilation, Air Conditioning (HVAC) & Plumbing
BP2	Outpatient Building: HVAC & Plumbing
BP3	Hospital: Plumbing
BP4	Hospital: HVAC/Dry
BP5	Hospital: HVAC/Wet
BP ALT	An alternate combination of any or all of BP3, BP4, BP5
BP6	All Facilities: Electrical

For each package, bidders were to submit prequalification materials, a best value questionnaire (BVQ), a lump sum preconstruction bid that included labor rates, and an option percentage fee for future construction. The project was to be awardedbased on the best value method of competitive bidding. According to a four-step selection process set out in the bid solicitation, DPRand the University would: (1) prequalify bidders, (2) determine a total BVQ score for each prequalified subcontractor, based on its financial condition, relevant experience, demonstrated management competency, labor compliance, and safety record (§ 10506.5, subd. (g)); (3) conduct a blind bid opening, and (4) identify the best value bid (§ 10506.7, subd. (b)) by applying a formula to the lump sum preconstruction bid, labor rates, and option percentage and dividing the result by the bidders' BVQ scores. The instructions to bidders provided: "... [b]idders submitting bids will be announced and all cost or price information will be secured until the completion of the qualifications evaluation. [...] Final evaluation of the Best Value contractor shall be done in a manner that prevents cost or price information from being revealed to the committee evaluating the qualifications of the bidders prior to completion and announcement of that committee's decision."

SCI submitted bids for BP1 and BP3, but not BP2. Southland submitted bids for both BP1 and BP2, along with a letter offering the University a substantial discount if it was awarded both: "We feel there will be certain synergies and less staff required to perform the Phase One Pre-Construction work if we are awarded both BP1 and BP2 bid packages together. As such, we are pleased to offer a deduct of $1,074,000 from our combined lump-sum BP1 and BP2 Pre-Construction lump-sum quotes."

Four days after the blind bid opening on October 16, 2008, DPR notified all bidders that "in the best interest of UCSF," it was rejecting all bids and conducting a rebid.

The Rebid

DPR requested resubmission of bids in accordance with amended instructions to bidders that invited bids on BP1 through BP6 from the initial bidding, as well as the following alternative combination packages:

BP ALT-1, 2	Energy Center/Outpatient Building: HVAC & Plumbing
BP ALT-3, 5	Hospital: Plumbing & HVAC Wet
BP ALT-4, 5	Hospital: HVAC Wet and Dry

The amended instructions to bidders indicated that BP ALT-1, 2 had been "added as a new bid package alternate." The instructions provided: "Mechanical subcontractors can only bid on the bid package alternates if a stand alone bid package is submitted." Subcontractors were allowed to submit a rebid only on the bid packages for which they had submitted a BVQ in the initial bidding. SCI submitted a protest, contending this requirementprecluded it from bidding on BP ALT-1, 2 because it had not bid earlier on BP2 and that the rebid instructions favored subcontractors who had bid initially on both BP1 and BP2. SCI asked that DPR withdraw the new package or permit SCI to bid on BP2. SCI also asked DPR to "explain by example the method of selection of the successful bidders[, including] how the BVQ [score] is applied to single entity bids versus alternate bids. This needs to be clearly defined before the bid. For example how will you compare the combination of BP-3, BP-4 and BP-5 with BP Alt-3, 5 in conjunction with BP-4[?]"

DPR revised the instructions to bidders shortly thereafter to allow subcontractors who had bid initially on either BP1 or BP2 to submit a bid on the other package. The revised instructions to bidders gave subcontractors the option to submit additional BVQ information for BP ALT-1, 2 and advised them that if no new information was submitted, BVQs for BP1 and BP2 would be reviewed and reevaluated for the combination package. SCI withdrew itsprotest the next day, noting that the revised instructions "took care of our concerns." DPR and the University never responded to SCI's request for an explanation of how the individual packages would be compared with the alternative combination packages.

The best value bid in the rebid was to be determined by a different formula than the one set out in the initial instructions to bidders. The formula for the rebid incorporated the same components, including the lump sum preconstruction cost, labor rates, and option percentage, but in the rebid, the preconstruction cost, which had been weighted in the initial bidding by a multiplier of 10 "as it reflects a greater importance," was weighted by a multiplier of only 3. The formula also factored in an add-alternate representing the monthly cost to the University if the preconstruction process extended beyond one year, weighting it by a multiplier of 6. As in the initial bidding, the best value bid would be determined by dividing the result of the formula calculation by the bidder's BVQ score.

In the rebid, SCI submitted bids for BP1 and BP3, as well as a team bid for BP2, along with a letter "guarantee[ing] that if selected as the successful bidder ... SCI can perform two (2) of the total bid packages bid." ² SCI did not submit a bid for BP ALT-1, 2. Only two bids were submitted on this package, one from Southland and one from ACCO Engineered systems(ACCO). Southland and ACCO did not submit additional BVQ Information specifically for BP ALT-1, 2, noting they were relying on their BVQs for BP1 and BP2. The same four subcontractors submitted bids for BP1 and BP2, including Southland, ACCO, and SCI.

Less than a half hour after SCI's president, Richard Schram (Schram), dropped off SCI's bid for BP2, he received a telephone message from DPR asking whether SCI had bid on BP ALT-1, 2. Schram told his secretary to inform DPR that SCI had not bid on this package. Later that day, DPR's regional manager for the Bay Area, George Pfeffer (Pfeffer), called Schram again, asking whether he intended to bid on BP ALT-1, 2. Schram said he did not.³

On November 12, 2008, the blind bid opening was conducted by two DPR employees and a University representative, Yvonne Kyrimis (Kyrimis). The sealed bids were commingled, and each was placed into an envelope marked with a letter. The bidders were assigned different letters for each bid package. Identifying each bidder by letter only, Kyrimis read off the bid figures to a DPR employee, who...