The URL can be used to link to this page

Home My WebLink AboutAGENDA REPORT 1997 0319 CC REG ITEM 10CRONALD R. BALL CITY ATTORNEY D. RICHARD RUDOLF Ass'STAN7 0T, ATTORNEY JANE MOBALDI ' FPUTY CITY ATTORNEY Februa 24 1997 ITEM /0• C . CITY OF CARLSBAD 1200 CARLSBAD VILLAGE DRIVE CARLSBAD. CALIFORNIA aff-GiMOMAM CALM 6191 434 -2891 city Council Mating FAX (619) 434 -8367 1 _,_199 of ACTION: gi TO: ALL CALIFORNIA CITY ATTORNEY FROM: RONALD R. BALL, City Attorney, City of Carlsbad AMICUS SUPPORT IN WEST COAST GENERAL CORP. V. CITY OF CARLSBAD Fourth District Court of Appeal The League of California Cities ( "the League ") has authorized an amicus brief and urged all California cities to join in it on this case interpreting public works construction projects. FACTUAL OVERVIEW The City of Carlsbad imposed a penalty of 10% of the amount of undisclosed subcontracts against the prime contractor for violating the Subletting and Subcontracting Fair Practices Act ( "SSFPA "), when it failed to designate a number of subcontractors who performed work on a road project. The City had discovered these companies when their employees and equipment showed up on the job and started working. The prime contractor claimed that the employees and equipment were leased from other companies and did not need to be disclosed. The trial court upheld the City's imposition of this penalty and awarded it its defense costs and attorneys' fees. THE ISSUES The prime contractor's Writ contended the SSFPA violation findings were improper because: (1) the manner in which the hearings were conducted violated due process; (2) the determination these companies were subcontractors was not supported by the factual findings; and (3) there was insufficient evidentiary support for the factual findings. The Superior Court determined each of these issues adversely to the prime contractor. It is anticipated on appeal the prime contractor will advance, among other things, the following position: The existence of an hourly -fee agreement to lease laborers and equipment conclusively establishes the lessor companies as "employees" or "materialmen" of the lessee, rather than subcontractors. RECEIVED uuuUfiy MAR ° 31997 CM r The City's position is a company is an "employee" only if that company receives hourly wages as its sole compensation, does not conduct independent business and does not have the right to control the work. (Bus. and Prof.Code §7053). Based on the documentary evidence and testimony, none of these elements were met. Furthermore, a general contractor's use of "leases" rather than subcontracts would permit a general contractor to engage in the invidious practice of "bid shopping" expressly condemned by the legislature. It is the City's request an amicus brief focus on the public policy impacts resulting from a general contractor's ability to avoid the subcontractor listing requirement by "leasing" portions of a public works contract. SIGNIFICANCE TO CITIES IN GENERAL The legislature's clear concern in enacting the SSFPA was to require all general contractors to identify subcontractors prior to the award of the contract. Without this requirement, general contractors receiving a public contract would be free to seek lower subcontract bids after the award. This creates the danger of less qualified but cheaper subcontractors performing portions of the contract. Additionally, subcontractors attempting to obtain the subcontract may bid below the amount with which they can safely and efficiently perform the contract. Finally, the general contractor's primary purpose of post -award bid shopping is to increase its profit margin without requiring a reduction in the general contractor's overall bid. Consequently, cities would lose the assurance the contract bids received reflect the lowest possible cost for the project. West Coast's approach would eviscerate the purpose behind the SSFPA by styling agreements to perform portions of the work as "leases" of equipment and labor. After the award of the contract, the general contractor could then bid portions of the work, seeking the lowest hourly "lease" rate or other form of compensation. This type of "lease shopping" is indistinguishable from "bid shopping " The trial court's decision in this case permits cities to preserve the integrity of the SSFPA by considering the manner in which undesignated companies actually perform the contract, rather than focusing exclusively on the documents under which the work is performed. Cities should be permitted to determine methods, such as West Coast's violate the subcontractor designation. An opposite outcome would reward and encourage a general contractor's efforts to circumvent these requirements to the detriment of fair competition and quality of the public project. The present appeal is of added significance because there is no reported case law interpreting the subcontractor designation requirement in the SSFPA. The present appeal provides an opportunity to establish case authority interpreting this law in a manner which protects cities' interests in these matters 2 000070 COMMON INTEREST This is a case in which all cities would have a common interest in the same outcome since they should be provided the necessary latitude to enforce the SSFPA in a manner which eliminates the risks associated with post- contract work shopping. The application of even- handed bidding requirements will both promote the integrity of the public contract process and ensure the highest quality of work. HOW AN AMICUS BRIEF COULD HELP If a number of cities joined in an amicus brief, the City believes the Court of Appeal would recognize the significant public policy interest in preserving the vitality of the SSFPA. West Coast will attempt to portray its "lease" arrangements as an innocuous and common method of performing contracts. Strong city support for the City's position would underscore the serious risks to fair competition, public project quality, and enforcement authority of cities which would result from approving West Coast's approach. Additionally, the presence of amicus support would illustrate to the Court of Appeal the need for clear appellate guidance on an issue of first impression. Such support would increase the likelihood the opinion would be published. FILING SCHEDULE As it stands now, West Coast has not yet filed its Notice of Appeal which must be filed by March 18, 1997, although it has indicated it will do so shortly. Subject to available time extensions, West Coast's brief will be due 30 days from the date the appellate record is prepared. BRIEF WRITER Attorney Marcia Kamine, Assistant City Attorney, City of Los Angeles, has agreed to write this brief. Please send your letters joining in the brief to her at: 200 North Main Street Suite 1800 Los Angeles, CA 90012 -4110 CONCLUSION The integrity of public contract bidding is dependent upon an even playing field. Likewise, the assurance of the lowest bid and highest possible quality of public projects is jeopardized by a general contractor's post -award shopping for the lowest cost at which a lower -tier company can perform portions of the contract. The legislature, recognizing these significant risks, enacted the SSFPA to require general contractors to designate at the outset all subcontractors who will be performing work on the contract. 3 000071 West Coast has attempted to circumvent these rules by simply altering the title of the agreement between it and lower -tier companies. However, the risks inherent in post - award work shopping remain. Under the SSFPA, cities should be permitted to look behind a general contractor's attempts to create such loopholes by looking beyond the formal characterization of the relationship, and to look to the true substance of that relationship and consider the practical effect of such agreements. Issues concerning the application of public contract laws face all California cities. Establishing favorable case law on these issues will prevent or greatly reduce general contractors' ability to fashion loopholes in these laws as well as their willingness to pursue protracted litigation on these issues. Accordingly, the City requests your support in the form of an amicus brief. RON LID R. BALL 4 000072 MOORPARK ) 529 0 799 Moorpark Avenue Moorpark. California 93021 -6864 (805 ,!. 7. This is to notify the City of Carlsbad that THE CITY OF MOORPARK, CALIFORNIA (Agency) joins in the amicus brief responding to and opposing appellant's opening brief in West Coast General Cor . V. City of Carlsbad, Court of Appeal case No. I Fourth District, Division One. -J- (Signat CITY ATTORNEY (Title) CITY OF MOORPARK, CALIFORNIA (Agency) c 1 --7 ............ !OH N E. WOZNIAK ')EBBIE RODGERS TEAS;.-��',, 'PATFiiCK HUN'F',:' RERNARDO V PERF7 C,�HRISTOPHER EVANF, Mayor 10A V, 0, - f %< q i ncilMprnt, - r r,ouncilmernber C:ouncilmember