An Overview of the California Public Contract Code
The California Public Contract Code provides the statutory frameworks that govern the process for public entities to procure and pay for goods or services. It is the umbrella of statutes in the California Government Code that provides the requirements and details for public contracts, specifically for the public agencies in California.
Generally, the California Public Contract Code does not apply to private organizations, but it does apply to public agencies such as counties, cities, authorities, districts, and other political subdivisions of the State of California. A public agency may be subject to specific provisions of the Public Contract Code that are unique to a particular public agency. For example, the California Government Code provides for school districts under Section 10000 et seq. or local agencies under Section 20110 et seq. The nature of the public agency does not change its obligation to comply with the California Public Contract Code, and should a conflict arise, the public agency would have to clarify which statute applies.
There are certain public agencies that are exempt from some of the provisions of the California Public Contract Code. Government Code Section 22050(e) clarifies that certain emergency public construction projects undertaken by the California Department of Transportation, "do not require public bidding when the round-trip distance from the project site to the southern or northernmost boundary of the county in which the project is located, measured along the most practical route suitable for normal travel by any motor vehicle , is less than 25 miles."
One exception to the competitive bidding requirement under the California Public Contract Code is for emergency public works projects under Government Code Sections 22010 through 22013. Section 22011 states: ‘"The board of supervisors of any county or the city council of any city may provide in the manner prescribed by subdivision (a) of Section 22035 for the performance by day labor of public work required to be performed in an emergency. An emergency does not include a normal road maintenance project."
The competitive bidding requirements set forth in the California Public Contract Code do not apply under subsection (b) of Section 22035 where the urgency of the situation does not allow a delay to advertise for bids. Emergency situations may include situations such as an earthquake or flood where bidding time would delay protection of public health.
Certain procurements by public agencies are specifically exempt from the provisions of the California Public Code, including: "supplies, equipment, or service, including insurance or bonds, to be purchased from the federal government." (California Government Code Section 1102.)
Because the provisions of the California Public Contract Code applies to most public procurement processes – and the consequences for failure to comply with the Code can be severe – it is important to be generally aware of its provisions before initiating a public procurement. Experts in the field know that compliance with California Public Contract Code can be a learning process, but with a little preparation, the process can be smooth.
Core Principles of Competitive Bidding
Ensuring impartiality and objectivity in public contract award processes helps safeguard vital taxpayer funds and comply with California law. Specific procedural safeguards include: open competitive bidding, separate evaluation of all proposals, and use of prescribed factors for evaluating bids. Further, to ensure consistency and impartiality, awarding authorities are expected to carefully and uniformly apply the same bi-directional selection criteria across the board to all bidders in order to compare "apples to apples." California’s Supreme Court has expressed that the goals of competitive bidding include: (1) ‘to secure competition’; (2) ‘to prevent favoritism, incompetency, extravagance, and corruption in the performance of public contracts’; (3) ‘to obtain the best work or materials at the lowest price consistent with the requisite degree of quality’; (4) ‘to provide a system of fair and informed competition among those who are willing and able to do the work and furnish the materials;’ and (5) to prevent ‘uncompetitive agreements as to prices and bids.’" Beyond these goals, the paramount principle of competitive bidding is ensuring open competitive bidding processes in which all prospective bidders are treated equally and fairly. That is they are given the same information, notice and reasonable opportunity to prepare and submit equally competitive bids.
The Process of Competitive Bidding
The process of competitive bidding under California’s Public Contract Code starts with a notice that is published publicly in one or more local newspapers or on a web site established by the public agency for receiving and retaining vendor or contractor information posted in response to its request for information, doing business in a specific area, or listing of interested vendors as provided in section 20111.2.
The notice must be published once a week for at least two consecutive weeks, with the first publication occurring not less than ten days before the date set for receiving sealed bids or proposals. In addition to any other information that the local agency deems appropriate, the notice must contain a general description of the work to be performed, state the estimated cost of the project, provide the bid or proposal deadline, specify where bid or proposal documents may be reviewed or obtained, and set forth the place, date, and time of bid opening. (See 20111(a), Public Contract Code.)
In addition to these minimum requirements, upon which public agencies commonly rely, local agencies are encouraged to adopt local ordinances or regulations that require the construction work, whether let or awarded, to be subject to competitive bidding procedures pursuant to applicable sections of the Public Contract Code (see Pub. Contract Code, § 22000, et seq.). The mechanism employed by public agencies to ensure compliance with such local ordinances or regulations includes the use of standard contract documents (which detail the process and requirements) specific to each project. These documents commonly include pre-qualification requirements that must be satisfied before interested parties may submit bids in response to public agency invitations to bid, forms that must be completed by all bidders in connection with the submission of a bid, and forms for the execution of the contract.
The awarding body is required to award the contract for the work to the lowest responsible bidder. (See Pub. Contract Code § 20111, et seq.) A local agency is prohibited from requiring any contractor (subcontractor of any tier) to enter into or adhere to any agreement with respect to the contractor’s relations with its employees who are signatory to or covered by a collective bargaining agreement, or otherwise attempting to incentivize a subcontractor to enter into or adhere to any such agreement. (See Pub. Contract Code § 2010.5).
When Bidding is Not Required: Exceptions and Exemptions
The Public Contract Code outlines various exemptions and exceptions that dictate when competitive bidding may not be necessary, or when different procedures may apply. These exemptions generally arise when the public interest in foregoing the competitive process outweighs the need for competition, or when the work to be done does not easily lend itself to competitive bidding. In the case of public projects, the Code provides that no competitive bidding is required in the following circumstances:
In addition to the above exemptions from bidding, the Public Contract Code also provides exceptions from the general rule that a contract awarded pursuant to the Public Contract Code must be in writing and signed by the appropriate public agency officer. Where a public agency acts in emergency conditions, it may be able to avoid the requirement for a writing and signature if the subsequent written contract is executed within a specific period of time.
Obstacles to Competitive Bidding
The process outlined above is simple conceptually but can be a bit more complex in real life, which means that it can give rise to practical problems. For instance, when specifications are ambiguous or poorly defined, there is the potential for the award to the lowest bidder to be challenged if that bidder does not provide an exact match between its product and the specification. In Hillside Water Co. v. City of Pismo Beach, the city specified AWWA (American Water Works Association) standard fittings for a project, but later purchased fittings that did not meet AWWA specifications. The court found that under the circumstances the city was "permitted to try and obtain what it desired from Hayward" – the winning bidder – "for those prices, and if the prices were too high, then to reject them and go out and obtain what it wanted for less." Hillside Water Co. v. City of Pismo Beach, 220 Cal.App.2d 800, 802-03 (Cal. App. 1963).. Put another way, a public agency generally cannot reject a bid based on its own inability to obtain a product (assuming there is no unreasonable delay) without abandoning the project.
There also have been instances where the public agency tried to require more from its bidders than the law allows . For example, the California Public Contract Code prohibits a municipality from using a request for proposal and qualification process if the value of the public contract is expected to be over $50,000:
In addition, bidders must be qualified to submit a bid "[p]ursuant to the procedures set forth in an ordinance or resolution adopted by the agency governing the purchasing procedures . . . ." Pub. Contract Code § 22035. Under section 22036, a "local agency" (or its representative) cannot "by any means . . . attempt[] to persuade the County Board of Supervisors or the local agency to determine that it is necessary to settle [a] claim . . . at a higher amount than $15,000, in connection with a contract with that local agency." Additionally, the local agency or its representative may not fail to diligently pursue to conclusion the resolution of claims involving the public agency. Finally, while a bidding process must be open and competitive, a public agency can use a prequalification process to screen out unqualified bidders. See generally Sierra-Bob, Inc. v. Superior Court, 103 Cal.App.4th 271 (Cal. App. 2002).
Legal Framework and Adherence
Mastery of California Public Contract Code also means that firms are aware of the legal pitfalls as they relate to competitive bidding. The public contracting arena is highly regulated, requiring a detailed understanding of how the system works and the underlying statutes that require and govern the bidding process. The following are among the issues that often crop up: Pre-qualification, Communication, Bidder’s Conference, Mistakes in Bid, Withdrawal of Bids, Disqualification.
Public Works Projects – Labor Compliance Labor compliance law for public works projects is fed by both federal and state law and is among the most stringent labor regulations in the United States. California Public Contract Code (CPCC) asserting that "[n]o public agency shall award a contract for importation which is subject to Section 1770, unless the contract includes a provision requiring the contractor and any subcontractor to pay not less than the general prevailing rate of per diem wages, plus employer payments for holiday and vacation as specified in Section 1773 … This section does not apply to contracts for the performance of maintenance work." CPCC Section 1772. CPCC Section 1773.1 further requires that "[i]t all times during the performance of any contract for public work, the contractor and all subcontractors shall pay or cause to be paid to all workers performing any work on the public work, the general prevailing rate of per diem wages established by the director of industrial relations, except as otherwise provided in this section … Nothing in this section shall prevent the payment of lesser wages and benefits than the prevailing wage and benefits, when these are paid pursuant to a collective bargaining agreement." Labor compliance violations under CPCC are serious matters that can result in potential criminal liability. Firms that are serious about mastering the California Public Contract Code should have a strategic plan in place that addresses the most frequently encountered pitfalls, and provides guidelines to deal with them if they come up.
Successful Competitive Bidding Case Studies
Effective bidding practices under the California Public Contract Code are essential to carrying out a successful project and minimizing the risk of any issues down the road. The following are case studies of several projects that have effectively utilized competitive bidding, each with their own unique circumstances, but drawing from similar lessons in the value of a strategic approach to public contracting.
The recently completed Altai Water Treatment Project in the Sierra National Forest is a prime example of how successful a project can be with competitive bidding. A $1 million federal grant from the EPA Clean Water State Revolving Fund helped construct the $2 million facility, where total cost savings of more than $200,000 were realized through competitive bidding and other strategies.
More than 100 informal bids were obtained from local contractors for this project, in addition to 47 formal bids from well-known general contractors. What proved most interesting about the bidding process was an alert engineer who noticed (and reported) that there was an incorrect liquidated damages figure in the informally bid project manual, but not the formal version. This simple oversight by the city made bidders wary of submitting an informal bid, or at least affected the pricing for many of them. As a result, the owner requested that all of the prospective bidders resubmit their pricing using the revised figures, but the low bid was still $10 , 000 higher than it would have been if the error had been caught initially.
Competitive bidding gave the city an advantage outside of this example. A review of the 18 bids submitted after the engineer caught the error determined that a large number were actually high-quality job offers from reliable contractors. It clearly gave the city leverage in negotiations and bargaining with these data-driven job offers.
In another local project, simply utilizing the bidding process helped save an owner nearly $100,000 on a project that was initially only budgeted at $25,000 for the replacement of concrete sidewalk panels. Instead, a total of 24 formal bids were received for the job, with a low bid of only $5,652, but a very high bid of nearly $150,000 as well. The reason for such a great discrepancy in pricing was suggested by the owner, and confirmed in part by the fact that of the prospective bidders, three were from out of state and six were locally sourced.
The project manager explained that the local contractors were aware of when the windows of time were typically available for sidewalk replacement, and were able to tailor their bid estimates to best take advantage of those windows. The competitive bidding process secured the concrete replacement job in a timely manner for the owner, quickly saving them $95,348.
While some projects may be less than successful, and one of your bids may not be the low bid that you had hoped, the Competitive Bidding Tender is one of the most important parts of California Public Contract Code Section 20160 and helps owners and contractors alike understand exactly what the other parties are willing and able to do.