Bid Protests for Failure to List Subcontractors on a California Public Works Construction Contract

California Public Construction laws require bidders to list in their bids the names and portions of the work which each of their subcontractors will be performing, where the bid of the subcontractor exceeds 0.5% of the total general contractor’s bid price. Pub. Cont. Code § 4104(a).

Failure to list a subcontractor in a bid as mandated by § 4104 IS grounds for finding a bid non-responsive and, when shown, rejection by the public entity of the non-compliant bidder’s bid is often MANDATORY,

“A bid is responsive if it promises to do what the bidding instructions require.” (MCM Construction, Inc. v. City and County of San Francisco (1998) 66 Cal.App.4th 359, 368 [78 Cal. Rptr. 2d 44].) Thus, a responsive bid must conform to the public agency's specifications for the contract. (Bay Cities Paving & Grading, Inc. v. City of San Leandro (2014) 223 Cal.App.4th 1181, 1188 [167 Cal. Rptr. 3d 733] (Bay Cities Paving).)”

“As part of a responsive bid, bidders on public construction contracts must list subcontractors who will provide work above a certain threshold amount. As pertinent to this case, the Public Contract Code requires any bid for construction of any public work or improvement list, in the bid or offer to perform the work, “[t]he name, the location of the place of business, and the California contractor license number of each subcontractor who will perform work or labor or render service to the prime contractor in or about the construction of the work or improvement … in an amount in excess of one-half of 1 percent of the prime contractor's total bid or, in the case of bids or offers for the construction of streets or highways, including bridges, in excess of one-half of 1 percent of the prime contractor's total bid or ten thousand dollars ($10,000), whichever is greater.” (§ 4104, subd. (a)(1).) Subdivision (b) of section 4104 specifies that “[t]he prime contractor shall list only one subcontractor for each portion as is defined by the prime contractor in his or her bid.”

DeSilva Gates Construction, LP v. Department of Transportation (2015) 242 Cal.App.4th 1409, 1417.)

“It is well established that a bid which substantially conforms to a call for bids may, though it is not strictly responsive, be accepted [only] if the variance cannot have affected the amount of the bid or given the bidder an advantage or benefit not allowed other bidders or, in other words, if the variance is inconsequential. [Citations.]”’” (Valley Crest, supra, 41 Cal.App.4th at pp. 1440–1441, quoting Konica Business Machines U.S.A., Inc. v. Regents of University of California (1988) 206 Cal.App.3d 449, 454 [253 Cal. Rptr. 591], italics added by Konica.)

DeSilva Gates Construction, LP v. Department of Transportation (2015) 242 Cal.App.4th 1409, 1422-1423.

“As we explained, “listing the subcontractor percentages [i]s a material element of the bid. Since it was a material element of the bid, North Bay could not change its bid to correct the mistake in stating the percentages. … The City could not permit the mistake as to this material element of the bid to be corrected by purporting to ‘waive an irregularity.’ Since North Bay's bid was nonresponsive, its contract is invalid.” (Ibid.) . . . .” (Emphasis added)

DeSilva Gates Construction, LP v. Department of Transportation (2015) 242 Cal.App.4th 1409, 1423.

“[Pub. Cont. Code] Section 4101 states the Legislature's finding “that the practices of bid shopping and bid peddling in connection with the construction, alteration, and repair of public improvements often result in poor quality of material and workmanship to the detriment of the public, deprive the public of the full benefits of fair competition among prime contractors and subcontractors, and lead to insolvencies, loss of wages to employees, and other evils.” Section 4101 does not prohibit disclosure of a subcontractor who will perform less than one-half of 1 percent of work under a public construction contract. Instead, section 4101 expresses the intent only to discourage the practice of bid shopping.”

DeSilva Gates Construction, LP v. Department of Transportation (2015) 242 Cal.App.4th 1409, 1419.

Thus, awarding the Contract to the non-compliant low bidder could allow it to engage in destructive and illegal bid shopping after the award of the contract, in violation of State Law and Public Policy!

Some contractors/bidders don’t list subcontractors purposely, despite being a violation of the law, so that they can bid shop after the award of the contract and chisel down the subcontractors’ prices after the fact, so that they can obtain an unfair and illegal advantage over other bidders despite the public harms found by the Legislature, and thus increase their profits.

Some contractors/bidders don’t list subcontractors purposely, despite it being a violation of the law, so that they can bid shop after the award of the contract and chisel down the subcontractors’ prices after the fact, so that they can obtain an unfair and illegal advantage over other bidders despite the public harms found by the Legislature, and thus increase their profits.

Thus, the Public Agency has a mandatory and non-discretionary duty - if a Bid Protest is timely filed - under State Law to find a non-compliant bid non-responsive to the invitation for bids, and reject its bid and award the contract to the next lowest responsible bidder, which obligation can be enforced in Court by a relatively speedy Writ of Mandate or appeals-type process in short Order.

In such a Writ of Mandate proceeding the Court can enter an Order which would result in the invalidation of the contract to the non-compliant bidder, and an order to replace contractor in the middle of the project with the next lowest bidder who had complied with Pub. Cont. Code § 4104(a) subcontractor listing requirements.

Bid Protests on such grounds typically must be filed in just a few days after bid opening, so be diligent, get copies of the other lower bids, and seek legal counsel VERY promptly!

N.B. The contents of this Article do not constitute legal advice or create an attorney-client relationship, and you may NOT rely on it without seeking legal advice regarding your particular situation from a competent California Public Works lawyer or Public or Government Contract s attorney.

Please also note that factual situations vary, and statutes, regulations and case law as well as the terms of insurance policies, endorsements and exclusions are frequently and constantly changing and evolving, and these written materials thus also may now be or may become outdated or incorrect.

For further information on this topic and how the current law and policies may apply to your unique public or government project, contract, job, claim or issues, Contact Us here, or via email or phone 415-788-1881.