Public Agency's Choice License Classification Requirement Upheld

Law Talk

Sam K. Abdulaziz
Attorney at Law

One Appellate Court has upheld a public agency's right to require a specific license classification for bidders. The holding is not very surprising. However, since the law is relatively new, this is the first appellate discussion interpreting this matter.

The Yuba County Water Agency created a project for the construction of a canal and pipeline. After consulting with their engineer, Yuba requested bid submissions for the project. The bid required that all contractors have a Class "A" general engineering contractor's license. "A" contractors work on projects that require specialized engineering skill and knowledge in construction projects such as dams bridges irrigation, drainage, water supply, flood control, pipeline and related work. Of the nine bids Yuba received all had an "A" license, with the exception of M&B Construction. M&B was the lowest bidder and objected to the decision to reject their bid as a result of M&B not having an "A" license. M&B claimed that Yuba was required to award the lowest bidder the project and M&B was the lowest bidder even though it only had a "B" license.

A Class "B" license is issued to general building contractors whose principal business involves buildings and similar structures. Yuba decided that the specification of a Class "A" license was reasonable in light of the project's complexity. However, the trial court directed Yuba to accept bids from other classes of legally licensed contractors. By that time, Yuba had put out a second bid request without the Class "A" requirement. M&B obtained a Writ of Mandate from the court directing the agency to allow all contractors that are "legally licensed to perform such work of improvement as prime contractors" to submit bids on the project. The Agency had already sent out a second bid request, which eliminated the "A" licensed requirement.

The Appellate Court overturned the trial court. Public Contract Code Section 3300 provides that any public entity shall specify the classification of the contractor's license which a contractor shall possess at the time a contract is awarded. Two years later Business & Professions Code Section 7059 was enacted stating that in public works contracts, the awarding authority shall determine the license classification necessary to bid and preform the project. Yuba argued that it was entitled to determine the license classification and to select from all the license categories in deciding which classification(s) should be permitted to bid. M&B contended that 7059 merely directs the agency to carry out the mandate of the second sentence (to identify all license classes whose type of work constitutes a majority of the contract). After reviewing the agency's determination, the court found that the agency engineer had given numerous reasons for requiring an "A" license as the required license as a prime contractor, including the complexity of the project, the type of equipment involved and the fact that class "A" contractors typically perform the type of work involved in constructing the heavy reinforced vertical concrete walls involved in the project. The agency engineer also urged the use of an "A" licensee in that it would minimize the number of subcontractors needed on the project.

The court reasoned that the decision should be based on the objects to be achieved by the public policy. The court stated that competitive bidding laws are passed for the benefit and protection of the tax paying public not for the benefit and enrichment of bidders. The court felt that that is exactly what the agency did in this case through its engineer.

The court further held that section 7059(b) authorizes the agency to consider license classifications in determining whether a bidder is qualified to bid on a contract.