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Schram Construction, Inc. v. Regents of the University of California

August 24, 2010

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.



(City & County of San Francisco Super. Ct. No. 09-509241). Peter J. Busch, Judge.

The opinion of the court was delivered by: Jones, P.J.

CERTIFIED FOR PUBLICATION

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*fn1 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 awarded based on the best value method of competitive bidding. According to a four-step selection process set out in the bid solicitation, DPR and 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: ...


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