Appeals court rules against subcontractor fighting against bid shopping law substitution provisions

A California appeals court has ruled that the Santa Monica Community College District had acted within its authority when it allowed one of its contractors to remove a subcontractor from a construction project in 2016.

The story involves the college, general contractor Bernards Bros. Inc. and JMS Air Conditioning and Appliance Service, Inc., which had been awarded a $8.2 million subcontract in November 2014. JMS started work on the site in April, 2015.

The appeals court ruling said:

On March 30, 2016, Bernards requested in writing that the District permit it to “substitute another subcontractor for JMS” because JMS had “failed or refused to perform its subcontract obligations and may not be properly licensed for a portion of its work pursuant to the contractors license law.”

JMS resisted this removal, initially at an administrative hearing, and then (after its removal was confirmed, though the Superior Court of Los Angeles) and then to the appeals court.

See the court decision here

JMS asserted that there wasn’t sufficient due process, that the hearing review was done by someone not directly working for the college, and that in any case, its work on certain tasks for which it lacked licenses were “incidental” to its primary contract and therefore allowed under law.

The judges rejected all of these arguments. Furthermore they made clear that the hearing/reviews process for substitution needs to relate to the statute’s provisions relating to bid shopping and peddling.

The judges ruled:

“Indeed, the Act protects subcontractors only to the extent that preventing bid peddling and bid shopping might protect them. (See Southern Cal. Acoustics, supra, 71 Cal.2d at p. 726 [Act’s goal is “to protect the public and subcontractors from the evils . . . of bid shopping and bid peddling subsequent to the award of the prime 14 contract for a public [project]”].)”

Costs were awarded against JMS.