Public Works Construction
Affholder, Inc. vs. Mitchell Engineering, Inc
By Sam K. Abdulaziz

Contractors should know that doing work on a Public Works project has significant bidding requirements as well as other requirements that are not the same as Private Works of Improvement. The submission of bids and the bidding process is completely different.

In this case, Mitchell Engineering, Inc. submitted a bid to the Sacramento County Sanitation District to be the prime contractor on a Public Works project. In turn, Affholder, Inc. submitted a bid to Mitchell to do tunnel work for nearly $7.5 million as Mitchell's subcontractor. Mitchell listed Affholder in its bid. The District awarded Mitchell the contract.

One of the aspects of being a listed subcontractor on a Public Works project is that when the public entity awards the contract, in order for the prime contractor to change subcontractors, the public entity must approve the change.

In this case, in an effort to cut costs, and share in the savings and before entering into the subcontract with Affholder, but after listing Affholder, Mitchell submitted to the District a Construction Incentive Change Proposal (CICP) to change the method of tunneling. Affholder demanded to be part of the CICP negotiations and threatened legal action if Affholder was not given the subcontract. It was clear that the change order called for performance of new or additional work not within the original specifications. Affholder refused to submit a new bid under the change order.

The District deleted Affholder's bids, and Affholder filed a complaint in Superior Court alleging that Mitchell violated the Subletting and Subcontracting Fair Practices Act. Evidently, Affholder alleged that since he was the listed subcontractor he should have gotten the job. The Court disagreed.

The Court held that under section 4107 ( c ) of the Subcontracting Act, if a change order calls for performance of new work that can "reasonably be construed as outside the scope of the originally specified work" the prime contractor may subcontract out for that work. The court held that this was new or additional work not within the original specifications. Affholder was only eliminated as a subcontractor after refusing to submit a new bid under the change order.

Attorney Sam Abdulaziz of Abdulaziz, Grossbart & Rudman has been practicing construction law for 30 years. He has written a book called "California Construction Law" which is updated annually. He represents numerous construction trade associations and contractors. He appears at Contractors State License Board meetings and has argued a number of cases before the appellate courts, including the California Supreme Court dealing with the "Pay-If-Paid Clause."

Abdulaziz, Grossbart & Rudman provides this information as a service to its friends & clients. The documents are of a general nature and are intended to highlight areas of the subject matter and should not be used as a substitute for specific legal advice. You should seek the aid and advice of a competent attorney and/or accountant instead of relying on the presentation and/or documents.

Sam Abdulaziz can be reached at:

Abdulaziz, Grossbart & Rudman
P.O. Box 15458
North Hollywood, CA 91615-5458
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