In D.H. Williams Construction Inc., v. Clovis Unified School District (Emmett's Excavation, Inc.), (C.D.O.S. 401 (January 10, 2007)), the California Court of Appeals held that a public agency could not reject the lowest bid as nonresponsive based upon the lowest bidding contractor listing an unlicensed subcontractor on bid forms. Plus, the court distinguished between "responsible" bidders and "responsive" bids, stating that the lowest bidding contractor was entitled to a due process hearing to determine whether it was responsible under these facts.
Clovis Unified School District, through a construction manager, solicited bids for multiple prime contracts to build a $126 million educational center. With respect to one contract, D.H. Williams Construction was the lowest bidder, and Williams listed Patch Master of Central California as a subcontractor. However, Patch Master's contractors' license had expired before Williams listed it. Moreover, Patch Master's license still had not been renewed before bid opening.
The district notified Williams that Patch Master did not have a current license, and Williams responded with a letter from Patch Master by which Patch Master refused the subcontract and released all claims. Additionally, Williams invoked Cal. Pub. Cont. Code section 4107(a)(3), stating that it would perform Patch Master's work with Williams' own forces. Nevertheless, the district notified Williams that it rejected Williams' bid as nonresponsive and awarded the contract to the second-lowest bidding contractor.
In its decision, the appellate court noted that the law requires public agencies to award construction contracts to the "lowest responsible bidder" (Cal. Pub. Cont. Code section 20111). However, agencies have discretion to determine whether a low bidder is "responsible," that is, whether the bidder has the fitness, quality and capacity to perform the proposed work satisfactorily. In addition to determining whether a bidder is "responsible," the agency also must determine whether the bid is "responsive," whether it "promises to do what the bidding instructions demand."
The court added that the Subletting and Subcontracting Fair Practices Act (California Public Contract Code section 4100 and following) does not require bidders to list only licensed subcontractors, and the Contractors' State License Law (Cal. Bus. & Prof. Code section 7000 and following) does not prohibit unlicensed subcontractors from being included in bids, only from entering into contracts or performing construction contracts. Furthermore, the district's bid package did not require that only licensed subcontractors be listed.
Because there was no evidence that Williams knew that Patch Master's license had expired when Williams submitting its bid, list the court of appeals held that the district abused its discretion by rejecting Williams' bid as nonresponsive and must afford due process to Williams as bidder, including notice and an opportunity to respond, on whether Williams was responsible.
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