Legal Alerts Dec 03, 2019

Single Contractor Not Precluded from Providing Both Design and Construction Services

Case Provides Valuable Guidance for Public Agencies Wanting One Contractor for Two Phases

Single Contractor Not Precluded from Providing Both Design and Construction Services

A contractor that had two separate contracts with a school district — one for preconstruction services and the other for construction services — did not have a disqualifying conflict of interest, a California appellate court held. The decision provides an important clarification for public agencies that want to hire the same contractor for both the design and construction stages.
 
In California Taxpayers Action Network v. Taber Construction, Inc., the First District Court of Appeal on Wednesday found that, because Mount Diablo Unified School District hired Taber Construction in a single procurement for both construction phases, the construction company was not in a position to influence how the public entity spends the public’s money. Government Code section 1090 prohibits public officials and employees, including certain independent contractors and consultants, from having a financial interest in government contracts made in their official capacities. Taber, therefore, could not have used its preconstruction consulting work to influence the school district to hire it for the construction phase because the school district had already selected Taber to perform that work. (Note that school districts may procure construction contracts without awarding to a low bidder by using the lease-leaseback method.)
 
The court’s opinion never explicitly mentions Davis v. Fresno Unified School District, but it serves as a much-needed clarification of the 2015 Davis opinion. Davis involved similar but distinguishable facts. A school district first hired a contractor to perform preconstruction services, and then subsequently hired the contractor to perform construction work through a lease-leaseback procurement. The Davis court held that the mere allegation that the contractor had a hand in designing and developing the plans and specifications was sufficient to bring a lawsuit under section 1090. The court left open the question as to whether the plaintiff could actually prove that the contractor had a conflict of interest.
 
Two key distinctions separate the Taber case from the Davis case. The first is factual: the school district selected Taber through a single Request for Qualifications/Proposal process. Thus, Taber was never in a position where it could influence the transaction until it was confirmed to provide work in both phases. This differs from Davis where work on the preconstruction phase led to the offer of a construction contract. The second distinction is analytical. Both cases rely on the case of Stigall v. Taft, which held that section 1090 precludes an official who performs preliminary discussions and drawings of plans and specifications from bidding on future contracts for that work. But where Davis simply concluded there may be a conflict of interest, Taber took a more logical and analytical approach, holding that Taber only provided services to the school district, not as a de facto official of the school district. That is, participation in the design phase does not automatically preclude work in the construction phase. The question under section 1090 is whether the contractor performed design work as a public official and had the opportunity to improperly influence the public agency to hire it for the construction work.
 
Taber provides an important clarification because there may be value in having the construction contractor perform preconstruction services. In the case of Taber, the preconstruction services included scheduling, estimating, constructability review and development of a guaranteed maximum price; i.e., work that the construction contractor is uniquely able to perform. Beyond the lease-leaseback context, Taber’s analysis of a “one transaction” procurement for multi-phased work provides a framework for public agencies to utilize a single independent contractor without the independent contractor improperly influencing the public agency.
 
If you have any questions about this new decision or how it may impact your agency, please contact the authors of this Legal Alert listed to the right in the firm’s Municipal Law practice group, or your BB&K attorney.
 
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Disclaimer: BB&K Legal Alerts are not intended as legal advice. Additional facts or future developments may affect subjects contained herein. Seek the advice of an attorney before acting or relying upon any information in this communiqué.

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