(A version of this article appears in the California Construction Law Reporter, published by the West Group.)
By James E. Acret
The city council, after a hearing, permanently debarred a contractor while it was working on 11 city projects. The city accused contractor of violating traffic control requirements, stealing water from city hydrants, misrepresenting that work had been completed, submitting false claims for extra work, inflating equipment rental rates and submitting false worker's compensation claims.
Evidence showed that contractor falsely claimed to have replaced dilapidated sewer laterals, took water from city fire hydrants without water meters, cut out the "approved" stamp from a traffic control plan and pasted it onto another plan that had not been approved, inflated labor rates on extra work claims to $28 an hour when the actual rate was $11 an hour, physically altered the model number on a backhoe in order to charge a higher rate for its use and submitted false worker's compensation claims for workers who were not performing work on the site at the time of their injuries.
On a writ of administrative mandamus, the trial court rejected contractor's claim that the city had not afforded it due process but reduced the penalty from permanent debarment to debarment for three years. The Court of Appeal reversed the reduction in the penalty and reinstated the decision of permanent debarment. Southern California Underground Contractors, Inc. v. City of San Diego, 108 Cal.App.4th 533, 133 Cal.Rptr.2d 527, 2003 DJDAR 4919 (2003).
Due process: City council hearings were based on lengthy written reports of the city manager supported by copies of documents from city files. The city opened its files to contractor before the hearings, and contractor took 19 depositions of city employees. Contractor was given the right to submit unlimited written materials, briefs, declarations and transcripts of depositions. Contractor submitted nearly 400 pages of written materials, and its counsel was allotted 40 minutes at each of two hearings to make an oral presentation.
Debarment is not intended as punishment but is a means to enable public agency to deal with irresponsible bidders and contractors. A contractor has a right to a fair hearing, but there is no constitutional right to a full panoply of trial procedures. Due process is the opportunity to be heard at a meaningful time and in a meaningful manner. It is flexible and calls for such procedural protections as the particular situation demands. There is no constitutional right to cross-examine witnesses at the hearing. Contractor was afforded an effective opportunity to confront adverse witnesses at depositions. Through its written presentations, the contractor was able to respond to the specific charges underlying the proposed debarment.
There is a presumption that members of the city counsel performed their official duty by reviewing the written materials submitted by contractor. Evidence Code §664.
Bias: Contractor contends that it did not receive a fair hearing because the city was both prosecutor and adjudicator and was at the same time a defendant in contractor's multi-million dollar lawsuit for damages arising out of the debarment. To overturn the city's decision, the contractor must show actual bias, not merely a suggestion or appearance of bias. It is well-established that overlapping investigatory, prosecutorial and adjudicatory functions do not necessarily deny a fair hearing. Such overlapping functions are common before most administrative boards. Members of the city council had no pecuniary interest in the outcome of the lawsuit, and there was no evidence of any financial gain to the city following from debarment.
Permanent debarment: The city ordered permanent debarment for "corrupt practices involving the administration. of a contract.." within the meaning of §22.0803 (b) of the Municipal Code. Section 22.0803 (a) provides debarment for three years for unsatisfactory performance. The trial court found that the corrupt practices of the contractor were in performance rather than administration. Dictionary definitions of the word "administration" include performance. Contractor's administration of its contracts included corrupt practices, deception and falsification, and the city council's permanent debarment was justified under §22.0803 (b).
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