AGO 1994 No. 14 - Sep 16 1994
PUBLIC WORKS-PUBLIC AGENCY CONTRACTS-CONTRACTORS AND SUBCONTRACTORS-Obligation of general contractor to list subcontractors on public works bid
A general contractor is obligated by RCW 39.30.060, as amended, to submit a list of the major subcontractors it will actually use on a public works contract if awarded the bid; the statute assigns no specific duties to public agencies in implementing its provisions, and does not specify a procedure for substituting subcontractors after the bid award.
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September 16, 1994
State Representative, District 39
436 John L. O'Brien Building, MS 40677
Olympia, WA 98504-0677
Cite as: AGO 1994 No. 14
Dear Representative Dunshee:
By letter previously acknowledged, you requested our opinion on a question paraphrased as:
Where a bidder on a public works project has supplied a list of subcontractors as required by RCW 39.30.060, and is successfully awarded the contract, is the bidder obligated to use those subcontractors named in its list?
We answer your question in the qualified affirmative. RCW 39.30.060 necessarily implies that bidders subcontract with those subcontractors whose names they have submitted with the bid. Once a bid has been accepted and a contract created, the terms of the contract will govern the extent to which subcontractors may subsequently be substituted.
In 1993, a new section was added to chapter 39.30 RCW. That chapter deals with competitive bidding violations in public contracts. RCW 39.30.060 provides:
Every invitation to bid on a contract that is expected to cost in excess of one hundred thousand dollars for the construction, alteration, or repair of any public building or public work of the state or a state agency or municipality as defined under RCW 39.04.010, an institution of higher education as defined under RCW 28B.10.016, or a school district shall require each bidder to submit as part of the bid, or within one hour after the published bid submittal time, the names of the subcontractors whose subcontract amount is more than ten percent of the contract price with whom the bidder, if awarded the contract, will subcontract for performance of the categories of work designated on the list to be submitted with the bid or to indicate by naming itself that a category of work on the list shall not be subcontracted. Failure to name such subcontractors or itself shall render the bidder's bid nonresponsive and, therefore, void.[]
By its terms, this section is of limited application and affects only general contractors bidding on contracts that (1) are expected to cost more than $100,000; and (2) are for construction, alteration, or repair of public buildings, or for public work undertaken by the state, a municipality, an institution of higher education, or a school district. Furthermore, the requirement that bidders name their subcontractors applies only to those subcontractors that subcontract for more than 10 percent of the contract price.
A fundamental rule of statutory construction is that laws should be interpreted so as to give effect to their intended purpose. See, e.g., Koker v. Armstrong Cork, Inc., 60 Wn. App. 466, 470, 804 P.2d 659,reconsideration denied 117 Wn.2d 1006, 815 P.2d 265 (1991). In interpreting the requirements of RCW 39.30.060, it is important to consider the purpose of competitive bid laws affecting public contracts in Washington.
The general scheme of competitive bidding statutes is to obtain the advantages of free and fair competition for the benefit of the general public. It is well recognized that such statutes are
"for the purpose of inviting competition, to guard against favoritism, improvidence, extravagance, fraud and corruption, and to secure the best work or supplies at the lowest price practicable, and they are enacted for the benefit of . . . taxpayers, and not for the benefit or enrichment of bidders . . . ."
Savage v. State, 75 Wn.2d 618, 621, 453 P.2d 613 (1969). Nevertheless, it is also recognized that another purpose is to provide bidders with a fair forum for the award of public contracts, and necessarily so. It is by protecting this secondary purpose that the primary benefits of the competitive bidding system can be insured to the general public. This requires a guarantee of impartial treatment for all those participating in public bidding[.]
A.A.B. Elec., Inc. v. Stevenson Pub. Sch. Dist. 303, 5 Wn. App. 887, 889-90, 491 P.2d 684 (1971) (footnote omitted, emphasis added). See alsoGostovich v. West Richland, 75 Wn.2d 583, 587, 452 P.2d 737 (1969).
With this background in mind, we turn to your question. The plain language of RCW 39.30.060 addresses the issue of whether bidders affected by the statute must use the subcontractors named in the bid. In this respect, the statute provides:
Every invitation to bid . . . shall require each bidder to submit as part of the bid, or within one hour after the published bid submittal time, the names of the subcontractors whose subcontract amount is more than ten percent of the contract pricewith whom the bidder, if awarded the contract, will subcontract for performance of the categories of work designated on the list to be submitted with the bid or to indicate by naming itself that a category of work on the list shall not be subcontracted. Failure to name such subcontractors or itself shall render the bidder's bid nonresponsive and, therefore, void.
Laws of 1994, ch. 91, § 1, p. 304 (emphasis added).
Words in a statute are given their plain and ordinary meaning unless a contrary intent appears in the statute itself. Koker, 60 Wn. App. at 471. The plain meaning of RCW 39.30.060 is that a bidder affected by this statute must submit, as part of the bid or within one hour after the published bid submittal time (whichever is stated in the invitation to bid), the names of subcontractors with whom the bidder will actually subcontract for performing work under the contract.
The statute only allows exceptions to this requirement if a subcontractor's subcontract amount is not more than 10 percent of the contract price, or if the bidder names itself for a category of work. Otherwise, failure to name the subcontractors that the bidder will use in performing the contract renders the bid "nonresponsive and, therefore, void".
Although there is no need to inquire into legislative intent when a statute is unambiguous on its face, Geschwind v. Flanagan, 121 Wn.2d 833, 840, 854 P.2d 1061 (1993), the statute's legislative history is consistent with this interpretation and with the purpose, identified by Washington courts, of affording fairness in the competitive bid process. The final bill report for the original 1993 legislation stated:
Background: General contractors who bid on public works projects include in the bid the work to be done by subcontractors. These general contractors are usually not required to name the subcontractors whose estimate was incorporated into the bid or to use these subcontractors once the contract is awarded. The general contractor who is awarded the contract is not prohibited from finding subcontractors willing to do the contract work at a lower price than the price incorporated into the original bid.[]
Final Legislative Report, 53rd Legislature (1993), at 88, Substitute House Bill 1370. As the court explained in theA.A.B. Elec. case, competitive bid laws are intended in part to provide fairness to bidders. A.A.B. Elec., 5 Wn. App. at 889-90. The provisions of RCW 39.30.060 have been enacted to extend this protection to those who subcontract for public works.
However, RCW 39.30.060 does not appear to create a new cause of action against an awarding agency based on a general contractor's failure to comply with the requirement that subcontractors be named. Furthermore, the statute imposes no duty on agencies to address this requirement in requests for proposals, contracts, or policies. RCW 39.30.060 simply establishes the requirement that, under certain circumstances, a general contractor bidding on a public work list the subcontractors it will use if awarded the bid.
An earlier version of SHB 1370 would have gone much further. Compare Laws of 1993, ch. 378 (Substitute House Bill 1370)with House Bill 1370. As first introduced during the 1993 legislative session, HB 1370 was considerably more comprehensive than the bill finally enacted. For example, the original version of the bill would have expressly prohibited substitution of subcontractors except under limited circumstances and with the awarding agency's approval, and would have established penalties for failure to comply with its provisions. House Bill 1370, 53rd Legislature (1993), §§ 5, 10, 11.
As enacted, RCW 39.30.060 expressly applies to bids for public works contracts. Once a bid has been accepted, specific terms of the contract with regard to substitutions of subcontractors would apply. SeeMottner v. Town of Mercer Island, 75 Wn.2d 575, 578, 452 P.2d 750 (1969) (a bid by a contractor is an offer to contract and does not create a contract itself until it has been accepted). We recognize that, once a contract has been entered into between the public body and the general contractor, circumstances might arise that would require a change in subcontractors. For example, one or more of the designated subcontractors may prove unable or unwilling to perform their contracts, or unforeseen changes in the scope of the work to be done might require additions, deletions, or substitutions in the list of designated subcontractors. The public works contract itself might well provide for these contingencies and specify the circumstances under which subcontractor changes can be made and the process to be followed in accomplishing that end.
We trust the foregoing will be of assistance to you.
Very truly yours,
CHRISTINE O. GREGOIRE
SUZANNE J. SHAW
Assistant Attorney General
As enacted, RCW 39.30.060 required subcontractor names to be submitted as part of the bid or "within twenty-four hours of the bid". In 1994, the Legislature amended this section to require the names to be submitted as part of the bid or "within one hour after the published bid submittal time". Laws of 1994, ch. 91, § 1, p. 304. The amendment was made effective prospectively only and applies only to invitations to bid issued on or after June 9, 1994, the amendment's effective date. Id. § 2, p. 304.
The report describes a form of "bid shopping" in which a contractor obtains quotes from subcontractors that are used in preparation of the contractor's bid on the public works project. Then, after having been awarded the bid, the general contractor would either substitute another subcontractor who would be willing to do the work for less money (thus benefiting directly from the savings), or would use the threat of changing subcontractors to force the original subcontractor to reduce its price. This "bid shopping" practice is regarded as unethical by many in the building industry. Our review of the legislative history showed that there was support from both the general contractors and the specialty contractors for Substitute House Bill 1370.
The California Supreme Court, interpreting statutory provisions substantially similar to those in HB 1370 (provisions which were not enacted by the Washington Legislature), has held that, unless statutory grounds for valid substitution exist, a subcontractor listed in a bid but not used by the prime contractor does have a cause of action against that contractor for breach of a statutory duty. Southern California Acoustics Co. v. C.V. Holder, Inc., 71 Cal. 2d 719, 727, 456 P.2d 975 (1969) (interpreting Cal. Gov't Code §§ 4100-4108 (1963)).
However, the California statute expressly provided the conditions under which an awarding agency could consent to substitution of a subcontractor. Cal. Gov't Code § 4107 (1963). Although the Washington Legislature could have opted for similar provisions in enacting RCW 39.30.060, it did not. It is an open question whether the more limited provisions of RCW 39.30.060 imply a cause of action by a subcontractor against a prime contractor that has named, but failed to use, the subcontractor.