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Court of Appeal, First District, Division 2, California.

ASSOCIATED BUILDERS AND CONTRACTORS, INC., Golden Gate Chapter et al., Plaintiffs and Appellants, v. SAN FRANCISCO AIRPORTS COMMISSION, Defendant and Respondent. SAN MATEO COUNTY BUILDING AND CONSTRUCTION TRADES COUNCIL, AFL-CIO, Real Party in Interest and Respondent.

No. A076022.

Decided: November 12, 1997

Thierman Law Firm, Mark R. Thierman and George P. Parisotto, San Francisco, for Plaintiffs and Appellants. Louise H. Renne, City Attorney, Mara E. Rosales, Deputy City Attorney, Morrison & Foerster and Harold J. McElhinny, San Francisco, for Defendant and Respondents. Joan R. Gallo, City Attorney (San Jose), Clifford S. Greenberg, Deputy City Attorney, N. Gregory Taylor, Marcia Scully, John C. Clairday, Morgan, Lewis & Bockius and Andrew C. Peterson, Los Angeles, as Amici Curiae on behalf of Defendant and Respondents. Van Bourg, Weinberg, Roger & Rosenfeld, Victor J. Van Bourg and Sandra Rae Benson for Real Party in Interest and Respondent.

I. Introduction

Appellants Associated Builders and Contractors, Inc., Golden Gate Chapter, and Asian American Contractors Association, Inc. (AACA) (collectively, ABC) appeal the denial of their petition for writ of mandate challenging the legality of a Project Stability Agreement (PSA) entered into between respondent San Francisco Airports Commission (Commission) and real party in interest San Mateo County Building and Construction Trades Council, AFL-CIO (Trades Council).   The adoption of the PSA was made a condition for bidders on the San Francisco International Airport Expansion Project.   We affirm, finding the PSA complies with applicable public contracting competitive bidding laws requiring construction awards to be based on the lowest responsible and/or reliable bid.   In so doing, we also reject ABC's right of association argument.

II. Factual Background

San Francisco is the undisputed center of air travel in Northern California.   San Francisco International Airport (SFIA) currently serves 67 percent of domestic, and 98 percent of international travelers in the Bay Area. Forecasted increases in the annual number of international passengers alone are projected to burgeon from the 1991 level of 31 million to 51 million by 2006.

To meet this growing need for airport facilities, the City and County of San Francisco, acting through its Airports Commission, has adopted a $2.4 billion airport design and construction Master Plan which will create 3,500 construction jobs and generate $43 million in local taxes.   The construction encompassed by the Master Plan is believed to be the “largest single public works project” ever undertaken in San Mateo County.1  The “centerpiece” of the Master Plan is the budgeted $211 million International Terminal Expansion Project, although the entire Master Plan involves 77 interrelated contracts of varying size.   Coordinating the work entailed by the Master Plan is a cadre of 60 construction managers, program managers, architects and engineers providing management, administration, design and construction support services.   During the estimated three years required to complete the new international terminal, passengers will have to endure such potential inconveniences as the necessity of being bused to gates in other terminals, and being penned in a “temporary processing center.”   Delays in completion of the International Terminal Expansion Project carry with them increased costs for maintaining these temporary services.

The Commission determined that in order to avoid disruption and delay in completion of the Master Plan, an agreement with the Trades Council was desirable through which there would be a continuous supply of labor provided by the Trades Council during the life of the project.   In return, the Trades Council would guarantee no labor unrest or job site actions.   Negotiations took place over three years.   Two public hearing were held by the Commission in April 1996, culminating in the Commission's passage of Resolution 96-0119 by which a PSA 2 was adopted.

Resolution 96-0119 set forth the Commission's findings supporting its decision to adopt the PSA. It concluded that the best interests of the City and County of San Francisco would be promoted by ensuring the timely and economical completion of the Master Plan. To accomplish that end, an agreement providing for “peaceful settlement of labor disputes and grievances without strikes or lockouts” was warranted.   The concern for timely completion stemmed from the likelihood that a Master Plan, requiring employment of multiple contractors and various labor bargaining units over a protracted time schedule, gave rise to a substantial risk of work disruption sometime during the life of the project.

The Commission also found that the public interest in competitive bidding “to guard against favoritism, fraud and corruption;  to prevent the waste of public funds;  and to obtain the best economic result for the public;  ․” would be furthered by entering into the PSA with the Trades Council.

The PSA was executed on May 16, 1996.   In it, the Trades Council agreed there would be no disruption or slowdown of any kind on the construction projects encompassing the Master Plan as a result of any labor disputes.   The agreement was to survive for the duration of the entire Master Plan. In the event of labor disagreements, the parties agreed to be bound by the adjudicative procedures specified in the body of the PSA to the exclusion of any job site action.

In return, the Commission agreed:  1) It would require all contractors and subcontractors who were awarded contracts to abide by the provisions of the PSA;  2) Core employees 3 of the contractor performing work on the project for more than 30 days would be required to become members of the union applicable to their craft for the duration of their work on the airport expansion project, or at least to pay the equivalent dues and fees to the respective union;  3) if any additional personnel were needed beyond the core employees during the life of the contracts, the applicable union would be given 48 hours to first furnish employees after which time the contractors could hire anyone from any source they chose;  and 4) contractors performing work on the project for more than 30 days would be required to follow the grievance procedures for employees not otherwise members of the Trade Council's unions.   Following the signing of the PSA, the Commission issued a change incorporating the provisions of the PSA into the documents relating to the international terminal portion of the Master Plan then going to bid.

III. Procedural History and Contentions

This appeal arises out of a petition filed by ABC and AACA in San Francisco Superior Court on July 10, 1996, the day before formal opening of the International Terminal Expansion Project bids.   The petition was accompanied by a request for a stay.   The petition and request for stay were ultimately heard and denied by the Honorable David A. Garcia on September 12, 1996, after finding the PSA compliance requirement was constitutional and consistent with the purposes underlying applicable competitive bidding laws.   Judgment for respondents was entered on October 11, 1996.

ABC contends that requiring bidding contractors to agree to be bound by the terms of the PSA as a prerequisite to a contract award violates state competitive bidding laws and the statutory right of association provided for in Labor Code section 923.   They argue that this requirement is in derogation of state law requiring contracts for public works be awarded to the “lowest responsible bidder.”  (Pub. Contract Code, § 20128.)

The Commission argues that since San Francisco is a charter city, it is exempt from state competitive bidding law, and that the PSA requirement is wholly consonant with the applicable requirements under the Administrative Code of the City and County of San Francisco (San Francisco Administrative Code).   Alternatively, the Commission argues that even if state law applies, the PSA bid requirement complies with state law.   As for ABC's right of association argument, the Commission claims ABC lacks standing to assert this statutory right, and that the PSA does not infringe on the rights of workers afforded by Labor Code section 923.

Contentions made by the Trades Council as real party in interest parallel those made by the Commission, but it further adds that ABC's claim under state competitive bidding law is preempted by federal law under the National Labor Relations Act (29 U.S.C. § 151 et seq.) which authorizes such labor stabilization agreements for public works.

We conclude local law applies because the subject matter regulated constitutes a “municipal affair” (Cal. Const., art. XI, § 5, subd. (a)), and therefore San Francisco's Administrative Code pertaining to competitive bidding is applicable, not state law.   The PSA compliance requirement is consistent with San Francisco's public contracting law requiring awards be made to the “lowest reliable and responsible bidder.”  (S.F.Admin.Code, § 6.1.) Furthermore, even if state law were applicable, the use of a PSA is also consistent with the state competitive bidding mandate requiring the award be made to the “lowest responsible bidder.”  (Pub. Contract Code, § 20128.)   We further find that inclusion of a PSA contract specification is not foreclosed by the federal preemption doctrine.   Last, we reject ABC's right of association arguments.

IV. Discussion

A. Standard of Review

 We begin with an area of agreement among the parties-the applicable standards of review.   Our review of the Commission's decision to adopt the PSA is governed by the substantial evidence test.  (Taylor Bus Service, Inc. v. San Diego Bd. of Education (1987) 195 Cal.App.3d 1331, 1340-1341, 241 Cal.Rptr. 379.)   The decision will be affirmed unless it is found to be arbitrary, capricious, entirely lacking in evidentiary support or procedurally deficient.  (Ibid.;  California Assn. of Psychology Providers v. Rank (1990) 51 Cal.3d 1,11, 270 Cal.Rptr. 796, 793 P.2d 2).   The federal preemption argument of the Trades Council is reviewed de novo.  (Cf. Mansell v. Board of Administration (1994) 30 Cal.App.4th 539, 544, 35 Cal.Rptr.2d 574.)

B. Applicability of State or Local Competitive Bidding Laws

 The parties dispute whether state or municipal law applies to public works contracts envisioned by the Master Plan and to the International Terminal Expansion Project in particular.   Resolution of this dispute necessarily begins with a determination of whether the planning and execution of the Master Plan constitutes a “municipal affair” of San Francisco, or whether that public work is of statewide concern.   ABC contends the state competitive bidding law as codified in Public Contract Code section 20128 4 applies because San Francisco, although a charter city and otherwise authorized by law to regulate its activities pertaining to municipal affairs, is engaged in the management of a project having statewide concern.   The Commission and the Trades Council contend the Master Plan, including the International Terminal Expansion Project is a “municipal affair,” and therefore San Francisco County, acting through the Commission, cannot be encumbered by state law affecting public contracting.

The parties agree that San Francisco is a “charter city” as that status is recognized in the California Constitution.  (Cal. Const., art. XI, §§ 2, 3.) Accordingly, San Francisco is empowered by the Constitution to govern its own “municipal affairs” to the extent the field is not preempted by state law.5  In this regard, article XI, section 5 provides in relevant part:  “It shall be competent in any city charter to provide that the city governed thereunder may make and enforce all ordinances and regulations in respect to municipal affairs, subject only to the restrictions and limitations provided in their several charters and in respect to other matters they shall be subject to general laws.”  (Cal. Const., art. XI, § 5, subd. (a).)

This is not the first time SFIA has been involved in litigation in which San Francisco's domination over that facility as a “municipal affair” has been questioned.   A case principally relied on by ABC in support of its position is Trans World, supra, 228 F.2d 473.   There, the controversy concerned the authority of the Public Utilities Commission of the City and County of San Francisco to set and change the rate charged air carriers for “common use facilities” in derogation of a contract authorized under section 4 of the California Municipal and County Airport Law. (Stats.1927, ch. 267, § 4, p. 487 [repealed].)  The Ninth Circuit found that the “conduct of municipal airports” is a matter of regional and state concern, noting the reliance on the facilities by the federal military and the wide geographic area served by air operations there.  (Id. at p. 476).   Therefore, the court found the setting of rates for use of common facilities was governed by state law, and not controlled by the local public entity.

The Commission and the Trades Council argue that Trans World is limited to its facts since the subject matter of regulation there was directly related to airport operations.   They assert that because the present dispute concerns the construction of the physical facilities comprising the airport, the right of San Francisco to regulate the manner of its public contracting is governed by subsequent state court decisions which plainly hold that the construction of public works projects are “municipal affairs.”

Our Supreme Court has declared that “The expenditure of city funds on a city's public works project is a municipal affair.  (Loop Lumber Co. v. Van Loben Sels (1916) 173 Cal. 228, 232, 159 P. 600 [street and sewer work];  see Vial v. City of San Diego (1981) 122 Cal.App.3d 346, 348 [175 Cal.Rptr. 647];  Smith v. City of Riverside (1973) 34 Cal.App.3d 529, 534-537 [110 Cal.Rptr. 67] [Smith].)”  (Domar Electric, Inc. v. City of Los Angeles (1994) 9 Cal.4th 161, 170-171, 36 Cal.Rptr.2d 521, 885 P.2d 934 (Domar).)

In Stacy Witbeck, Inc. v. City and County of San Francisco (1995) 36 Cal.App.4th 1074, 44 Cal.Rptr.2d 472 Division Four of this district confirmed the right of San Francisco to suspend a contractor's right to bid on public work.   It was argued that San Francisco was powerless to regulate contractor licensing because the field had been preempted by state contractors' licensing law, or alternatively, that “general” state law applied because matters pertaining to competitive bidding were not “municipal affairs.”  (Id. at pp. 1092-1094, 44 Cal.Rptr.2d 472.)   Division Four opined that the issue did not involve either a matter upon which the state had expressed an intent to preempt or was of statewide interest so as to eliminate the ability of the city to regulate it.  (Id. at pp. 1093-1094, 44 Cal.Rptr.2d 472.)

 We concur with the Commission and the Trades Council that the subject of public contracting is a “municipal affair.”   Without question, works of public improvements undertaken by cities having business, social and cultural profiles as prominent as those of San Francisco will almost always have an impact on persons beyond its borders.   It is difficult to conceive of any area of local regulation in our urban center which would not create an economic ripple effect extending throughout the region, state, nation, and to foreign nations with whom we have become irrevocably linked.   Yet this is not the sine qua non to a finding that local regulation is a “municipal affair.”   Legislative deference to the state is not mandated simply if the matter being regulated produces a statewide effect, but only if the matter being regulated itself is one in which there is a statewide interest.

We agree with the court in Smith that the manner of constructing a public work is not usually a matter of statewide interest, and has little to do with the appropriate analysis:  “However, the facts stipulated by the parties fail to disclose any facts or circumstances indicating that a city's choice of the method of doing the type of work here involved has a statewide impact.   Plaintiffs' contention that distribution of electricity and water are matters of statewide concern misses the mark.   The municipal activity at issue is not the distribution of electricity and water but the mode chosen to build and extend the distribution facilities.  ‘․ Whatever the subject matter of a municipal contract, it is manifest that the mode in which a city chooses to contract is a municipal affair, ․’ (Dynamic Ind. Co. v. City of Long Beach, 159 Cal.App.2d 294, 299, 323 P.2d 768․)”  (Smith, supra, 34 Cal.App.3d at p. 536, 110 Cal.Rptr. 67.)

Each of San Francisco's 31 million annual international passengers, and thus certainly the state, has an interest in events unfolding at SFIA. Undoubtedly, the manner in which the construction projects there are managed may have an impact on air travel over the next decade.   But the fact the construction may create an effect outside San Francisco is not determinative of the issue.   Like the licensing regulation in Smith, the San Francisco Administrative Code merely regulates what is included in San Francisco's own public contracts within its jurisdiction.   It does not purport to regulate airport operations as in Trans World, supra, 228 F.2d 473, which unarguably are a matter of statewide concern.   Accordingly, we conclude there is no state interest in the subject being regulated.   The construction contracting requirement at issue here is a “municipal affair” subject to the administrative regimen of the San Francisco Administrative Code rather than state law.   Were it otherwise, there would be precious few matters reserved to the regulatory proclivities and provincial needs of our cities.

C. Local Competitive Bidding Law Does Not Invalidate the PSA

The applicable regulation is Section 6.1 of the Administrative Code of the City and County of San Francisco.   That section requires all public works contracts involving expenditures of more than $50,000 shall be let “to the lowest reliable and responsible bidder.” 6  Here, the central focus of the dispute is whether that phrase is violated by the PSA.   We conclude it is not.

The legal requirement for competitive bidding as a prerequisite to the award of a construction contract involving public funds has been part of the statutory and regulatory fabric governing public works throughout California virtually since the birth of public contracting in this state.   The purpose for this requirement has been often quoted as follows:

“ ‘The provisions of statutes, charters and ordinances requiring competitive bidding in the letting of municipal contracts 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 property holders and taxpayers, and not for the benefit or enrichment of bidders, and should be so construed and administered as to accomplish such purpose fairly and reasonably with sole reference to the public interest.   These provisions are strictly construed by the courts, and will not be extended beyond their reasonable purpose.   Competitive bidding provisions must be read in the light of the reason for their enactment, or they will be applied where they were not intended to operate and thus deny municipalities authority to deal with problems in a sensible, practical way.’  (10 McQuillin, Municipal Corporations (3d rev. ed.1990) § 29.29, p. 375, fns. omitted.)”  (Domar, supra, 9 Cal.4th at p. 173, 36 Cal.Rptr.2d 521, 885 P.2d 934.)

Parties have judicially contested the meaning of “lowest responsible bidder” almost from the inception of appellate review in California.   The earliest such attempt to interpret this phrase, and one still quoted with regularity, appears to be in the case of West v. Oakland (1916) 30 Cal.App. 556, 159 P. 202 (West ), written by Justice Richards within the first dozen years of our own appellate district's constitutional existence.   The dispute concerned the proper interpretation of Section 130 of Oakland's city charter which limited the award of contracts to the “lowest responsible bidder.”  (Id. at p. 560, 159 P. 202.)   A disgruntled low bidder whose bid was rejected contended the term meant the lowest monetary bidder who had not been “delinquent or unfaithful in any former contract with the city․”  (Ibid.) The court concluded the use of the term “responsible” deliberately invoked a qualitative assessment which vested discretion in the city as to whom contracts should be awarded.  (Id. at pp. 560-561, 159 P. 202.)   Justice Richards explained that the phrase encompassed significantly more than the lowest arithmetic bidder:

“There are many occasions in the experiences of municipal government when the quality of the thing to be supplied in the course of the public service depends upon conditions which differentiate bidders, and require the exercise of a sound discretion on the part of city officials in determining whether the wares or device which each individual bidder offers in the form of his own exclusive design are such as will meet the particular requirements of the intended work.   In order to cover such cases it is quite usual in the provisions of city charters to find such terms as ‘lowest and best bidder,’ or as ‘lowest responsible bidder,’ and the like;  and these phrases have been given by the courts a particular meaning, in which it must be presumed they are used by the framers of city charters in the absence of other limiting clauses.   The term ‘lowest responsible bidder’ has been held to mean the lowest bidder whose offer best responds in quality, fitness, and capacity to the particular requirements of the proposed work, and that where by the use of these terms the council has been invested with discretionary power as to which is the lowest responsible bidder, having regard to the quality and adaptability of the material or article to the particular requirements of its use, such discretion will not be interfered with by the courts, in the absence of direct averments and proof of fraud.  (2 Dillon on Municipal Corporations, (5th ed.) sec. 811, p. 1223, and cases cited.)”  (West, supra, 30 Cal.App. at pp. 560-561, 159 P. 202.)

The matter was revisited more recently in City of Inglewood-L.A. County Civic Center Auth. v. Superior Court (1972) 7 Cal.3d 861, 103 Cal.Rptr. 689, 500 P.2d 601 (Inglewood) which concerned a dispute regarding rejection of the lowest monetary bid without an express finding of nonresponsibility.   In quoting from West, supra, 30 Cal.App. 556, 159 P. 202, the Supreme Court noted that the term “responsible” connotes an attribute of trustworthiness and also references the “quality, fitness, and capacity of the low bidder to satisfactorily perform the proposed work.”  (Inglewood, supra, 7 Cal.3d at p. 867, 103 Cal.Rptr. 689, 500 P.2d 601.)

 To date, we know of no court which has been called upon to interpret the meaning of the additional term “reliable” when used in the phrase “lowest reliable and responsible bidder.”  “Reliable” has been defined as “dependable,” 7 “applied to a person or thing that can be counted upon to do what is expected or required ․,” 8 “that [which] may be relied on;  dependable in achievement, accuracy, honesty, etc.:  ․ [Reliable] suggests consistent dependability of judgment, character, performance, or result:  ․” 9 and “[t]hat [which] may be relied upon;  in which reliance or confidence may be put;  trustworthy, safe, sure.” 10  The inquiry, then, is whether the PSA compliance requirement bears a legitimate relationship to the reliability or responsibleness of prospective bidders.   If it does, and does not suffer from some other legal infirmity,11 it is a permissible contracting requirement which furthers the purpose for competitive bidding.

We have noted that the Commission held two public meetings on April 18 and 30, 1996, before Resolution 96-0119 adopting the PSA was voted upon.   The record duly notes that representatives of ABC appeared and challenged the potential adoption of the PSA. The record leaves no doubt that a matter of considerable concern to the Commission was the potential for labor strife during the work envisioned by the Master Plan. Seventy-seven separate construction contracts were interrelated by time and effect.   John L. Martin, Director of Airports, whose declaration was submitted by the Commission in opposition to ABC's petition below, stated that for every month of delay in completion of the Master Plan, it was estimated that the cost of administering the project would increase by $1.5 million, and the Commission would lose revenue of $13 million.   Inflation alone would add an additional $4,635,000 monthly to the cost of the Master Plan. In addition, there would be increased expenditures needed for the continuation of temporary facilities, and an unquantifiable loss of tourist revenue to San Francisco.   Director Martin noted that significant delays in the completion of one contract would likely have a “domino effect” by causing delays in the completion of other, later-in-time contracts.   These facts are not challenged by ABC.

On the other hand, ABC presented no evidence that the cost of prosecuting the work envisioned by the Master Plan would be greater by virtue of the PSA compliance requirement.   ABC complains, however, that contractors should be able to pay earnings comparable to fringe benefits directly to their employees rather than as contributions to union dues or to union trust accounts.   Furthermore, it asserts the PSA is anticompetitive because it, and other like-minded contractors, will be precluded from bidding.   A contract provision which restricts the pool of bidders necessarily lessens the chance that the lowestpotential bidder will be awarded the work.

First, we note ABC essentially concedes the prevailing wage law applicable to these contracts 12 will ensure virtually the same labor rates will be applied with or without the PSA. The Commission correctly points out that the case of Neal Publishing Co. v. Rolph (1915) 169 Cal. 190, 196, 146 P. 659 cited by ABC, involved circumstances where the contested bidding requirement affirmatively eliminated nonunion contractors from receiving an award.   This is simply not the case here.   If ABC chooses not to bid, that is its right, the exercise of which is strictly within its control.   It is not “rendered ineligible” due to its status, a result which the Supreme Court has criticized as being anticompetitive.  (Domar, supra, 9 Cal.4th at pp. 177-178, 36 Cal.Rptr.2d 521, 885 P.2d 934.)   Moreover, other than ABC, the record does not support the conclusion that the PSA compliance requirement will drive away nonunion contractors in such numbers so as to create a palpable risk of materially increasing the cost of the work.

Importantly, the Commission's concern regarding delay was a uniquely significant one to completion of the Master Plan, with financial consequences to San Francisco well beyond those implicitly facing all contracting municipalities in the timely completion of every construction project.   This issue was so pervasive that the use of a PSA to modulate labor needs and ensure continuous progress of the work without labor strife was integrally related to the virtues of reliability and responsibility of potential bidders.   “Responsibility” as a bidder clearly encompasses trustworthiness to ensure that the work undertaken is completed in a timely fashion, particularly where propitious performance is of critical concern to the funding public.   “Reliability” necessarily includes the virtue of dependable execution of the work.   Being on site pursuing the work on every available day is congruous with both terms.   Given the risk of multimillion dollar overruns caused by even minimal preventable delays, it would render the terms “responsible” and “reliable” bidder meaningless to limit their definitions to matters other than those relating to the ability to complete the work in accordance with the anticipated schedules.   Thus, the PSA's objective of eliminating the potential for a significant cause of construction delays was rational and wholly justified on this record as being in the best interests of the public.

At oral argument ABC's counsel conceded that timely completion of the work being bid is a legitimate and necessary attribute for any bidder to be either “responsible” and “reliable.”   Furthermore, although ABC vigorously disputes that the public work at issue is a “municipal affair,” counsel again conceded during argument that there is no qualitative difference between a bidder being the “lowest responsible bidder” under state law and the “lowest responsible and reliable bidder” under local law as both terms relate to the ability of a contractor to ensure timely completion of the project.   Under either regulatory scheme, consideration and elimination of causes of delay in setting bid specifications is a justifiable goal of the public which is fully harmonious with competitive bidding principles.

 We emphasize that our role in reviewing administrative proceedings is simply to examine the record to determine if the decision reached was “arbitrary or capricious, entirely lacking in evidentiary support, or whether it failed to follow proper procedures or failed to give notice as required by law.  [Citations.]”  (Boydston v. Napa Sanitation Dist. (1990) 222 Cal.App.3d 1362, 1369, 272 Cal.Rptr. 458, citing Taylor Bus Service, Inc. v. San Diego Bd. of Education, supra, 195 Cal.App.3d at p. 1340, 241 Cal.Rptr. 379.)   We do not judge the wisdom of the agency's action but simply its legality.   Based on this undisputed record we are not hesitant to conclude that the Commission's findings were fully supported by substantial evidence, and were clearly not arbitrary or capricious.   These include that the public interest in guarding against favoritism, fraud and corruption and to prevent waste of public funds, would be furthered by the PSA, yielding the best economic result for the public.

To the extent authorities in other jurisdictions are helpful in deciding this novel issue, we note that the overwhelming majority of courts have upheld PSAs of similar content.  (See Enertech Elec. Inc. v. Mahoning County Com'rs (6th Cir.1996) 85 F.3d 257, 260;  Minn. Chapter of Assoc. Builders v. St. Louis Cty. (D.Minn.1993) 825 F.Supp. 238, 244;  Utility Contractors Assn. of New England v. Comm. of Mass., Dept. of Public Works 5 Mass. L. Rptr. 17, 1996 WL 106983 (Mass.Super.Ct.1996).)

In support of its position, ABC refers us to George Harms Const. v. Turnpike Authority (1994) 137 N.J. 8, 644 A.2d 76, 91-95 (Harms ) where the New Jersey Supreme Court invalidated a New Jersey Turnpike Authority contract specification requiring compliance with a PSA not unlike the PSA involved here.   An important distinguishing fact, and one which was significant to that court's ruling, was that the specification requiring acceptance of the PSA was imposed after the bids were submitted.  (Id., 644 A.2d at pp. 79-80, 91.)   The result of this bidding anomaly was the invalidation of the admittedly lowest bidders who would not agree to this new term.  (Id. at pp. 79-80.)   The timing of the requirement was particularly troubling to the court:

“The contract specification seems to have allowed the bidder to supply the executed project-labor agreement after the award of bids.   Settled principles of public bidding dictate that no material element of a bid may be provided after bids are opened.  [Citation.]   The reason for that is to prevent any possibility of favoritism.  [¶] As the Attorney General explained in a letter brief submitted to us in another public-contract case:  ‘To utilize post-execution change orders or supplementary agreements as a mechanism for accomplishing goals established prior to contract execution would, at a minimum, create an appearance of impropriety.   When the public competitive bidding process is involved, even an appearance of impropriety cannot be tolerated.’  [Citations.]  ․ [¶] Avoidance of any potential for contract manipulation is a central theme of all public-bidding doctrine.”  (Harms, supra, 644 A.2d at pp. 91-92.)

Here, unlike the circumstances in Harms, all bidders began the bidding process on equal footing.   The PSA was included in the bid packages that went to all interested bidders, and there was a prebid meeting held to discuss the details of the PSA before the bidding deadline.   It was not a new term added after bidding closed.   Therefore, the bidding process employed by the Turnpike Authority found by the New Jersey court in Harms to have been corrupted by an appearance of favoritism, and a risk of bid manipulation is completely absent in the instant case.

Furthermore, in Harms the economic need for a PSA was simply not demonstrated, and the New Jersey Supreme Court had no difficulty balancing the respective interests in favor of open competition.   However, in doing so the court also utilized criteria seemingly inimicable to the policy of California law underlying competitive bidding requirements.   The New Jersey law is grounded on the “paramount policy” of fostering “ ‘unfettered competition.’ ”   (Harms, supra, 644 A.2d at p. 95.)   To the contrary, we have noted and again emphasize California's stated objective in promoting a competitive bidding system is “ ‘not for the benefit or enrichment of bidders,’ ” but has been “ ‘enacted for the benefit of property holders and taxpayers.’ ”   (Domar,supra, 9 Cal.4th at p. 173, 36 Cal.Rptr.2d 521, 885 P.2d 934.)   Therefore, because the court was not faced with comparable factors, and was required to employ an analytical matrix materially at odds with that which we must apply, Harms is not compelling authority.

We are abundantly satisfied that the use of the PSA on the International Terminal Expansion Project under consideration in this case is compatible with the publicly charged quest to find the “lowest responsible” or “lowest responsible and reliable” bidder as mandated by both the San Francisco Administrative Code and state law.  “Responsibility” and “reliability,” either individually or collectively, includes the virtue of timely completion of the contracted work so as to make the PSA compliance requirement in this case consistent with the competitive bidding regulations contained in both local and state law.   Thus, while we have determined that the city's code is the applicable competitive bidding law, even in its absence, the PSA compliance requirement would satisfy state law on the subject as well.

D. Federal Preemption

 The Trades Council posits federal law applies with preemptive force to prohibit either state or local competitive bidding law from prohibiting PSAs. It contends that applying either state or local competitive bidding laws so as to forbid ab initio all PSAs conflict with the National Labor Relations Act (NLRA) (29 U.S.C. § 151 et seq.), and thus violates the supremacy clause of the federal Constitution.   Because the contractual requirement at issue does not constitute “regulation,” the preemption doctrine does not apply.

Primary reliance has been placed by the Trades Council on the United States Supreme Court decision in Building & Constr. Trades Council v. Associated Builders & Contractors of Mass./R. I., Inc. (1993) 507 U.S. 218, 113 S.Ct. 1190, 122 L.Ed.2d 565 (Boston Harbor ).   Like the instant case, the question in Boston Harbor was whether state action requiring PSA adoption in a public works contract constituted a “regulation” which was preempted by federal law.  (Id. at p. 227, 113 S.Ct. at 1196.)   The Supreme Court addressed the specific provisions of the NLRA which serve as the wellspring for the Trade Council's preemption argument here:

“In 1959, Congress amended the NLRA to add § 8(f) and modify § 8(e).   Section 8(f) explicitly permits employers in the construction industry-but no other employers-to enter into prehire agreements.   Prehire agreements are collective bargaining agreements providing for union recognition, compulsory union dues or equivalents, and mandatory use of union hiring halls, prior to the hiring of any employees.  935 F.2d [345], at 356 [(1991)];  Jim McNeff, Inc. v. Todd, 461 U.S. 260, 265-266 [103 S.Ct. 1753, 1756-1757, 75 L.Ed.2d 830] (1983).   The 1959 amendment adding a proviso to subsection (e) permits a general contractor's prehire agreement to require an employer not to hire other contractors performing work on that particular project site unless they agree to become bound by the terms of that labor agreement.   See Woelke & Romero Framing, Inc. v. NLRB, 456 U.S. 645, 657 [102 S.Ct. 2071, 2078, 72 L.Ed.2d 398] (1982).   Section 8(f) contains a final proviso that permits employees, once hired, to utilize the NLRB election process under §§ 9(c) and (e) of the Act, 29 U.S.C. §§ 159(c) and (e), if they wish to reject the bargaining representative or to cancel the union security provisions of the prehire agreement.   See NLRB v. Iron Workers, 434 U.S. 335, 345 [98 S.Ct. 651, 657, 54 L.Ed.2d 586] (1978).”  (Boston Harbor, supra, 507 U.S. at p. 230, 113 S.Ct. at p. 1197.)

The Supreme Court found that this statutory system was applicable to political subdivisions acting in their capacities as purchasers no differently than private parties.  (Boston Harbor, supra, 507 U.S. at p. 231, 113 S.Ct. at p. 1198.)   This separate status was distinguished from public entity action as a regulatory body:  “When a State owns and manages property, for example, it must interact with private participants in the marketplace.   In so doing, the State is not subject to pre-emption by the NLRA, because pre-emption doctrines apply only to state regulation.  [¶] Our decisions in this area support the distinction between government as regulator and government as proprietor.   We have held consistently that the NLRA was intended to supplant state labor regulation, not all legitimate state activity that affects labor.”  (Id. at p. 227, 113 S.Ct. at p. 1196.)

Thus, states and municipalities were found to be entitled to the same elective right to enter into PSAs as private parties were acting in their roles as purchasers.   However, the Supreme Court held a much different view when considering application of the preemption doctrine where the public entity has attempted to regulate the right of contracting parties to enter into prehire agreements.   The Supreme Court discussed two forms of preemption applicable to the NLRA, both based upon extant decisions of that tribunal.   It described them as follows:  “When we say that the NLRA pre-empts state law, we mean that the NLRA prevents a State from regulating within a protected zone, whether it be a zone protected and reserved for market freedom, see Machinists, or for NLRB jurisdiction, see Garmon.”  (Boston Harbor, supra, 507 U.S. at pp. 226-227, 113 S.Ct. at 1196.)

The reference to Machinists was that court's opinion in Machinists v. Wisconsin Emp. Rel. Comm'n (1976) 427 U.S. 132, 96 S.Ct. 2548, 49 L.Ed.2d 396, in which the Supreme Court found that a form of preemption exists where Congress has intended by its enactments that a particular area remain unregulated and subject to market forces.   Preemption in this context prohibits state regulation in the face of express congressional intent to leave the matter unregulated.   Its reference to Garmon was to San Diego Union v. Garmon (1959) 359 U.S. 236, 79 S.Ct. 773, 3 L.Ed.2d 775, where it recognized preemptive proscription for public entities engaged in controlling activities subject to existing regulation under the NLRA. The subject matter of the PSA in Boston Harbor was determined to involve neither type of preemption because the court concluded the public entity's bid specification incorporating the PSA was not regulatory activity.

Similarly here, preemption does not prevent the Commission's inclusion of a PSA in its contract specifications where it is acting as a “purchaser” under the teaching of Boston Harbor.   Because the San Francisco administrative regulation mandating competitive bidding does not address PSAs, the questioned governmental activity before us is not regulatory.   Therefore, like the court in Boston Harbor, we need not decide if such hypothetical regulation would be barred by the preemption principles enunciated in either Machinists or Garmon.  (Boston Harbor, supra, 507 U.S. at p. 232, 113 S.Ct. at p. 1198.)

E. Right of Association

Alternatively, ABC argues the PSA violates state law ensuring the right of workers to associate.   It is argued that this employee right is engendered by Labor Code section 923 13 which contains the stated public policy of this state affirming rights of employees to negotiate terms of employment for themselves or as collective groups.   ABC contends the PSA violates this doctrine in that it mandates workers on Master Plan contracts to join, or at least to support financially, unions as a condition of employment.   Accordingly, we are invited to decide this issue in the absence of any California case directly addressing the contention.

 The question is easily disposed of for the fundamental reason that ABC lacks standing to seek its adjudication.  (See Azusa Western, Inc. v. City of West Covina (1975) 45 Cal.App.3d 259, 265-266, 119 Cal.Rptr. 434.)   No individuals have joined this suit as petitioners seeking judicial intervention in setting aside the PSA because it infringes upon their purported right to associate.   ABC has failed to respond to the Commission's claims raising the matter in their briefs, nor has it cited any authority purporting to allow it to assert employee rights under the Labor Code. Thus, its claim based on workers' right to associate fails.

Perhaps in recognition of its lack of standing, ABC attempts to change the focus of the right of association argument in its reply brief from employees to contractors.   However, again it cites no authority supporting the proposition that requiring it to comply with the terms of the PSA violates either a statutory or constitutional right of association vested in contractors.   The only authority referenced in its reply brief is the recent United States Supreme Court decision in O'Hare Truck Service Inc. v. City of Northlake (1996) 518 U.S. 712, 116 S.Ct. 2353, 135 L.Ed.2d 874.   The controversy in that case concerned the right of independent contractors of public entities not to be discharged as a result of their refusal to support a particular political candidate.  (Id. at pp. ---- - ----, 116 S.Ct. at pp. 2355-2356.)   We discern no such First Amendment issue involved here.

V. Disposition

The judgment of the trial court denying ABC's petition for mandamus and stay is affirmed.   Costs on appeal are awarded to the Commission as the prevailing party.  (Cal. Rules of Court, rule 26.)


1.   While the airport is owned by San Francisco, the land on which the complex sits is in San Mateo County.  (Trans World Airlines v. City & County of San Francisco (9th Cir.1955) 228 F.2d 473, 474 (Trans World ).)

2.   PSAs are also commonly referred to as PLAs (Project Labor Agreements).   We perceive no functional difference between the two, and apparently the nomenclature is dictated solely by the degree of adoration or contempt the user holds for such agreements.   We refer to it here as a PSA because that is the precise title of the agreement at issue.

3.   “Core employees” were defined as persons on the active payroll of the contractor for at least 60 of the 100 days preceding award of the contract.   Regardless of whether they fit the definition of “core employee,” personnel exempted from the agreement were executives, managers, supervisors, engineering staff, or office and clerical workers.

4.   That section provides:  “The board shall award the contract to the lowest responsible bidder, and the person to whom the contract is awarded shall perform the work in accordance with the plans, specifications, strain sheets, and working details, unless the contract is modified by a four-fifths vote of the board.”

5.   No one contests that the City may delegate to the Commission its jurisdiction over SFIA. (See Air Cal Inc. v. City and County of San Francisco (9th Cir.1989) 865 F.2d 1112, 1115.)   Nor does ABC contend that state competitive bidding law preempts local regulation of public contracting.

6.   In contrast, Public Contract Code section 20128 requires public contracts governed by state or “general” law (Cal. Const., art. XI, § 5, subd. (a)) be awarded to the “lowest responsible bidder.”   Although we conclude the San Francisco Administrative Code is the applicable regulation, as we will discuss, infra, the PSA at issue here is permissible under state law as well.

7.   American Heritage Dictionary (3d ed.1992) at page 1524.

8.   Webster's New World Dictionary (college ed.1966) at page 1228.

9.   Random House Unabridged Dictionary (2d ed.1993) at page 1628.

10.   13 Oxford English Dictionary (2d ed.1989) at page 562.

11.   The only other basis upon which the PSA is challenged is ABC's contention that it also violates a statutory right of association, which we will discuss independently in Section F post.

12.   San Francisco's 1996 Charter provides:  “Every contract for any public work or improvement ․ must provide:  ․ [¶] (b) that any person performing labor thereunder shall be paid not less than the highest general prevailing rate of wages in private employment for similar work;  ․” (S.F. Charter, appendix A, § A7.204.) Prevailing wage laws in part are mandated to permit both union and nonunion contractors to compete equally for public employment.  (Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 976, 987, 4 Cal.Rptr.2d 837, 824 P.2d 643).

13.   Section 923 of the Labor Code provides:  “In the interpretation and application of this chapter, the public policy of this State is declared as follows:  [¶] Negotiation of terms and conditions of labor should result from voluntary agreement between employer and employees.   Governmental authority has permitted and encouraged employers to organize in the corporate and other forms of capital control.   In dealing with such employers, the individual unorganized worker is helpless to exercise actual liberty of contract and to protect his freedom of labor, and thereby to obtain acceptable terms and conditions of employment.   Therefore it is necessary that the individual workman have full freedom of association, self-organization, and designation of representatives of his own choosing, to negotiate the terms and conditions of his employment, and that he shall be free from the interference, restraint, or coercion of employers of labor, or their agents, in the designation of such representatives or in self-organization or in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.”

RUVOLO, Associate Justice.

KLINE, P.J., and LAMBDEN, J., concur.

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