PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT v. Caltrop Engineering Corp., et al., Intervenors and Respondents.

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Court of Appeal, First District, Division 5, California.

PROFESSIONAL ENGINEERS IN CALIFORNIA GOVERNMENT et al., Plaintiffs and Appellants, v. Jeff MORALES et al., Defendants and Respondents Caltrop Engineering Corp., et al., Intervenors and Respondents.

No. A108641.

Decided: November 16, 2005

Law Offices of Kelley Stimpel Martinez and Kelley Stimpel Martinez;  Law Offices of James E. McGlamery and James E. McGlamery, Sacramento, for Plaintiffs and Appellants. Department of Transportation, Legal Division, Bruce A. Behrens, Chief Counsel, Brelend C. Gowan, Deputy Chief Counsel, José Aguirre, Assistant Chief Counsel, and Stephanie G. Sakai, for Defendants and Respondents. Stoel Rives and James P. Corn, Sacramento, for Intervenors and Respondents.

Proposition 35, an initiative passed by California voters in 2000, allows the state to use private contractors to perform architectural and engineering services on public works.   This case requires us to construe Proposition 35 and determine its effect on pre-existing statutes.

In the published part of the decision, we affirm the judgment of the trial court in part.   We hold that Proposition 35 impliedly repealed or amended Government Code sections 14101, 14130-14137 and 19130 to the extent that those statutes restrict Caltrans's authority to contract with private architects and engineers beyond the constraints of the initiative itself.   Further, we hold that there is no conflict between the initiative and Caltrans's use of a qualifications based selection procedure.

In the unpublished part of the opinion we reverse in part and remand with instructions to issue a peremptory writ of mandate ordering Caltrans to refrain from applying the regulations contained in its manuals until it fully complies with the Administrative Procedure Act.

Background

Proposition 35 was the culmination of a 14-year legal struggle over when and how the Department of Transportation (Caltrans) could contract with private architects and engineers on transportation projects.   The struggle began in 1986 with a lawsuit between the main parties to the present case and played out through legislative action, trial court injunctions, court appeals and ultimately a constitutional ruling of the California Supreme Court, which struck down statutes expanding Caltrans's ability to use private contractors.   (See Professional Engineers v. Department of Transportation (1997) 15 Cal.4th 543, 548, 63 Cal.Rptr.2d 467, 936 P.2d 473 (Professional Engineers ).) 1  Proponents of Proposition 35 wrote in the ballot materials that one purpose of the initiative was to reverse the effect of lawsuits that impeded Caltrans use of private contractors.

In 2000, the voters approved Proposition 35, the “Fair Competition and Taxpayer Savings Initiative” (Proposition 35).2  The express intent of the initiative was to “remove existing restrictions on contracting for architectural and engineering services”;  to allow state government to use qualified private architectural and engineering firms to help deliver transportation projects safely, cost effectively and on time;  and to speed the completion of a multi-billion dollar backlog of highway, bridge, transit and other projects.  (Prop.35, § 2, subds.(a), (d).)

The initiative added Article XXII to the state Constitution, which provides that the “State of California and all other governmental entities ․ shall be allowed to contract with qualified private entities for architectural and engineering services for all public works of improvement.”  (Cal. Const., art.   XXII, § 1.) Section 2 provides, “Nothing contained in Article VII of this Constitution shall be construed to limit, restrict or prohibit the State or any other governmental entities ․ from contracting with private entities for the performance of architectural and engineering services.”  (Cal. Const., art.   XXII, § 2.)

The initiative also enacted a new chapter of the Government Code, Chapter 10.1, sections 4529.10-4529.20.3 Because these statutes were enacted by initiative, the Legislature has only a limited ability to amend them.  (Cal. Const., art.   II, § 10, subd. (c);  Amwest Surety Ins. Co. v. Wilson (1995) 11 Cal.4th 1243, 1251, 48 Cal.Rptr.2d 12, 906 P.2d 1112.)   The act may be amended only to further its purposes and only by a statute passed in each house by roll call vote entered in the journal, two-thirds of the membership concurring, and signed by the Governor.  (Prop.35, § 5.) The statutes enacted by Proposition 35 do not provide detailed regulations of private contracting for architectural and engineering services.   Rather, they simply define architectural and engineering services;  clarify that State Transportation Improvement Program (STIP) projects are subject to Article XXII;  impose procedural safeguards; 4  and ensure that the statutes are not construed to extend beyond contracting for architectural and engineering services.5 (§§ 4529.10-4529.15.) The statutes expressly provide that they are intended to comprehensively regulate the matters contained in the initiative's provisions. (§ 4529.20.) They also provide that the initiative must be liberally construed to accomplish its purposes and that it prevails over any conflicting acts of the Legislature. (§§ 4529.18-4529.19.)

Following the voters' approval of Proposition 35, Caltrans stopped complying with pre-Proposition 35 statutes that regulated private contracting (§§ 14101, 14130-14136, 19130), but continued to use a pre-Proposition 35 statutory procedure for selecting architectural and engineering contractors (§§ 4526-4529.5).   The Caltrans director issued a policy statement (2001 Director's Policy) establishing criteria for the private contracting of architectural and engineering services.

On November 21, 2002, Professional Engineers and a California taxpayer filed this mandamus action challenging Caltrans's contracting practices since the passage of Proposition 35.   They raise three main arguments in their petition.   First, the pre-Proposition 35 statutes that regulated private contracting remain in effect and Caltrans's failure to comply with those statutes is unlawful.   Second, Caltrans's continued use of the pre-Proposition 35 qualifications based selection procedure (often referred to as QBS) violates Proposition 35 because section 4529.12 requires adopting a new “fair, competitive selection process” that gives greater weight to cost considerations.   In the alternative, they argue that Caltrans is not fully complying with the qualifications based selection procedure.   Third, Caltrans is improperly enforcing “underground regulations” contained in its 2001 Director's Policy and in two Caltrans manuals without full compliance with the Administrative Procedure Act (APA). (§ 11340 et seq.)   The trial court denied the petition and entered judgment for Caltrans.

A review of the litigation history assists in our understanding of the purpose, intent and effect of Proposition 35.   The constitutional context for the 1986 Professional Engineers litigation was a body of case law that interpreted Article VII of the California Constitution (Article VII) as a restriction on state agencies' authority to hire private contractors.   Article VII establishes the state civil service, which was created to promote efficiency and economy in state government by requiring appointments and promotions to be made on the basis of merit, efficiency and fitness.  (Cal. Const., art.   VII, § 1;  Professional Engineers, supra, 15 Cal.4th at p. 548, 63 Cal.Rptr.2d 467, 936 P.2d 473.)   Courts have construed Article VII as a restriction on private contracting, relying on the necessity, implicit in Article VII, of protecting the civil service system from dissolution and destruction.  (Professional Engineers, at p. 548, 63 Cal.Rptr.2d 467, 936 P.2d 473.) Under what is known as the “nature of the services” rule, which was first announced by the Supreme Court in 1937, private contracting is prohibited if the services can be performed adequately and competently by civil service employees.  (Id. at p. 549, 63 Cal.Rptr.2d 467, 936 P.2d 473;  State Compensation Ins. Fund v. Riley (1937) 9 Cal.2d 126, 135, 69 P.2d 985 [discussing former Cal. Const., art.   XXIV, predecessor of art.   VII].) Under the “new function” rule, private contracting is allowed for a new function not previously undertaken by the state and not already covered by an existing department or agency.  (Professional Engineers, at pp. 549-550, 63 Cal.Rptr.2d 467, 936 P.2d 473.)   Under the “cost savings” rule, cost savings may be considered in determining whether civil service employees can perform the tasks adequately and competently.  (Id. at p. 549, 63 Cal.Rptr.2d 467, 936 P.2d 473.)

In 1945, the Legislature enacted section 14101 permitting Caltrans to contract with private architects. (§ 14101, added by Stats.1945, ch. 118, § 1.) The Legislature amended the statute in 1955, mandating that Caltrans contract with qualified architects and engineers when the agency determines that obtainable staff is unable to perform particular work within the time the public interest requires the work to be done. (§ 14101.)   We refer to section 14101 as the Caltrans contracting law.

In 1982, the Legislature enacted section 19130, which codifies the nature of the services, cost savings and new state function rules developed in Article VII case law. (§ 19130;  Professional Engineers, supra, 15 Cal.4th at p. 552, 63 Cal.Rptr.2d 467, 936 P.2d 473.)  Section 19130, which applies to all state agencies and to contracts for any personal services, describes the circumstances when it is permissible for agencies to hire private contractors.   We refer to section 19130 as the personal services contracting statute.

In 1986, Professional Engineers in California Government (Professional Engineers), a union representing state civil service employees and a plaintiff in the instant appeal, sued Caltrans for unlawfully contracting with private architectural and engineering firms.  (Professional Engineers, supra, 15 Cal.4th at p. 553, 63 Cal.Rptr.2d 467, 936 P.2d 473.)   Plaintiffs alleged that Caltrans had adopted a policy of using private contracting rather than hiring sufficient staff to perform the department's work;  that Caltrans used private contractors to perform work traditionally performed by civil service employees and that could have been timely performed by civil service employees had Caltrans been adequately staffed;  and that Caltrans failed to justify the private contracting as cost-effective.  (Id. at pp. 553-554, 63 Cal.Rptr.2d 467, 936 P.2d 473.)

While Professional Engineers was pending in the trial court, the Legislature enacted a statutory scheme to govern private contracting by Caltrans for professional and technical services. (§§ 14130-14137, added by Stats.1988, ch. 9, § 1.) We refer to sections 14130 to 14137 as the Caltrans private contracting scheme.   The scheme (which is substantially similar today to the way it was in 1988) authorizes Caltrans to contract with private architectural and engineering firms when certain conditions are met. (§ 14131.)   The legislation includes findings that there is a compelling public interest in ensuring that all highway funds are captured and used in a timely manner;  that in order to maximize use of those funds Caltrans needs to be “plan-ready”;  that because of significant fluctuations in project development workload, private contracting allows Caltrans to maintain a more stable workforce and avoid the costly process of short-time hiring and layoff;  and that it is therefore the intent of the Legislature that Caltrans contract for architectural and engineering services whenever Caltrans is inadequately staffed to satisfactorily carry out project development work in a timely and effective manner. (§ 14130.)   The statutes instruct Caltrans to adopt guidelines for private contracting that include consideration of the factors set forth in the statement of legislative findings and intent, and permit Caltrans to hire private contractors whenever the director determines that the guidelines are applicable. (§ 14131.)   Private contractors shall not displace civil service employees. (§ 14131.)   The statutes specifically provide that Caltrans contracts for architectural and engineering services are not subject to section 19130, the personal services contracting statute. (§ 14133, subd. (a).)

In 1990, the Professional Engineers trial court found that Caltrans was contracting with private architects and engineers unlawfully and it enjoined Caltrans from contracting for those services unless it complied with the Caltrans contracting directive, the Caltrans contracting scheme and Article VII. (Professional Engineers, supra, 15 Cal.4th at pp. 553-554, 63 Cal.Rptr.2d 467, 936 P.2d 473.)   The court specifically found that certain contracts that had been awarded by Caltrans did not satisfy the statutory criteria and it enjoined the agency from continuing those contracts.  (Id. at p. 557, 63 Cal.Rptr.2d 467, 936 P.2d 473.)

In 1993, the Legislature attempted to permit greater private contracting by Caltrans with amendments to the Caltrans contracting scheme, sections 14130 to 14130.3, and 14132.  (Stats.1993, ch. 433.)   The 1993 bill expressed an intent to afford Caltrans “a new and independent basis upon which to justify contracting out” through January 1, 1998.  (Stats.1993, ch. 433, § 1.) It contained a set of statutes effective until January 1, 1998 and a set of statutes effective on January 1, 1998.  (Stats.1993, ch. 433.)   The first set of statutes declared that the use of private contractors was a new state function that did not duplicate the existing functions of Caltrans;  that the seismic retrofit program enacted following the 1989 Loma Prieta earthquake was a short-term workload demand;  and that Caltrans was not required to staff at a level that would allow the civil service to meet Caltrans's needs. (§§ 14130, subds.(a)(5), (d), 14130.1, 14130.2.)  Section 14137 provided that contracts awarded on or before July 1, 1993 should not be terminated.   The second set of statutes restored the law in effect before the 1993 amendments. (§ 14130, as amended by Stats.1993, ch. 433, § 3, eff.   January 1, 1998.)

After passage of the 1993 amendments, Caltrans took the position that the Professional Engineers trial court injunction was no longer applicable.   (Professional Engineers, supra, 15 Cal.4th at p. 555, 63 Cal.Rptr.2d 467, 936 P.2d 473.)   However, the trial court refused to dissolve or modify the injunction and in 1997 the California Supreme Court upheld the trial court's order.  (Id. at pp. 555-557, 563, 63 Cal.Rptr.2d 467, 936 P.2d 473.)   The Supreme Court reaffirmed decisional law that interpreted Article VII as a restriction on private contracting and held that the 1993 amendments effective until January 1, 1998 were invalid because they conflicted with Article VII. (Id. at p. 563, 63 Cal.Rptr.2d 467, 936 P.2d 473.)   It is against this historical backdrop that the voters passed Proposition 35.

Discussion

I. Standard of Review

 We review the trial court's rulings on questions of law de novo and its factual findings for substantial evidence.  (Kavanaugh v. West Sonoma County Union High School Dist. (2003) 29 Cal.4th 911, 916, 129 Cal.Rptr.2d 811, 62 P.3d 54.)

 Our review of the legality of Caltrans's contracting practices is de novo.  “ ‘In determining whether to accept a bid for a public contract, public officers as a rule perform not merely ministerial functions, but duties of a judicial or discretionary nature, and the courts, in the absence of fraud or an abuse of discretion, will not ordinarily interfere, so long as the officers comply with the controlling constitutional or legislative provisions.’ ”  (Diablo Beacon Printing & Pub. Co. v. City of Concord (1964) 229 Cal.App.2d 505, 508, 40 Cal.Rptr. 443, quoting 27 A.L.R.2d at p. 920.)   Plaintiffs do not contest Caltrans's discretionary choice of one potential contractor over another.   Rather, they argue that Caltrans is violating controlling law, Proposition 35 and other statutes and regulations, with its contracting practices.   These claims are subject to nondeferential review.   (Associated Builders and Contractors, Inc. v. San Francisco Airports Com. (1999) 21 Cal.4th 352, 361, 87 Cal.Rptr.2d 654, 981 P.2d 499.)   To determine the controlling law, we must construe Proposition 35, as well as other statutes and regulations.   Statutory construction is a legal determination we make independently.  (California Teachers Assn. v. San Diego Community College Dist. (1981) 28 Cal.3d 692, 699, 170 Cal.Rptr. 817, 621 P.2d 856.)

II. Implied Repeal of Pre-Proposition 35 Statutes Governing Private Contracting

 Plaintiffs argue that Proposition 35 simply lifted the restrictions of Article VII on the Legislature's power to authorize private contracting of architectural and engineering services on public works.   Because Article VII no longer restricts the Legislature's power, plaintiffs argue, the Legislature may authorize more extensive private contracting by Caltrans or other state agencies if it chooses.   Unless and until the Legislature amends or repeals the pre-Proposition 35 statutes that govern private contracting, those statutes remain in effect and are binding on state agencies.   We disagree.

An express purpose of the initiative is to remove existing restrictions on private contracting for architectural and engineering services.  (Prop.35, § 2, subd. (a).)  California Constitution, Article XXII expressly removes the constitutional restriction on private contracting that courts had inferred from Article VII. (Cal. Const., art.   XXII, § 2.) The initiative contains no parallel provision expressly repealing existing specific statutory restrictions on private contracting, but it does include several provisions that can only be given meaningful effect if the initiative as a whole is construed as impliedly repealing those statutory restrictions.

 Ordinarily, repeals or amendments by implication are strongly disfavored and will be found only when two acts are “irreconcilable, clearly repugnant, and so inconsistent that the two cannot have concurrent operation.”  (Stop Youth Addiction, Inc. v. Lucky Stores, Inc. (1998) 17 Cal.4th 553, 569, 71 Cal.Rptr.2d 731, 950 P.2d 1086;  see McLaughlin v. State Board of Education (1999) 75 Cal.App.4th 196, 219-220, 89 Cal.Rptr.2d 295 [statutes may be amended by implication under same principles governing repeals by implication].)   Nevertheless, an implied repeal or amendment will be found if the later-enacted statute constitutes “ ‘a revision of the entire subject, so that the court may say that it was intended to be a substitute for the first.’  [Citation.]”  (Board of Supervisors v. Lonergan (1980) 27 Cal.3d 855, 868, 167 Cal.Rptr. 820, 616 P.2d 802.)   Proposition 35 expresses an intent to comprehensively regulate the subject of private contracting for architectural and engineering services on public works. (§ 4529.20.) It also expresses an intent to remove existing restrictions;  provides that it is to be liberally construed to accomplish its purposes;  provides that it prevails over conflicting acts of the Legislature (§§ 4529.18;  Prop. 35, § 2, subd. (a), § 6);  and provides that it can only be amended to further its purposes (§ 4529.19;  Prop. 35, § 5).   Collectively, these provisions compel the conclusion that Proposition 35 effected an implied repeal or amendment of existing statutes to the extent that they limit Caltrans's ability to hire private contractors to perform architectural and engineering services beyond the limitations of Proposition 35.

The pre-existing Caltrans contracting scheme (§§ 14130-14137) limits Caltrans's ability to use private contractors more restrictively than Proposition 35 because it requires that civil service staff not be displaced and it authorizes Caltrans to use private contractors only when certain guidelines apply. (§§ 14131, 14134.)  Section 19130 also limits Caltrans's ability to use private contractors more restrictively than Proposition 35 by imposing the same nature of services, new state function and cost savings rules that had been developed in Article VII case law.   Finally, to the extent that the Caltrans contracting directive might be construed as a restriction on Caltrans's authority to contract with private firms (i.e., authorizing private contracting only when obtainable staff is unavailable), it limits Caltrans's ability to use private contractors beyond the intended limits of Proposition 35. (§ 14101.)

Our conclusion that the pre-existing statutory restrictions have been impliedly repealed or amended is bolstered by the observation that otherwise Proposition 35 would have little practical effect.   An express intent of the initiative is to speed delivery of transportation projects.  (Prop.35, § 2, subd. (d);  see also subds. (a) and (b).)  Because the pre-Proposition 35 statutory restrictions mirror the restrictions imposed by Article VII, which were expressly removed by California Constitution Article XXII, the initiative would have no immediate practical effect if those statutory restrictions remained in force.

Plaintiffs argue that Caltrans has no power to contract with private firms until the Legislature enacts legislation specifically authorizing them to do so.   We are unpersuaded.

Plaintiffs rely on case law holding that state agencies may only exercise such power as has been expressly delegated to them by the Legislature.   Those cases, however, do not require delegations of power at the level of specificity plaintiffs propose.   Rather, the cases stand for the general proposition that agencies exceed their powers only when their actions are inconsistent with acts of the Legislature.   In Terhune v. Superior Court (1998) 65 Cal.App.4th 864 at pages 872-873, 76 Cal.Rptr.2d 841, for example, the court held that the Board of Prison Terms exceeded its authority by revoking parole based solely on a parolee's psychiatric problems.   The court did not rely on an absence of enabling legislation that specifically authorized the agency to revoke parole on this basis, but on a conflict between the Board's rule and the Legislature's statutory scheme for addressing the problems of mentally disordered offenders.  (Id. at p. 878, 76 Cal.Rptr.2d 841.)   Similarly, in American Federation of Labor v. Unemployment Ins. Appeals Bd. (1996) 13 Cal.4th 1017 at page 1040, 56 Cal.Rptr.2d 109, 920 P.2d 1314, the Supreme Court held that the Unemployment Insurance Appeals Board exceeded its authority by awarding prejudgment interest not because there was no law expressly authorizing it to do so, but because an award of interest was inconsistent with the controlling legislative scheme.   Here, Caltrans has statutory authority to plan, design and construct transportation systems. (§ 14030, subd. (d).)  Using private contractors to perform architectural and engineering services on transportation systems falls within that grant of authority and is consistent with the constitutional and statutory scheme adopted by Proposition 35.   Therefore, Caltrans does not exceed its statutory authority when it hires private architectural and engineering contractors on transportation projects.

Moreover, Proposition 35 impliedly repealed or amended existing statutes that restricted private contracting by Caltrans.   Section 14131 provides that Caltrans may contract with private contractors under certain conditions;  it has been impliedly amended to remove those restrictive conditions, but it survives as an authorization for Caltrans to hire private contractors, consistent with the intent of Proposition 35.

 Finally, Article XXII is not one of those rare constitutional provisions that requires legislative action before it takes effect.  (Cal. Const., art.   XXII.) Constitutional provisions are presumed to be self-executing and to have effect without implementing legislation, unless a contrary intention is clearly expressed.  (People v. Vega-Hernandez (1986) 179 Cal.App.3d 1084, 1092, 225 Cal.Rptr. 209.)   Ordinarily, a contrary intention is expressed with words directing the Legislature to act.  (Ibid.) No such language appears in Proposition 35.

 The California Constitution is a restriction on the Legislature's otherwise plenary lawmaking powers.  (Methodist Hosp. of Sacramento v. Saylor (1971) 5 Cal.3d 685, 691, 97 Cal.Rptr. 1, 488 P.2d 161.)   It must be liberally construed in favor of the Legislature's powers.  (Ibid.) Specifically, a constitutional provision such as Article XXII that removes a restriction on the Legislature's powers must be construed in favor of the Legislature's powers.  (Methodist Hosp. at p. 691, 97 Cal.Rptr. 1, 488 P.2d 161.)   Plaintiffs invoke these principles to argue that Article XXII expanded the Legislature's powers to authorize private contracting, but did not directly expand Caltrans's authority to use private contractors.   They argue that it is for the Legislature, now freed from the restrictions of Article VII, to decide whether to authorize greater contracting by Caltrans.   Until the Legislature does so, Caltrans is not free to use private contractors beyond pre-existing statutory authorizations.

Plaintiffs' analysis might be persuasive if Article XXII had been adopted in isolation, but the article was adopted as part of an act and must be construed in context.   Other parts of the act provide that it must be liberally construed to accomplish its purposes, which include removal of existing restrictions on private contracting, and the initiative explicitly restricts the Legislature's prospective power to regulate private contracting.6 (§ 4529.19;  Prop. 35, §§ 2, 5.) Article XXII authorizes private contracting by the State of California “and all other governmental entities,” which includes both local governments (cities and counties) and local agencies.  (Cal. Const., art.   XXII, § 1.) We construe Article XXII to affirmatively authorize state agencies to contract with private entities for architectural and engineering services.  (Prop.35, § 5.)

In sum, Proposition 35 provides that the “State of California and all other governmental entities,” including Caltrans, shall be allowed to contract with private architectural and engineering firms. It enacted a new, albeit skeletal, statutory scheme to replace pre-Proposition 35 statutes that restricted Caltrans's power to contract in ways that are inconsistent with the purposes of the initiative.   We hold that the initiative impliedly repealed or amended sections 14101, 14130-14137, and 19130 to the extent those statutes limit Caltrans's authority to contract with private architects and engineers beyond the constraints of the initiative itself.

III. Contractor Selection Procedure

 Plaintiffs contend the initiative mandates a new selection process that gives greater weight to cost considerations than the pre-Proposition 35 qualifications based selection procedure because Proposition 35 requires a “fair competitive selection process” and costs savings to the taxpayer. (§ 4529.12.)

There is no inconsistency between Caltrans's use of the qualifications based selection procedure and section 4529.12's requirement of a fair competitive selection process.   The qualifications based selection procedure requires firms to compete on the basis of their qualifications and requires state agencies to reject firms that are unwilling to agree to a fair and reasonable contract price. (§§ 4525-4529.5.) Regulations require Caltrans to prepare its own cost estimate for a project before commencing price negotiations, an additional procedural mechanism to ensure the state pays a fair price.  (Cal.Code Regs., tit. 21, § 1520.3.) Although cost may be a less salient consideration in the qualifications based selection procedure than in a competitive bidding process, it is a consideration nevertheless.

Further, section 4529.16 mandates that the initiative not be applied in a manner that results in the loss of federal funding.   Federal law requires the use of a qualifications based selection procedure on state highway projects that receive federal aid.   Federal law requires that where the construction of federal-aid highways is to be performed by a state transportation department or under its supervision, contracts for architectural and engineering services must be awarded pursuant to the Brooks Act (40 U.S.C. § 1101 et seq.) or an equivalent state qualifications based selection procedure.  (23 U.S.C. § 112(b)(2)(A).)   The Brooks Act establishes a qualifications based selection procedure virtually identical to Chapter 10, sections 4525-4529.5.  (40 U.S.C. § 1101 et seq.)   About 84 percent of Caltrans's architectural and engineering contracts are subject to these federal requirements.   At a minimum, as to federally funded projects, section 4529.16 compels a construction of section 4529.12 that allows the use of the qualifications based selection procedure.

Caltrans's use of the qualifications based selection procedure does not conflict with the initiative's statement of purpose and intent.   Although the statement refers to cost-effectiveness, better or best value for taxpayers, and taxpayer savings, the references neither promise nor mandate that private contractors will be used only when they are less expensive than civil service employees.   Moreover, the concepts of value and cost-effectiveness encompass more than simply the amount of personnel hours that can be purchased at a price.   The concepts include considerations of quality of services, efficiency and speed of delivery, all referenced in the statement of purpose and intent.

Although the title of the initiative mentions taxpayer savings, the ballot materials put voters on notice that the initiative might not result in cost savings to the taxpayer.   The official summary of the initiative prepared by the Attorney General, and the Legislative Analyst's analysis of the initiative both indicate that the fiscal impact of the initiative was unknown.   The Legislative Analyst specifically notes that in some cases costs may be higher when an agency contracts out services.  “It may still be in the state's best interest to do so, however, because of other considerations” such as avoiding the delay of formally hiring and training state employees to meet a short-term surge in workload, and the financial benefits derived from completing construction projects more quickly.   Moreover, the official summary clearly states that competitive bidding on the contracts (the prevailing method of public contractor selection that gives prominent weight to cost) is permitted but not required under Proposition 35.   Caltrans's use of a qualifications based selection procedure does not conflict with Proposition 35.

IV.-V.**

Disposition

The judgment of the trial court is affirmed in part and reversed in part.   The matter is remanded with instructions to the trial court to issue a peremptory writ of mandate ordering Caltrans to refrain from applying the regulations contained in the 2001 Director's Policy, the 1992 Consultant Services Manual or the 2003 A & E Handbook without first complying with the rulemaking procedures of the Administrative Procedure Act. In all other respects, the judgment is affirmed.   Each side shall bear its own costs.

FOOTNOTES

1.   Defendants to this appeal are Caltrans and its director, and the Business, Transportation and Housing Agency, a state umbrella agency that includes Caltrans, and its secretary.   For convenience, we refer to defendants collectively as Caltrans.

2.   The initiative consists of a statement of purpose and intent, a new article to the Constitution, a new chapter to the Government Code, and two uncodified provisions.  (Cal. Const., art.   XXII;  Gov.Code §§ 4529.10-4529.20 (Chapter 10.1);  uncodified provisions reprinted following Deering's Ann. Const.  (2005 Supp.) foll. art.   XXII, § 1, p. 42.)

3.   All statutory references are to the Government Code unless otherwise indicated.

4.   Section 4529.12 requires a fair, competitive selection process with safeguards against conflicts of interest and unlawful activities.   Section 4529.14 provides that architectural and engineering contracts shall be subject to audit and standard accounting practices.

5.   Section 4529.13 provides that the act shall not be construed to alter design, safety or construction standards or to restrict the Legislature's authority to provide different procurement methods for design-build and design-build-and-operate standards.  Section 4529.15 provides that the initiative shall not apply to government services other than architectural and engineering services.

6.   Plaintiff's argument ignores the fact that the initiative contains statutory provisions not subject to the Legislature's ordinary powers of statutory amendment.   The statutes enacted by Proposition 35 may be amended by the Legislature only to further the purposes of the initiative and only by a two-thirds vote and with the concurrence of the governor.  (Prop.35, § 5.) If the Legislature cannot prospectively enact a statute that conflicts with the purposes of the initiative, it makes little sense that pre-Proposition 35 statutes conflicting with the purposes of the initiative (which were enacted with the requirement of only a simple majority vote) would remain in effect.

FOOTNOTE.   See footnote *, ante.

GEMELLO, J.

We concur.  JONES, P.J., and SIMONS, J.

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