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HomeMy WebLinkAbout2025-02-25; Municipal Water District; 05; Update of Council Policy No. 55, Subcontractor Substitution on Public Works ContractsCA Review GH Meeting Date: Feb. 25, 2025 To: Mayor/President and City Council/Board Members From: Geoff Patnoe, City Manager/Executive Manager Staff Contact: Mariel Cairns, Management Analyst mariel.cairns@carlsbadca.gov, 442-339-5367 Subject: Update of Council Policy No. 55, Subcontractor Substitution on Public Works Contracts Districts: All Recommended Actions 1.Adopt a City Council resolution accepting revisions to City Council Policy No. 55, Subcontractor Substitution on Public Works Contracts. 2.Adopt a Carlsbad Municipal Water District Board of Directors resolution accepting revisions to City Council Policy No. 55, Subcontractor Substitution on Public Works Contracts. Executive Summary City Council Policy No. 55, adopted in 1994, designated the City Engineer as the City Council’s “duly appointed officer” to review requests for subcontractor substitutions from public works contractors at the administrative level, to minimize delays in construction of capital projects. This is consistent with the requirements in the California Public Contract Code, as shown in Exhibit 3. Without this designation, the City Council or the Carlsbad Municipal Water District (CMWD) Board of Directors, would be required to conduct public hearings to approve these subcontractor substitution requests. Staff are proposing revisions to Council Policy No. 55 to improve the process and provide greater clarity. The proposed revisions to Council Policy No. 55 would: 1)Designate authority to the City Engineer or designee for all substitution requests 2)Clarify the required notification procedures 3)Delineate the procedures for scheduling a hearing City Council Policy No. 1 states that all City Council policies may be adopted, amended, or rescinded only by a resolution receiving four affirmative votes from the City Council. Explanation & Analysis The Subletting and Subcontracting Fair Practices Act, California Public Contract Code Sections 4100–4114, prohibits a contractor from substituting any person as subcontractor in place of the subcontractor listed in the original bid. The public policy behind the law is to prevent bid Feb. 25, 2025 Item #5 Page 1 of 12 shopping and bid peddling1 and to give the public entity the opportunity to investigate and approve proposed replacement subcontractors. (Note that there are different requirements for the substitution of subcontractors if the change is requested soon after the bid closes or after the bid is accepted.) Under the law: • After the closing date of a bid, a bidder may substitute a subcontractor for a listed subcontractor only if there was an inadvertent clerical error, and they must do so within two working days after the time the bid was opened. • Notice must also be given to the listed subcontractor, who may submit a written objection. • After a bid is accepted, a prime contractor may submit a request for the substitution of a listed subcontractor, but only in certain circumstances and subject to awarding authority approval.2 Public Contract Code section 4107 provides that the “awarding authority or its duly authorized officer” may approve the substitution of subcontractors only if the prime contractor demonstrates that one of nine criteria established by state law is met. The authority to accept the substitution may be delegated to a “duly authorized officer” to conduct a substitution hearing because the listed subcontractors only have limited, ancillary rights protecting against substitution, which is related to the Subletting and Subcontracting Fair Practices Act’s primary purpose to prevent bid shopping and bid peddling. Without a duly authorized officer, requests for subcontractor substitutions would need to be heard by the City Council or the CMWD Board. City Council Policy No. 55 designated the City Engineer as the City Council’s “duly authorized officer” to handle requests for subcontractor substitutions in an expeditious manner at the administrative level. The proposed revisions to Policy No. 55 expand the City Council’s and CMWD Board’s designated authority to include the City Engineer or designee as the “duly authorized officer.” This will allow the City Engineer to designate the specific authority for subcontractor substitution to the most appropriate staff member based on the type of project, for example, delegating capital construction projects for the Transportation, Utilities and Parks & Recreation Departments to the Deputy City Engineer/Engineering Manager for the Construction Management & Inspection Department, or the Fleet and Facilities Department projects to the Deputy City Engineer/Public Works Manager. The updated policy also details the procedural requirements for providing notice to the listed subcontractor and the procedures for scheduling a hearing, if the listed subcontractor submits a written objection, consistent with state law. The proposed changes to the policy are provided in Exhibit 4 as reference. 1 Bid shopping is using the low bid already received by the general contractor to pressure other subcontractors into submitting even lower bids. Bid peddling is when a subcontractor tries to undercut known bids already submitted to the general contractor to be awarded the subcontract. 2 These circumstances are limited to subcontractor insolvency, refusal to perform, inadvertent clerical error or failure to post bonds. Feb. 25, 2025 Item #5 Page 2 of 12 Fiscal Analysis There are no fiscal impacts resulting from adopting the revisions to Council Policy No. 55 on subcontractor substitution on public works contracts. Next Steps Once adopted, the policy will be implemented by staff when prime contractors request subcontractor substitutions on public works contracts. Environmental Evaluation This action does not constitute a project within the meaning of the California Environmental Quality Act under Public Resources Code section 21065 in that it has no potential to cause either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment. Exhibits 1. City Council resolution 2. Carlsbad Municipal Water District Board of Directors resolution 3. City Council Agenda Bill 12,940 (on file in the Office of the City Clerk) 4. Proposed changes to Council Policy No. 55 Feb. 25, 2025 Item #5 Page 3 of 12 RESOLUTION NO. 2025-053 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, ACCEPTING REVISIONS TO COUNCIL POLICY NO. 55, SUBCONTRACTOR SUBSTITUTION ON PUBLIC WORKS CONTRACTS WHEREAS, the Subletting and Subcontracting Fair Practices Act (Public Contract Code Sections 4100-4114), or Act, is designed to prevent bid shopping and bid peddling, though allows for subcontractor substitution in certain circumstances; and WHEREAS, the City Council of the City of Carlsbad, California, has determined that requests for substitution of a listed subcontractor with another subcontractor can be handled most expeditiously by designating a "duly authorized officer" in compliance with the Act; and WHEREAS, on Dec. 6, 1994, the City Council adopted Council Policy No. 55, appointing the City Engineer as its "duly authorized officer" for the purposes of consenting to substitutions of subcontractors; and WHEREAS, staff prepared revisions to the policy consistent with the Act to expand the delegated authority to the City Engineer, or designee, and to include procedures for providing notice and scheduling hearings, as needed. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the City Council accepts the revisions to Council Policy No. 55 provided in Attachment A. PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of Carlsbad on the 25th day of February 2025, by the following vote, to wit: AYES: NAYS: ABSTAIN : ABSENT: Blackburn, Bhat-Patel, Acosta, Burkholder, Shin. None. None. None. ~ KEITH BLACKBURN, Mayor V tlJr(b,.4 Km~ ~HERRY FREISINGER, City Clerk {)--(SEAL) Policy No. 55 Date Issued XX/X/XX Resolution No. 2025-xxx Subject: Subcontractor Substitution on Public Works Contracts Purpose To designate the City Engineer, or designee, as the City Council’s “duly authorized officer” for the purposes of approval of the substitution of subcontractors on public works contracts in the City of Carlsbad. In addition to public works contracts for the city, the Board of the Carlsbad Municipal Water District, or CMWD, a subsidiary district of the city, also awards public works contracts. As such, both entities are subject to this policy and “City Council” shall be read to mean the “CMWD Board” when the policy applies to CMWD.1 Background Prime contractors that have had a competitive bid accepted may request the substitution of a listed subcontractor with another subcontractor, so long as the basis of the substitution is provided and justified in compliance with this policy. Prime contractors that have submitted a bid that inadvertently listed a subcontractor as a result of a clerical error, must request a substitution for the intended contractor within two working days of the bid opening date. Statement of policy It is the policy of the City Council that for all public works contracts entered into pursuant to Carlsbad Municipal Code Section 3.28.080, the substitution of subcontractors, when authorized under the law, will be handled in the most expeditious manner at the administrative level. For the purposes of Public Contract Code Sections 4107 and 4107.5, the City Engineer, or designee, is hereby designated as the City Council’s “duly authorized officer.” As such, the City Engineer, or designee, is authorized to consent to substitutions of subcontractors, provide notices and schedule hearings consistent with the requirements of the Public Contract Code. Procedure After a prime contractor has provided notice to the city that it is seeking to substitute a subcontractor listed in its bid with another subcontractor, the City Engineer, or designee, will provide written notice to the listed subcontractor of the prime contractor’s intent to substitute the subcontractor, as well as the basis for substitution consistent with Public Contract Code Section 4107 or 4107.5. Notice will be sent to the listed subcontractor by either certified or registered mail. The listed subcontractor will then have five (5) working days to submit a 1 The policy was adopted by the Carlsbad Municipal Water District Board of Directors of the City of Carlsbad on {date} by Resolution No. {xxxx}. Attachment A Feb. 25, 2025 Item #5 Page 6 of 12 City Council Policy Statement No. 55 Month Day, 2025 Page 2 written objection if the bid has been accepted, or six (6) working days from the bid opening date if the bid has not been accepted. If the listed subcontractor submits a written objection, then the City Engineer, or designee, will send notice to the affected parties that the City Engineer, or designee, will conduct a hearing. The notice to the listed contractor must provide for at least 5 working days until the scheduled hearing. The City Engineer, or designee, will conduct the hearing and review the relevant information and materials submitted by the affected parties. After the hearing, the City Engineer, or designee, will determine if the substitution is justified. Alternatively, the City Engineer, or designee, may recommend action for the City Council to determine if the substitution is justified, and schedule and notice the hearing accordingly. Feb. 25, 2025 Item #5 Page 7 of 12 RESOLUTION NO.1762 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE CARLSBAD MUNICIPAL WATER DISTRICT OF THE CITY OF CARLSBAD, CALIFORNIA, ACCEPTING REVISIONS TO COUNCIL POLICY NO. 55, SUBCONTRACTOR SUBSTITUTION ON PUBLIC WORKS CONTRACTS WHEREAS, the Subletting and Subcontracting Fair Practices Act (Public Contract Code Sections 4100-4114), or Act, is designed to prevent bid shopping and bid peddling, though allows for subcontractor substitution in certain circumstances; and WHEREAS, the Carlsbad Municipal Water District, or CMWD, Board has determined that requests for substitution of a listed subcontractor with another subcontractor can be handled most expeditiously by designating a "duly authorized officer" in compliance with the Act; and WHEREAS, on Dec. 6, 1994, the City Council of the City of Carlsbad, California, adopted Council Policy No. 55 appointing the City Engineer as its "duly authorized officer" for the purposes of consenting to substitutions of subcontractors; and WHEREAS, staff prepared revisions to the policy consistent with the Act to expand the delegated authority to the City Engineer, or designee, and to include procedures for providing notice and scheduling hearings, as needed. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Carlsbad Municipal Water District of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. 2. That the CMWD Board accepts the revisions to Council Policy No. 55 provided in Attachment A of City Council Resolution No. 2025-053. PASSED, APPROVED AND ADOPTED at a Joint Special Meeting of the Board of Directors of the Carlsbad Municipal Water District, and the City Council of the City of Carlsbad on the 25th day of February 2025, by the following vote, to wit: AYES: NAYS : ABSTAIN: ABSENT: Blackburn, Bhat-Patel, Acosta, Burkholder, Sh in. None. None. None. KEITH BLACKBURN, President Exhibit 3 City Council Agenda Bill 12,940 (on file in the Office of the City Clerk) Feb. 25, 2025 Item #5 Page 10 of 12 Policy No. 55 Date Issued 12XX/X6/94XX Resolution No. 20245-xxx Subject: Subcontractor Substitution on Public Works cContracts, subcontractor substitution Purpose To designate the City Engineer, or City Engineer’s designee, as the City Council’s “duly authorized officer” for the purposes of approval of the substitution of subcontractors on public works contracts in the City of Carlsbad. In addition to public works contracts for the cityThe city provides sewage collection services, and the Board of the Carlsbad Municipal Water District, or CMWD, a subsidiary district of the city, also providesawards public works contracts water distribution services. As such, bBoth entities are subject to thethis policy and “City Council” shall be read to mean the “CMWD Board” when the policy applies to CMWD provided herein, which shall be adopted by both entities.1 Background For public worksPrime contractscontractors that have beenhad a competitively bid acceptedawarded a prime contractor may request the substitution of a listed subcontractor that was listed in its original contract with another subcontractor, so long as the basis of the substitution is provided and justified in compliance with situations described in Public Contract Code Sections 4107 and 4107.5this policy. Prime contractors that have submitted a bid that inadvertently listed a subcontractor as a result of a clerical error, must request a substitution for the intended contractor within two working days of the bid opening date. Statement of policy It is the policy of the City Council that: I infor all public works contracts withthat the City of Carlsbad entered into pursuant to Chapter 3.28 of the Carlsbad Municipal Code Section 3.28.080 and/or the California Public Contract Code in an amount more than specified in Section 22032(c) of the Public Contract Code, that the substitution of subcontractors, when authorized under the law, will be handled in the most expeditious manner at the administrative level, rather than requiring a City Council public hearing. For the purposes of Public Contract Code sSectionss 4107 and 4107.5 and 4107.5, the City Engineer, or City Engineer’s designee, is hereby designated as the City Council’s “duly authorized officer”.” andAs such, the City Engineer, or City Engineer’s designee, is empowered authorized to consent to substitution-s of subcontractors, giveprovide notices, and conduct schedule public hearings , if required, in accordance with and as authorized byconsistent with 1 The policy was adopted by the Carlsbad Municipal Water District Board of Directors of the City of Carlsbad on {date} by Resolution No. {xxxx}. Exhibit 4 Feb. 25, 2025 Item #5 Page 11 of 12 City Council Policy Statement No. 55 Month DayMonth Day, 2025 Page 2 those contract code provisionsrequirements of the Public Contract Code. The City Engineer shall consult with the City Attorney prior to consenting to substitution of a subcontractor. Procedure After a prime contractor has provided notice to the city that it is seeking to substitute a listed subcontractor listed in its bid with another subcontractor, the City Engineer, or City Engineer’s designee, will provide written notice to the listed subcontractor of the prime contractor’s intent to substitute the subcontractor, as well as the basis for substitution in situations described inconsistent with Public Contract Code Sections 4107 andor 4107.5. , and will provide the Nnotice will be sent to the listed subcontractor by sending it to the listed subcontractor by either certified or registered mail. The listed subcontractor will then have five (5) working days to submit a written objection to the cityif the bid has been accepted, or six (6) working days from the bid opening date if the bid has not been accepted. The City Engineer is not authorized to approve substitutions prohibited by law. The City Engineer shall notify the parties in writing of the decision to grant or refuse consent within five (5) days of conducting a public hearing required by section 4107 and/or 4107.5. The decision shall be final ten (10) days after mailing, unless an affected party files a written appeal with the City Clerk within those ten (10) days. The appeal fee shall be set at $250.00; thereafter to be established by resolution. The Appellant shall specify therein the manner in which the City Engineer’s decision erred, and serve the appeal on all affected parties. The City Clerk shall give notice of a public hearing thereon by mail to the Appellant and all affected parties, for the next City Council meeting which will result in at least five (5) days’ notice. If the listed subcontractor submits a written objections, then the City Engineer, or City Engineer’s designee, will have five (5) working days to givesend notice to the affected parties that the cityCity Engineer, or designee, will conduct a n administrative hearing. The notice to the listed contractor must provide for at least 5 working days until the scheduled hearing. The City Engineer, or City Engineer’s designee, will conduct the hearing and review the relevant information and materials submitted by the affected parties,. A and after the hearing, the City Engineer, or designee, will decidedetermine if the substitution is justified. Alternatively, the City Engineer, or City Engineer’s designee, may recommend action for the City Council to decidedetermine if the substitution is justified, and schedule and notice the hearing accordingly. Where the amount of the subcontract in controversy exceeds $250,000, the public hearing, if required, shall be conducted by the City Council. Feb. 25, 2025 Item #5 Page 12 of 12