Friday, April 13, 2007
S.C. Strikes Down Restrictions on Privatization of Public Works
By TINA BAY, Staff Writer
An initiative permitting the state to contract with private companies for public works improvement projects implicitly repealed prior statutes regulating private contracting for architectural and engineering services, the state Supreme Court held yesterday.
The justices unanimously affirmed a ruling by the First District Court of Appeal, which concluded the state Department of Transportation, better known as Caltrans, was not bound by pre-Proposition 35 statutes restricting its ability to contract out architectural and engineering services to private firms.
Passed by voters in November 2000, Proposition 35 added Art. XXII to the state Constitution, authorizing the state to contract with qualified private entities for architectural and engineering services for all public works of improvement. The initiative eliminated restrictions on the authority of public entities to enter into such contracts that had been imposed by judicial construction of Art. VII, which established the state’s merit-based civil service.
The measure was silent, however, concerning certain statutory regulations on private contracting that were derived from the Art. VII-based restriction. Those regulations allowed the state to enter into private contracts for architectural and engineering services only where the services could not be provided by civil service employees.
After the measure’s passage, Caltrans stopped complying with the regulatory statutes, entering into private contracts without justifying such contracting under the statutory provisions. It did however, continue to use pre-Proposition 35 procedures for selecting contractors.
A civil service engineers’ union and taxpayer promptly sued Caltrans alleging that Proposition 35, in referring to “the State of California,” pertained only to the governor and Legislature and not Caltrans. Since neither the governor nor lawmakers have authorized new or different circumstances under which Caltrans may contract out architectural and engineering services, the plaintiffs argued, Caltrans was bound by the preexisting statutory restrictions on private contracting.
They also claimed that Proposition 35’s cost-saving mandate invalidated the pre-initiative “qualifications based selection process” method for choosing contractors. While the prior statutory procedure barred competitive bidding and required selection based on factors not including cost considerations, Proposition 35 required Caltrans to use “a new and different selection process sharply focused on cost competition among consultants and between consultants and the state,” the plaintiffs argued.
The trial court denied their petition for writ of mandate, siding with Caltrans that Proposition 35 impliedly repealed the regulatory statutes but not the selection methods.
Lower Courts Upheld
Div. Five of the First District Court of Appeal agreed with the trial judge, rejecting the plaintiffs’ contention that Caltrans had no power to contract with private firms unless authorized by specific legislation. Art. XXII was self-executing and did not require implementing legislation, the panel said.
Writing for the high court, Justice Carlos R. Moreno echoed the lower courts’ view:
“When we examine the constitutional and statutory provisions of Proposition 35, in light [of] the initiative as a whole, we find that they demonstrate a clear intent by the electorate to supersede prior law, under which the ability of state agencies to contract with private entities for architectural and engineering services was limited by article VII and article VII-derived statutory restrictions.”
The justices rejected the plaintiffs’ contention that the initiative violated the separation of powers doctrine by diverting the Legislature’s function of regulating private contracting to an executive agency.
“This interpretation of Proposition 35 does not endorse a shift of policymaking powers from the legislative branch to executive branch agencies,” Moreno said. “Rather, it recognizes that there has been a policy determination made by a constitutionally empowered legislative entity, the electorate acting through its initiative power, to permit those agencies to contract for architectural and engineering services free of article VII-derived limitations.”
As for the preexisting contractor selection method, the justice said, Caltrans use of it was not improper because it was non inconsistent with Proposition 35’s requirement that “contracting for architectural and engineering services occur through a fair, competitive selection process.”
He added that:
“[W]hile the initiative mentions taxpayer savings, the ballot materials made clear that cost savings were not necessarily the measure of the value to the taxpayers of permitting private contracting by public entities.”
To the extent that the plaintiffs believe the method should give cost savings a more prominent role, Moreno said, their arguments should be directed at the Legislature.
In a statement yesterday, Gov. Arnold Schwarzenegger called the court’s decision “a great victory for commuters and taxpayers.”
The decision “will allow for the Strategic Growth Plan to be implemented more quickly and cost effectively and helps ensure that the $20 billion in transportation bonds passed by the voters last November will bring traffic relief to commuters faster and more cost-effectively,” he said.
“I will continue to move forward and work with Senator George Runner and the entire legislature to send bills to my desk that will allow the state to use design-build and public-private partnerships to allow for more projects and the faster construction of those projects,” the governor added.
The case is Professional Engineers in California Government v. Kempton, 07 S.O.S. 1803.
Copyright 2007, Metropolitan News Company