PISMO BEACH COUNCIL AGENDA REPORT
Agenda Item #9.G
SUBJECT/TITLE:
RESCISSION OF RESOLUTION R-2020-094 AND SETTING OF DEBARMENT HEARING FOR V. LOPEZ JR. & SONS GENERAL ENGINEERING CONTRACTORS RECOMMENDATION:
Adopt a Resolution rescinding R-2020-094 and setting a hearing for December 20, 2022 to consider declaring V. Lopez Jr. & Sons General Engineering Contractors, Inc. a non- responsible bidder, in the event the parties are unable to resolve the matter before that date.
BACKGROUND:
The Five Cities Lift Station and Lift Station Maintenance Project consisted of replacing the Five Cities Lift Station, performing maintenance on six lift stations, and various other repairs to the wastewater collection system. The apparent low bidder was V. Lopez Jr. & Sons General Engineering Contractors, Inc. (V. Lopez) in the amount of $3,046,203. The contract was awarded for the base bid for both portions of the project, and Bid Alternates 1, 3, 4, and 6 for the Lift Station Maintenance portion of the project in the amount of $2,901,486.
Construction for the project commenced on February 2, 2018 and based on the 300-day contract time had a completion date of April 15, 2019. The extended date of completion for the project, including additional days because of change orders and other unforeseen circumstances, was March 17, 2020. The project experienced significant delays and resulted in the City extending the Contract time 159 days past the 300-day contract time, to a total of 459 days. Substantial completion for the project was reached on June 22, 2020, 69 days after the contract end date, and in accordance with the executed construction agreement, the City withheld liquidated damages in the amount of $69,000 ($1,000 per day).
On November 17, 2020, the City Council held a hearing to declare V. Lopez a non- responsible bidder, at which time both City staff and V. Lopez presented evidence and testimony to the Council. Following the hearing, the City Council adopted Resolution R- 2020-094 (Attachment 2), declaring V. Lopez a non-responsible bidder, and imposing a five-year bar against V. Lopez bidding on City of Pismo Beach public works projects.
V. Lopez filed suit against the City to overturn Resolution R-2020-094, and the City cross- complained against V. Lopez for its damages incurred during the project. On June 24, 2022, the Superior Court of San Luis Obispo County issued a ruling (Attachment 3) setting aside Resolution R-2020-094 and ordering the City to hold a new hearing providing V. Lopez additional time to present evidence at such a hearing. The court held that providing five days’ notice, which was the period of time between the City’s posting of the agenda and the date of the Council meeting, was not adequate notice to allow V.
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Lopez a meaningful opportunity to respond and be heard on the issues. The court rejected the remainder of the due process arguments V. Lopez raised.
Conclusion and Recommendation
As such, staff recommends that to comply with the court’s ruling, the Council adopt a Resolution (Attachment 1) that will rescind Resolution R-2020-094 and set a new hearing date of December 20, 2022, at which time V. Lopez may present such evidence as it deems appropriate. The City and V. Lopez may also resolve this matter by alternative means prior to that date, which may eliminate the need for the hearing.
FISCAL IMPACT:
There is no direct fiscal impact from this action. Internal staff costs in preparing for the new hearing are expected to be within the adopted budget.
ALTERNATIVES:
1. Due to the existence of a court order for the rescission of R-2020-094 and the setting of a new hearing date, staff has identified no viable alternatives to the recommended action.
ATTACHMENTS:
1. Resolution rescinding R-2020-094 and setting a new hearing date
2. Resolution R-2020-094
3. Court ruling dated June 24, 2022
Meeting Date: August 16, 2022 Submitted by:
Dave Fleishman, City Attorney
City Manager Approval:
9.G-2Council Agenda 8-16-2022
RESOLUTION NO. R-2022-XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH, CALIFORNIA RESCINDING RESOLUTION R-2020-094 AND SETTING A HEARING ON DECEMBER 20, 2022 TO CONSIDER DECLARING V. LOPEZ JR. & SONS GENERAL ENGINEERING CONTRACTORS, INC. A NON-RESPONSIBLE BIDDER
IN THE EVENT THE PARTIES ARE UNABLE TO RESOLVE THE MATTER BEFORE
THAT DATE
WHEREAS, on December 19, 2017 V. Lopez Jr. & Sons General Engineering Contractors, Inc. (V. Lopez) was awarded a contract in the amount of $2,901,486 for the Five Cities Lift Station and Lift Station Maintenance Projects; and WHEREAS, several significant issues were encountered with V. Lopez’s project understanding and public works competence over the course of the project; and WHEREAS, on November 17, 2020, the City Council conducted a hearing at which time staff and V. Lopez presented testimony and evidence regarding the project; and WHEREAS, following the November 17, 2020 hearing, the City Council adopted Resolution R-2020-094 finding V. Lopez to be a non-responsible bidder and imposing a five-year bar against V. Lopez bidding on City of Pismo Beach public works projects; and WHEREAS, V. Lopez filed suit to overturn Resolution R-2020-094 alleging, among other issues, that it had insufficient time to prepare for the November 17, 2020 meeting; and WHEREAS, on June 24, 2022, the Superior Court of San Luis Obispo County ordered R- 2020-094 to be set aside, and further ordered that the City conduct a new hearing to consider declaring V. Lopez to be a non-responsible bidder.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Pismo Beach hereby rescinds Resolution R-2020-094 and sets a hearing on December 20, 2022 to consider declaring V. Lopez to be a non-responsible bidder, in the event the parties are unable to resolve the matter prior to that date.
UPON MOTION OF Council Member , seconded by Council Member , the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 16th day of August 2022, by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSED:
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Attachment 1
Approved: Attest:
________________________ ________________________
Ed Waage, Mayor Erica Inderlied, City Clerk
9.G-4Council Agenda 8-16-2022
Attachment 1
RESOLUTION NO. R-2020-094
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH, CALIFORNIA DECLARING V. LOPEZ JR. & SONS, INC. A NON-RESPONSIBLE
BIDDER THEREBY DISQUALIFYING THEM FROM PERFORMING FUTURE WORK
FOR THE CITY OF PISMO BEACH FOR A PERIOD OF FIVE YEARS
WHEREAS, on December 19, 2017 V. Lopez Jr. & Sons (V. Lopez) was awarded a contract in the amount of $2,901,486 for the Five Cities Lift Station and Lift Station Maintenance Projects; and
WHEREAS, several significant issues were encountered with V. Lopez's project understanding and public works competence over the course of the project; and WHEREAS, the project experienced significant delays and resulted in the City extending the contract time 159 days past the 300-day contract time to a total of 459 days; and WHEREAS, V. Lopez completed the work 69 days past the contract time, for which the City withheld 69 days of liquidated damages for a total of $69,000; and WHEREAS, the total approximate financial loss to the City as a direct result of V. Lopez is $322,500.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Pismo Beach hereby declares V. Lopez Jr. and Sons as a non-responsible bidder, thereby disqualifying them from performing future work for the City of Pismo Beach for a period of five years from the date of this action.
UPON MOTION OF Mayor Pro Tern Howell, seconded by Council Member Blake, the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 17 th day of November 2020, by the following vote:
AYES: 5
NOES: 0
ABSENT: 0
ABSTAIN: 0
RECUSED: 0
Howell, Blake, Guthrie, Reiss, Waage
PAGE 1 OF 1
R-2020-094
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Attachment 2
FILED
JUN 23 2022
SAN LU BIS o pERBy.l COURT
.Slmms.“Nae
V.Lopez Jr.&Sons General Engineering Contractors,Inc.v.City ofPismo Beach,20CV-0652 Hearing:Petition for Writ of Administrative Mandamus
Date:June 23,2022
TENTATIVE RULING
On December 7,2020,V.Lopez Jr.&Sons General Engineering Contractors,Inc.(“VLS”)filed a Petition for Writ of Administrative Mandamus against the City of Pismo Beach (the “City”).The City responded on April 22,2021.That same day,the City filed a cross-complaint against VLS alleging breach of contract,false claims,and unfair competition.On June l4,2021 ,VLS filed its own cross-complaint against the City for breach of contract,breach of the implied covenant of good faith and fair dealing,and claims arising under section 1983 of title 42 of the United States Code.
I.BACKGROUND
On December 19,2017,after a competitive bidding process,the City awarded VLS a contract for construction of the Five Cities Lift Station,and modification of other sewer lift stations within the City (the-“Project”).(AR 028-029.)Construction of the Project began in February 2018.(AR 013.)The contemplated completion date was April 15,2019,which was subsequently extended to March 17,2020.(1bid.)Substantial completion of the Project occurred on June 22,2022.(Ibid) On October 6,2020,the City Council accepted the Project as complete,but imposed $69,000 in ' liquidated damages against VLS for the delays.(AR 203,243.)The parties dispute the cause of the delays in completing the Project.VLS alleges the liquidated damages were imposed without notice.
A month later,on November 5,2020,the City emailed a “Public Hearing Notice”t0 VLS informing it that a public hearing would be held before the City Council,on November l7,2020. (AR 070,03 8.)The purpose of the hearing was to consider a staff recommendation to declare VLS a “non-responsible bidder,”which would disqualify it from performing future work for the City.(AR 002.)This was the first time that VLS learned that the City was considering such action.(AR 075.)
The City’s November 5,2020,email to VLS invited it to participate in the hearing,provided an email address for any written submissions,and set forth the process which would be followed at the hearing.(AR 070.)The Public Hearing Notice stated that the hearing’s agenda would be posted on November 12,2020.(AR 002.)
The parties then engaged in some discussions focusing 'on two items:(1)an agreement that VLS ,would not bid on any work with the City for a defined period of time,and (2)payment of the City’s claimed financial losses.(AR 121.)In those discussions,counsel for VLS requested \\1
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documentation supponing the staff‘s recommendation and made clear that VLS did “not know the basis of the City’s current position.”(AR l 18,124-129.)VLS also raised due process concerns during those discusSions,stating it was entitled to “advisement of the basis of the City’s position and all supporting documentation [and]a reasonable opportunity to prepare and provide a response,and to a fair hearing.”(AR 080.)
On November 12,2020,the City Manager emailed VLS’s counsel a copy of the draft staff report and the proposed City Council resolution.(AR 137.)It was at that time,that VLS first learned of the grounds on which the City sought to deem it a non-responsible bidder.(AR 013-21,075,198.) On November 16,2020,the day before the hearing,VL‘S submitted written statements setting forth its position.(AR 033-150.)VLS raised its due process concerns in its written submission.(AR 053-054.)In particular,VLS noted the “extremely tight timeframe”it had to respond.(AR 054.) On November 17,2020,the day of the hearing,VLS submitted a synopsis of comments it expected to provide at the hearing.(AR 151-152,201 .)During the hearing,VLS reiterated'its due process concerns at the hearing,noting that it had not been provided with any information regarding the City’s basis for debarment,until five days beforehand.(AR 198.)VLS’s counsel further stated:
I’m very concerned with the time frame-here,too.Not only did we have seant amount of time to prepare our response here —we did —we were able to submit a fairly substantial response yesterday;however,that was the tip of the iceberg in terms of the information we could have provided.And in fact,even today,after I submitted a supplemental response,kind of a synopsis of our —our primary argument here,I was getting information from people that worked on the project that buttress our position that V.Lopez was not in fact responsible for a number of these things that the city claims ....[11]The other thing that’s wrong is that —or the other concern I have about the short time frame is that you were provided a fairly substantial submission yesterday and additional material today,which gives you even less time to consider it.And because of the importance of this,especially to my client,...-I’m very concerned that you’re not going to have an adequate opportunity to have considered the information and the facts that we presented in that information that show that what the city is doing here is not only extraordinary but it’s unwarranted,it’s unnecessary,and it’s illegitimate,and,for those reasons,it should be rejected out of hand.[11]the other thing that just --that requires much more detail and in-depth consideration and review is the factual inadequacy of the city’s position supporting their recommendation.We provided rebuttal to —to the claims that have been made with respect to these issues,and we have even more rebuttal. (AR 200—202.)
In addition to the procedural issues raised by VLS’s counsel,a member 0f the public (a licensed architect)noted that the issues presented were “very complex.And if really there has only been a one-week.timeline for the contractor and his attorney to respond,I would encourage you to .continue this discussion and not make any decisions today,because you need to better understand 2 9.G-7Council Agenda 8-16-2022
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it and we need to better understand it,as the public.”(AR 211,212;see also AR 219 [VLS’s counsel agreeing with architect’s comments].)1
Although two council members confirmed that they had read all of VLS’s submissions in support of its position,one council member had only read “most of the stuff.”(AR 233,236.)After presentations by both sides}and some questioning by council members,the City Council voted unanimously to adopt Resolution No.R-2020-094 (the “Resolution”)to disqualify VLS from performing future work for the City,for a period of five years.(AR 243.) VLS seeks to set aside the Resolution based on due process violations by the City.For the reasons set forth below,the Court grants VLS’s request for a writ of mandamus.— II.LEGAL STANDARD
Code of Civil Procedure section 1094.5,subdivision (b)sets forth the standard of review in administrative mandamus proceedings,and limits review to three specified grounds:(1)whether the agency proceeded without,or in excess,of its jurisdiction;(2)whether there was a fair trial; and (3)whether there was a prejudicial abuse of discretion.It is the second ground which is at issue in this proceeding.3
Determining whether an administrative proceeding was fundamentally fair is a question of law, which is independently evaluated by the Court.(Southern Cal.Underground Contractors,Inc.v.
City 0f San Diego (2003)108 Cal.App.4th 533,542 (Southern Cal.Underground).) llI.DISCUSSION
“‘A debarment excludes a person from doing business with the government for a defined period ....’[Citation.]”(Golden Day Schools,Inc.v.State Dept.of Education (2000)83 Cal.App.4th 694,703 (Golden Day).)“Debarment is never a matter of small moment [11]But despite its '1 In rebuttal,the City Manager (James Lewis)noted VLS was aware of the issues that the City had with the Project,and had been suggesting mediation for months before the hearing.(AR 215.)
VLS was allocated 1 1 minutes for its initial remarks and an additional five minutes for rebuttal.(AR 197.)
3 The third ground,i.e.,abuse of discretion,occurs when “the respondent has not proceeded in the manner required by law ....”(Code Civ.Proc.,§1094.5,subd.(b).)Thus,“[i]fthe agency has violated due process by denying a fair hearing,the agency has at the same time failed to proceed as ‘required by law.’Whether it is called one or the other,if the error was prejudicial, the writ will be held.”(Abbot,et al.,Cal.Administrative Mandamus (Cont.Ed.Bar 3d ed.2022) §6.23.)~
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severe impact on contractors,debarment is not intended as punishment.It is,instead,a necessary means to enable the contracting governmental agency to deal With irresponsible bidders and contractors,and to administer its duties with efficiency.[Citation.]”(Id.at pp.703-704.) A person facing debarment “‘has a constitutionally protected liberty interest at stake,’[Citation]” entitling him or her to due process.(Golden Day,supra,83 Cal.App.4th at p.706.)What qualifies as due process,and the specific procedural protections required,depends on the particular situation.(Gilbert v.Homar (1997)520 U.S.924,930 [due process is a flexible concept].)Here, both sides agree that debarment requires due process,but disagree on the parameters of due process to be applied under the circumstances.
A.Reasonable Notice and an Opportunity to be Heard
“Due process is the opportunity to be heard at a meaningful time and in a meaningful manner. [Citation.]”(Southern Cal.Underground,supra,108 Cal.App.4th at p.543.)This encompasses sufficient notice of the charges.(See id.at pp.539-540 [reciting that the trial court previously found the contractor had not been afforded adequate time to prepare a defense,despite receiving three weeks to prepare,and ordering another administrative hearing to be set no sooner than 45 days from the court’s order].)
After receiving the Public Hearing Notice,VLS informed the City that the notice was the first time it had heard of the City’s proposed action to deem it a non-responsible bidder.(AR 075.)The day after receiving the Public Hearing Notice,VLS requested the documentation supporting the staff’s recommendation (AR l 18),then made clear that it did “not know the basis of the City’s current v position”(AR 124),and asserted its right to a reasonable opportunity to prepare and provide a response.(AR 080.)After receipt of the draft staff report,VLS raised concerns regarding the tight timeline which it was given to respond.(AR 200—202.)
The City argues that counsel for VLS acknowledged awareness of the dispute with the City as early as February 2020.(AR 118.)4 Awareness of an ongoing dispute does not equate to adequate notice of the grounds on which the City was seeking to debar VLS.Nor does it address the issue of whether the City provided VLS sufficient time to respond.
The Court concludes that providing five days-notice,only three of which were business days,of the grounds on which the City sought debarment,was not adequate notice to allow VLS a meaningful opportunity to respond and be heard on the issues.(Cf.Southern Cal.Underground, 4 1n a letter dated November 6,2020,VLS‘s counsel stated:“Following your February 5,2020, letter to my client I have communicated to you,on no less than three occasions,suggestions [sic]that our clients engage in some form of meaningful dispute resolution and avoid an adversarial approach to these issues.Neither/the City nor you everresponded to these proposals ....”(AR 1 l8.)This is insufficient to show VLS was aware ofthe grounds on which the City was seeking debarment.
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supra,108 Cal.App.4th at pp.545-546 [concluding a contractor received an adequate opportunity to be heard where it received ample notice,an opportunity to conduct discovery'including depositions,and an opportunity to present “unlimited documentary evidence”prior to the hearing].)
'
The Court grants the writ on this ground.
B.Ability to Cross-Examine Witnesses and Present Live Testimony VLS argues that cross-examination of witnesses in an administrative proceeding must be allowed, if requested.For support,VLS relies on Golden Day and Goldberg v.Kelly (1970)397 U.S.254 (Goldberg).
In Goldberg,the Supreme Court noted that “[i]n almost every setting where important decisions turn on questions of fact,due process requires an opportunity to confront and cross-examine adverse witnesses.[Citations.]”(Goldberg,supra,397 U.S.at p.269.)At issue in Goldberg was the adequacy of the procedures for notice,and a hearing in connection with the termination of public assistance benefits to welfare recipients.The Supreme Court determined that the inability to present evidence orally at a hearing,or to confront or cross-examine adverse witnesses violated the recipients’due process rights.(1d.at p.268.)
The Supreme Court explained that “[t]he opportunity to be heard must be tailored to the capacities and circumstances of those who are to be heard.It is not enough that a welfare recipient may present his position to the decision maker in writing or second-hand through his caseworker.
Written submissions are an unrealistic option for most recipients Moreover,written submissions do not afford the flexibility of oral presentations.”(Goldberg,supra,397 U.S.at pp. 268-269.)The Court noted that “the crucial factor in this context —a factor not present in the case of the blacklisted government contractor,is that termination of aid pending resolution of a controversy over eligibility may deprive an eligible recipient of the very means by which to live while he waits.”(Id.at p.264.)
Relying on Goldberg,the contractor in Southern Cal.Underground argued that it should have been allowed to present live testimony and cross—examineadverse witnesses at the hearing on its debannent before the city council.The court rejected the argument on the ground the contractor had the opportunity to confront adverse witnesses by taking their depositions.(Southern Cal.
Underground, supra,
108 Cal.App.4th at p.546.)The court stated,“[a]lthough a government contractor cannot be debarred without procedural safeguards,there is no constitutional entitlement to the full panoply of judicial trial procedures such as cross-examination.[Citation.]”(Id.at pp. 542-543.)
In distinguishing Goldberg,the.court noted the contractor before it was “a sophisticated business entity and had the professional assistance of counsel,”so that permitting depositions was “an effective opportunity to confront adverse witnesses And,unlike the welfare recipients in Goldberg,[the contractor]was able,through its counsel,to effectively present its position in 5 9.G-10Council Agenda 8-16-2022
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writing,and present arguments and evidence orally before the decision maker.[Citation.]” (Southern Cal.Underground,supra,108 Cal.App.4th at p.544.)Pursuant to Southern Cal Underground,due process in the debarment context does not require live testimony and an opportunity to cross-examine witnesses in front of the adjudicatory panel,as long as the contractor had other means available to it to develop relevant facts.
VLS next cites to Golden Day,in which the court found a violation of due process based on the fact that one of the members of the adjudicatory panel had investigated the underlying claims against the appellant,putting him “in the position of judging the correctness of his own decision.” (Golden Day,supra,83 Cal.App.4th at p.710 [addressing debarment of childcare contractor for three years].)After making that finding,the court addressed the appellant’s argument that the hearing was unfair because it had not been allowed to cross-examine adverse witnesses.“[T]he ‘ court in Golden Day,noted that the contractor had not sought to cross-examine anyone.However, the court held that the contractor should have been allowed the opportunity to cross-examine staff persons who had participated in the determination that led to the debarment recommendation.” (Southern Cal.Underground,supra,108 Cal.App.4th at p.546 [discussing Golden Day].) The court in Southern Cal.Underground distinguished Golden Day on the ground that the contractor had the opportunity to cross-examine city employees who participated in the investigation leading to its debarment,by taking their depositions and using that testimony in its oral and written presentations to the city council~..“Nothing inGolden Day or other case law requires that cross--examination occur at the hearing before the City Council rather than at a deposition.”
(Southern
Cal Underground,supra,108 Cal.App.4th at p.547.)
Other than a brief suggestion in its November 16,2020,written submission that the City “must allow the subject contractor to cross examine its protagonists”(AR 053),VLS does not identify any portion of the record where it affirmatively requested an opportunity to cross-examine witnesses.VLS argues that it “had no opportunity to do sol”(Reply,p.8,l.25.)VLS,however, raised multiple due process concerns in its correspondence with the City,its written submissions, and at the hearing.Thus,the wn't on the ground that it was unable to present live testimony,and cross-examine witnesses is denied.
C.-An Impartial Tribunal
“‘The concept of fundamental fairness includes the right to an impartial decision maker.’ [Citations.]”(Golden Day,supra,83 Cal.App.4th at p.709.)g “[A]party claiming,that the decision maker was biased must show actual bias,rather than the appearance of bias,to establish a fair hearing violation.”(Southern Cal.Underground,supra,108 Cal.App.4th at p.549 [bias in the administrative hearing context cannot be implied].)
VLS argues that the City,as an overall entity,was investigating,prosecuting,and adjudicating the case,and as such the City Council could not serve as an impartial tribunal.In support,VLS quotes the rule as stated in Golden Day that “no employee involved in investigating or prosecuting a case may participate as an adjudicator.”(Golden Day,supra,83 Cal.App.4th at p.709.)The City \
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responds that VLS does not set forth any facts establishing bias by a member of the City Council; and further that city staff advocated for debarment,while the City Council acted as the decision maker —which involved separate divisions of the City.
“It is well established that a party is not denied an impartial adjudicator merely because an administrative entity performs both the functions of prosecutor andjudge.”(Southern Cal.
Underground, supra,
108 Cal.App.4th at p.549.)Moreover,where “‘an administrative body has a duty to act,and is the only entity capable of acting,the fact that the body may have an interest in the result/does not disqualify it from acting.The rule of necessity precludes a claim of bias from the structure of the process.’[Citation.]”(Id.at p.550.) VLS next argues that its cross-complaint against the City implicates a potential bias by the City Council.A similar issue was raised and rejected in Southern Cal.Underground,where the appellant claimed the city was a biased decision maker,because it had bee’n named as a defendant in a multimillion-dollar lawsuit filed by the appellant.In rejecting the argument,the court reasoned that because the individual city council members were not named as defendants in the lawsuit,they lacked any personal pecuniary interest in the outcome of the case.(Southern Cal.
Underground,supra,108 Cal.App.4th at p.549.)Similarly,none of the council members are individually named in VLS’cross-complaint.
The Court finds VLS has failed to show any bias by the City,or its council members.The writ on this groundis denied.
D.Sufficient Evidence for Debarment
Finally,VLS argues that thereis 1nsuffc1ent evidence supporting the findings1n the Resolution.In light of the Court’s conclusion that the hearing procedure failed to comply with applicable due process requirements,this argument is moot.The writ on this groundls therefore denied.
Ml3)*“X'”ORDER (TENTATIVE)
The writ of mandate is granted.Resolution No.R-2020-094 of the Pismo Beach City Council is ordered set aside.Withi ays of the date of this order,the City is directed to hold a new hearing that complies with the due process requirements outlined in this order.VLS shall serve
notice of the order.
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