Synergy Project Management, Inc. v. City and County of S.F.

The Subletting and Subcontracting Fair Practices Act (Pub. Contract Code, § 4100 et seq.) (Act), which governs public works projects, was enacted to protect the public and subcontractors from bidding practices that “often result in financial difficulties for subcontractors and poor workmanship on public improvements.” (Cal-Air Conditioning, Inc. v. Auburn Union School Dist. (1993) 21 Cal.App.4th 655, 660 (Cal-Air Conditioning).)  To this end, section 4107, subdivision (a) (section 4107(a)) requires a prime contractor to obtain the consent of the awarding authority before replacing a subcontractor listed in the original bid, and it limits the awarding authority’s ability to consent to specified circumstances.  If the original subcontractor objects to being replaced, section 4107(a) requires the awarding authority to hold a hearing “on the prime contractor’s request for substitution.”

In this case, the City and County of San Francisco (City) entered a contract with prime contractor Ghilotti Bros., Inc. (Ghilotti) for a major renovation of Haight Street.  Consistent with its accepted bid, Ghilotti entered a contract with subcontractor Synergy Project Management, Inc. (Synergy) for Synergy to perform excavation and utilities work.  After Synergy broke five gas lines and engaged in other unsafe behavior, the City invoked a provision of its contract with Ghilotti to direct Ghilotti to remove Synergy from the project and substitute a new subcontractor.  Under protest, Ghilotti terminated Synergy and identified two potential replacement contractors to the City, and Synergy objected to being replaced.  A hearing was held under section 4107(a), and the hearing officer determined that Synergy’s poor performance established a statutory ground for substitution. 

Synergy and Ghilotti each filed a petition for a writ of administrative mandate in the trial court.  Abandoning any challenge to the determination that Synergy’s performance justified substitution, they contended the hearing officer lacked jurisdiction because Ghilotti had not made a “request” for substitution within the meaning of either section 4107(a) or the relevant provision of the City-Ghilotti contract.  The court agreed and granted the petitions.  On appeal, the City claims the court’s ruling was erroneous, and we agree.  Even though the statute contemplates that the prime contractor will normally be the party to seek substitution, the procedure followed here “complied in substance with every reasonable objective of the statute.”  (Titan Electric Corp. v. Los Angeles Unified School Dist. (2008) 160 Cal.App.4th 188, 208 (Titan).)  Thus, the hearing officer had jurisdiction under the Act to issue a decision, and we need not address whether jurisdiction separately existed under the City-Ghilotti contract. Accordingly, we reverse.

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