The Curious Case of QBS in California

“You know we’re sitting on four million pounds of fuel, one nuclear weapon and a thing that has 270,000 moving parts built by the lowest bidder. Makes you feel good, doesn’t it?” – Steve Buscemi as Rockhound in Armageddon.

If you’ve worked on a public works project you’re likely familiar with the concept of the lowest bidder or, as its called here in California, the lowest responsible bidder.

The idea is simple. Because public funds are being used, public entities should be frugal when spending “our” money.  Of course, it’s this very simplicity that also makes competitive bidding the fodder for smart alecks like Rockhound.

Qualification Based Selection

But, if you’re an architect, landscape architect, engineer, land surveyor, or environmental consultant you know that you’re not subject to competitive bidding. Instead, in California, on state and local public works projects, public entities are required to award contracts for architectural, landscape architectural, engineering, land surveying and environmental services, not based on price, but rather on the quality of services to be provided, known as qualification based selection, or QBS.

But when it comes to the public pocketbook is the sky really the limit when it comes to professional services? Well, not quite.

California’s QBS requirements can be found at Government Code sections 4525 et seq., also known as the Mini Brooks Act, after the federal QBS standards established by legislation sponsored by U.S. Representative Jack Brooks of Texas in 1972. California’s QBS standards require that state and local agencies contract out for professional services based on “demonstrated competence and qualifications for the types of services to be performed” but also “at fair and reasonable prices to the public agencies.” (emphasis added).  So, it seems, price is a consideration after all.

But here’s where it gets sticky.  At what point in the public bidding process can price be considered?  At bid submission, during contract negotiations, or some other time?

QBS Requirements for State Agencies

California’s QBS requirements provide that for state agencies, the state agency is required to maintain a list of professional firms, their qualifications and performance data.  When bidding out public works, the state agency is then required to conduct discussions with no less than three professional firms regarding anticipated concepts and the utility of alternative methods of approach for furnishing the required services.  The state agency is then required to select no less three of the professional firms “deemed to be the most highly qualified to provide the services required.”

It is only after selection, that the state agency may begin negotiating with the selected professional firms to determine the “compensation which the state agency head determines is fair and reasonable,” and if unable to negotiate a contract at a price determined to be fair and reasonable, the state agency may then undertake negotiations with the second most qualified professional firm, and so on down the line. Thus, for state agencies, while price is a consideration, it is only a consideration during contract negotiations not bid submissions.

QBS Requirements for Local Agencies

While California’s QBS requirements provide a relatively straightforward process for state agencies, local agencies “may,” but are not required to, follow the same procedures as state agencies. So, then, unlike state agencies, can local agencies request submission of pricing information in their request for proposals?

Perhaps. And the issue became even more vague when Proposition 35, “The Fair Competition and Taxpayer Savings Initiative,” was approved by voters in 2000.  Proposition 35 added a new Government Code section 4529.12 which requires “[a]ll architectural and engineering services [to be] procured pursuant to a fair, competitive selection process.”

In Professional Engineers in California Government v. Morales, et al., 40 Cal.4th 1016 (2007), the union representing government engineers in California sued the State of California arguing that Government Code section  4529.12’s “fair, competitive selection process” language mandated competitive bidding of professional services and abrogated California’s pre-Proposition 35 QBS process.  The California Supreme Court, however, disagreed.

California’s QBS process, the California Supreme Court explained, “is a competitive process and ‘while cost may be a less salient consideration in the qualifications-based selection procedure than in a competitive bidding process, it is a consideration nevertheless.'”

So Where Does This Leave Us?

While the California Supreme Court held that Proposition 35’s “fair, competitive selection process” was not inconsistent with California’s pre-Proposition 35 QBS process, it didn’t directly address whether local agencies can request pricing information when they solicit bids from professional firms, it merely held that pricing and cost are considerations even under QBS.

However, it would appear that (1) given the California Supreme Court’s holding in Professional Engineers in California Government that cost is a consideration even under QBS, and (2) California’s QBS statute which permits but does not require that local agencies follow the QBS process applicable to state agencies, that local agencies may request pricing information in their request for proposals to professional firms.

Indeed, many local agencies currently do, and trade organizations such as the American Institute of Architects, California Council have attempted to sponsor legislation which would prevent this from happening. So, until the state legislature steps in, or the courts further define when local agencies can request pricing information, local agencies appear to be within their rights to request pricing information when soliciting proposals from professional firms.