The Subletting and Subcontracting Fair Practices Act and Public Contract Code Section 6826

One of the purposes of the competitive bidding laws us to ensure that there is a fair and even playing field for bidders on public works projects. Another related purpose is to prevent “bid shopping” and “bid peddling.”

Bid shopping involves the use of a low bid already received by a general contractor to pressure other subcontracts into submitting even lower bids. Bid peddling involves a subcontractor’s attempt to undercut bids already submitted to a general contractor in order to procure the job.

The Subletting and Subcontracting Fair Practices Act (Pub. Contract Code §§ 4100 et seq.) was enacted to curtail bid shopping and bid peddling by requiring prime contractors to identify or “list” in their bids to a public entity all subcontractors performing work “in an amount in excess of one-half of 1 percent of the prime contractor’s total bid . . .” Pub. Contract Code §4107.

While the Subletting and Subcontracting Fair Practices Act typically applies to design-bid-build projects, it also applies to design-build transportation projects under Public Contract section 6826 which provides: “The transportation entity… may identify specific types of subcontractors that must be included in the design-build entity statement of qualifications and proposal. All construction subcontractors that are identified in the proposal shall be afforded all the protections of Chapter 4 (commencing with Section 4100) of Part 1 of Division 2.” Pub. Contract Code § 6826.

In Golden State Boring & Pipe Jacking, Inc. v. Astaldi Construction Corporation, 110 Cal.App.5th 805 (2025), the 4th District Court of Appeal of California addressed a claim by a subcontractor that a prime contractor had violated Public Contract Code section 6826 by failing to obtain the consent of a transportation agency when awarding a subcontract to another subcontractor.

The Golden State Boring Case

The Orange County Transportation Authority awarded a contract to OC 405 Partners Joint Venture, a joint venture between Astaldi Construction Corporation and OHL USA, Inc., for a $1.2 billion design-build transportation project.

The prime contract between the Transportation Authority and OC 405 outlined the requirements applicable to OC 405’s solicitation of subcontractors that were not “listed” in its initial proposal to the Transportation Agency.  In order to procure these new subcontracts, OC 405 was required to “use a competitive process that complies with the provisions of Public Contract Code section 6826 . . .” The prime contract also stated: “Design-Builder shall not have the right to make any substitution of any Listed Subcontractor or Subcontractor selected pursuant to Section 7.2.2 except in accordance with the provisions of the Subletting and Subcontracting Fair Practices Act, Public Contract Code section 4100 et seq.” 

In 2020, in response to a request for proposals from OC 405, Golden State Boring & Pipe Jacking, Inc. submitted a bid to perform a portion of the work under the prime contract for $1.7 million. Golden State Boring later received an email from OC 405 congratulating it on being awarded the subcontract work. Thereafter, the parties attempted to negotiate the terms of a subcontract, but due to disagreements over the scope of work, OC 405 ended up contracting with another subcontractor.

In June 2022, Golden State Boring filed a first amended complaint against OC 405 and its joint venture partners claiming that they violated Public Contract Code section 6826 by failing to obtain the consent o the Transportation Authority before contracting with another subcontractor.

In December 2022, the defendants filed a motion for summary judgment arguing that: (1) there was never a contract between defendants and Golden State Boring; and (2) Golden State Boring did not qualify for the protections of Subletting and Subcontracting Fair Practices Act because Golden State Boring was not a “listed” subcontractor and Golden State Boring’s bid did not exceed one-half of 1 percent of OC 405’s original bid for the project.

The trial court granted the defendants motion for summary judgment and Golden State Boring appealed.

The Appeal

On appeal, the Court of Appeal noted that when reviewing an order granting summary judgment, the courts of appeal review such orders de novo, considering all evidence properly presented to the trial court, liberally construing evidence in support of the party opposing summary judgment, and resolving doubts about the evidence in the opposing party’s favor.

The Court of Appeal also noted that the appeal presented a question of first impression in California, namely, the interplay between Public Contract Code section 6826 with Public Contract Code section 4107. As such, explained the Court, “[o]ur fundamental task . . . is to ascertain the intent of the lawmakers so as to effectuate the purpose of the statute.”

Public Contract Code section 6826, explained the Court of Appeal, states: “Subcontractors awarded subcontracts under this chapter shall be afforded all the protections of Chapter 4 (commencing with Section 4100) of Part 1 of Division 2 (Italics added.)” Section 4107, in turn, explained the Court, provides: “A prime contractor whose bid is accepted may not: [¶] (a) Substitute a person as subcontractor in place of the subcontractor listed in the original bid, except that the awarding authority, or its duly authorized officer, may, except as otherwise provided in Section 4107.5, consent to the substitution of another person as a subcontractor” in one of nine listed circumstances. (§ 4107, subd. (a)(1)-(9), italics added.)”

Contrary to what is provided for in Public Contract Code section 4107, held the Court of Appeal, Golden State Boring was never a “listed” subcontractor in OC 405’s original bid. Further, held the Court of Appeal, Golden State Boring was not required to be listed in OC 405’s original bid because Golden State Boring’s bid did not exceed one-half of 1 percent of OC 405’s original bid.

Conclusion 

So, there you have it. A pretty straightforward case both legally and factually. Under Public Contract Code section 6826, the requirements of the Subletting and Subcontracting Fair Practices Act only applies to subcontractors “listed” in a design-builder’s proposal to a transportation agency, and a design-builder is only required to “list” a subcontractor in its proposal if a subcontractor is performing work in excess of one-half of 1 percent of the total value of the design-builder’s proposal.