Thousand Oaks Legal Win Seen as Far-Reaching

Thousand Oaks’ success in court against a contractor seeking $2.7 million in cost overruns for its work on the Civic Arts Plaza was a major victory for all California municipalities and taxpayers, government officials said Tuesday.

At stake in the six-year battle was the concept of competitive bidding, a state law aimed at saving taxpayer dollars by keeping costs down on major public works projects.

“It’s a huge relief for public agencies and the taxpaying public,” said JoAnne Speers, general counsel for the League of California Cities.

Attorneys who represent public contractors, meanwhile, predicted the ruling, issued Monday by the state Supreme Court, will result in more expensive public construction projects that will drag on longer or never be completed.

The decision overturns two lower-court findings in favor of Amelco Electric of Gardena, one of the nation’s largest electrical contractors. Amelco sued Thousand Oaks in 1996, one year after the $63.8-million Civic Arts Plaza was finished, claiming that it was not bound by the fixed price of its contract because the city made too many last-minute changes to design plans.

Amelco attorneys did not return phone calls seeking comment Tuesday.

The company--paid $7.2 million for its work--sought an extra $2.7 million, including interest, under a legal theory called “abandonment.” In an abandonment case, an original contract changes so much it becomes invalid, entitling the contractor to recover all extra costs on the project, Thousand Oaks City Atty. Mark Sellers said.

The Supreme Court concluded that the abandonment argument does not apply to public agencies, which are forced to award contracts based entirely on who was the lowest responsible bidder.

If a contractor wants to file claims against a public agency for costs not covered in the initial agreement or approved in a written change order, the high court ruled, it must prove the agency directly caused damage by the changes.

Although Thousand Oaks has spent about $1 million over the years defending the lawsuit, Sellers said it was an important fight. Already this year, for instance, the city has more than $30 million in public contracts underway, he said.

And the case’s potential effect on the state’s competitive-bidding law--designed to protect taxpayers from excessive costs in public works projects--caught the attention of cities, counties and other public agencies throughout the state.

Had Amelco prevailed in the Supreme Court, that law essentially would have become “a sham,” Sellers said. That was the court’s rationale in siding with Thousand Oaks in the 5-2 decision.

“One can imagine a situation where a friend of a public official bids extremely low, with the understanding that numerous changes in the contract ... will be forthcoming,” the written opinion said.

“Such scenarios would simply provide an end run around the public works bidding requirements.”

Although officials acknowledged one effect of the ruling may be higher bids, they said the decision will save public money in the long run.

“If contractors make a more careful and realistic bid--even though it’s higher--the ultimate result will be a reduction in claims, because claims will be harder to make,” said Nowland C. Hong, a Los Angeles attorney who filed a brief in support of Thousand Oaks on behalf of 98 California cities.

But Neil H. O’Donnell, a San Francisco attorney who represents contractors on public works projects, said this week’s ruling will have the opposite effect.

“You’re going to have projects that take longer to complete and be more expensive to get done in the end,” he said.

“And you’re going to have very large-scale and bitter litigation.”