Duties of The Agency

Upon receipt of the General's substitution request, the awarding authority or its duly authorized agent is required to give notice in writing to the listed subcontractor of the General's request to substitute and the reason for the request. Although the notice is required to be served by certified or registered mail, case law indicates that substantial compliance is acceptable under Public Contract Code ' 4107.5,(7) and may very well be acceptable under Public Contract Code ' 4107.(8)

The affect of Public Contract Code ' 4107 is to limit the right of the General to make substitutions, thereby putting it in the hands of the Agency to give permission to substitute in those situations listed above. Notably, all of the named situations are keyed to the unwillingness or inability of the listed subcontractor to properly perform.(9) In accordance with Public Contract Code ' 4107, the aforementioned procedure is used for subcontractor substitutions falling within the statute's enumerated descriptions. The main exception to this procedure pertains to the forwarding of the notice of substitution request to the listed subcontractor. If the substitution request is made due to a clerical error (e.g. where the General mistakenly listed subcontractor in a bid, instead of subcontractor AB), then the General has a duty to give notice to the subcontractor. In all other circumstances the duty to notify the subcontractor of the substitution request falls to the Agency. (10)

Duties And Options of The Listed Subcontractor

Upon receipt of notification as to the substitution request, the listed subcontractor will have five working days within which to submit to the Agency, written objection to the substitution. Failure to file such written objections constitutes the listed subcontractor's consent to the substitution. Subsequently, if written objections are filed, the awarding authority is then required to give written notice of at least five working days to the listed subcontractor of a hearing conducted by the awarding authority as to the General's request for substitution.

Analysis of Rationale Behind the Act

Both the statute and case law are silent with regard to whether a formal subcontractor substitution is necessary pursuant to Public Contract Code ' 4107, for extra work or disputed work. Additionally, the legislative history makes no mention of such. The purpose of the Subletting and Subcontracting Fair Practices Act is to prevent "bid shopping" by the General, including the pressuring of other subcontractors to submit lower bids than listed subcontractors or "bid peddling" by unlisted subcontractors to undercut known bids of listing subcontractors in order to procure the job. As such, it is highly questionable whether non-change order extra work and disputed work fall within the realm of what the legislature intended within its public policy reasons for enacting the statute.

On a similar plain, Public Contract Code ' 4107(c) allows for the subletting or subcontracting of work involving the performance of change orders causing changes or deviations from the original contract and/or any portion of the work in excess of one half of 1 percent of the prime contractor's total bid, as to which his or her original bid did not designate a subcontractor. However, since the statute and case law are silent with regard to separate formal substitution procedures for non-change order extra work or disputed work, it might be inferred that the lack of precedent in this specific area is due to problems relating to extra work and disputed work being classified under one of the other categories justifying the substitution (e.g. the subcontractor's failure or refusal to perform the subcontract). Although the Act likely was not intended to apply to extra work or disputed work, clarification in this regard would be efficacious.