Activists decry court ruling striking down L.A. Minority business policy.

Leaders of the minority and women-owned business community are up in arms over a recent court decision that struck down the City of L.A.'s contract diversity outreach program.

In Domar Electric v. City of L.A., the state's 2nd District Court of Appeals ruled Oct. 26 the city's good faith outreach program is invalid because it was enacted by a mayoral directive that conflicts with the city charter. Amending the city charter requires voter approval.

Thus, the city can no longer deny a contract to the lowest bidder solely because that bidder failed to demonstrate a "good faith effort" toward subcontracting to minority and women-owned companies, said Assistant City Attorney Christopher Westhoff.

"I think the impact is going to be quite severe," said Constance Rice, western regional counsel for the NAACP legal defense and educational fund.

"If you don't have public policy forcing prime contractors to open up their doors and share some of the wealth of contracting with minority and women-owned businesses, it's not going to happen," she said.

The good faith effort outreach program was established by a directive from Mayor Tom Bradley in 1989. It mandated bidders for city contracts had to demonstrate they had made a "good faith effort" toward subcontracting to minority and women-owned businesses. This included placing advertisements to attract such companies and advising companies how to obtain the necessary bonds and credit.

During summer 1992, the City of L.A.'s Board of Public Works put out a request for proposals for a contract to design and install a computer-based control system for the Hyperion Treatment Plant, a sewage plant in Playa del Rey.

Lake Elsinore-based Domar Electric Inc. submitted the lowest bid but did not file a statement with the board indicating what it had had done to comply with the good faith outreach requirement.

The Board of Public Works awarded the contract to Cleveland, Ohio-based Bailey Controls Co., the second lowest bidder - but the lowest among those that had complied with the city's good faith outreach program, said Bailey's attorney Gerald Palmer.

Domar filed suit against the city, asking the Los Angeles County Superior Court to take the contract away from Bailey. The court declined, stating the Department of Public Works had the authority to award the contract to Bailey.

Domar appealed to the state's 2nd District Court of Appeals, which reversed the lower court's ruling. The city's good faith outreach program is not a valid part of the contracting program because it is inconsistent with the city charter, the court stated.

The charter states the city must award the contract to the lowest responsible bidder and doesn't mention anything about a good faith effort outreach program, the court stated. Any amendment to the city charter must be voted on by the electorate and cannot be accomplished solely by mayoral directive.

The city plans to file a petition to have the appellate court reconsider the case. If that petition is denied, the city plans to appeal to the state Supreme Court, Westhoff said.

Since the appellate court's ruling, officials at the city's Department of General Services have been instructed not to disqualify any low bidders solely on the basis that they have not demonstrated a good faith outreach to minority and women-owned businesses, said Jim Grant, management analyst for the department's purchasing division. The Department of General Services handles the purchasing for all non-revenue-producing city agencies.

According to Domar's attorney, Bernard Kamine, the city's good faith outreach program was too subjective and prone to political influence.

Companies were known to hire lobbyists to convince city departments of their good faith outreach efforts. In other instances, the city departments "suggested" that bidders offer subcontracts to certain types of subcontractors.

A group of minority and women-owned business organizations filed an amicus curiae brief with the appellate court last week denouncing the court's decision.

The requirement that voters must amend the city charter in order to establish a good faith outreach program is preempted by the state's Public Contract Code section 2000, according to the brief.

This law was designed to facilitate the adoption of minority and woman business enterprise programs by local public entities in California, including charter cities like Los Angeles, Kamine said in a prepared statement.

Groups putting their name on the brief included the Latin Business Association, the Asian Business Association, the Black Business Association, the Hispanic Contractors Association, the Filipino Business Association, the Mexican American Grocers Association, the National Association of Women Business Owners and the National Center for American Indian Enterprise Development.

The appellate court's decision is based on a technicality and ignores the real issue of minority contracting, said NAWBO President Barbara Frantz.