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HomeMy WebLinkAboutCC 2026-06-23_09e_Supplemental 1 MEMORANDUM TO: City Council FROM: Jessica Matson, Director of Legislative & Information Services/ City Clerk SUBJECT: Supplemental Information Agenda Item 9.e – June 23, 2026 City Council Meeting Notice of Award, Halcyon Complete Streets, PW 2023-15 DATE: June 22, 2026 Attached is correspondence received for the above referenced Item. Cc: City Manager Acting Director of Public Works/City Engineer City Attorney City Clerk City Website and Public Review Binder Enc June 19, 2026 VIA EMAIL AND U.S. CERTIFIED MAIL AND RETURN RECEIPT isaac.rosen@bbklaw.com Isaac Rosen BEST BEST & KRIEGER LLP CITY OF ARROYO GRANDE 300 South Grand Avenue, 25th Floor Los Angeles, CA 90071 Re: Rejection of Bid – Halycon Complete Streets Project ATPSB1-5199(035) Dear Mr. Rosen: Edwards Construction Group Inc. (“Edwards Construction”) retained my office to represent it with respect to the City of Arroyo Grande’s (“City”) improper rejection of the Edwards Construction bid (“Bid”) for the Halycon Complete Streets Project ATPSB1- 5199(035) (“Project”). This letter is directed to your attention because you are listed as the City Attorney on the City’s website. If this is not correct, please notify me immediately. Please direct all further correspondence related to this matter to my attention. The letter is in response to the City’s letter dated June 18, 2026 (“Protest Rejection Letter”). The City’s Protest Rejection Letter notified Edwards Construction that the City was rejecting the Edwards Construction letter dated June 16, 2026, protesting the City’s determination that the Edwards Construction Bid was nonresponsive and its intent to award the Project to V. Lopez Jr. & Sons (“Protest Supplement”) and, for the first time, attempted to provide a legal and factual basis for its rejection of the Bid. The City’ Protest Rejection Letter, however, still fails to provide an adequate legal or factual justification for its rejection of the Bid. This letter is addressed to you because the City concluded its Protest Rejection Letter by stating that it would not respond to any further correspondence from Edwards Construction. Edwards Construction is an experienced public works contractor based in Arroyo Grande. Edwards Construction’s Bid totaled $6,038,707, which is $614,919 less than the bid from V. Lopez Jr. & Sons. The City’s Rejection Letter rests on a flawed understanding of bid responsiveness, the discretion afforded to public agencies in California when bidding public works projects, and fails to establish an adequate basis for rejecting Edwards Construction’s Bid as nonresponsive. In choosing to reject Edwards Construction’s Bid arbitrarily, the City created the very appearance of favoritism and corruption that Isaac Rosen BEST BEST & KRIEGER LLP June 19, 2026 Page 2 California’s public contracting laws were created to avoid. Nothing in the City’s Rejection Letter comes close to justifying the waste of $614,919 in tax payer dollars which would result if the City awarded the Project to the second lowest bidder instead of Edwards Construction. This letter is intended to be: 1. A request under the California Public Records Act, Government Code section 7920.000 et seq., for (1) copies of the bids submitted by all of the bidders for the Project including, but not limited to, Edwards Construction and V. Lopez Jr. & Sons, (2) the City’s estimate for the Project, (3) any and all materials the City consulted or relied on in making its determination that Edwards Construction was nonresponsive. 2. A request under Government Code section 54954.1 for written notice of all meetings of the City at which any issues pertaining to the award of that contract are on the agenda for the meeting. If there is any fee for this service, please telephone that information to us immediately, so we can promptly pay the fee. 3. A request to be informed (by telephone or fax) as soon as any staff reports or recommendations concerning any issues pertaining to the award of that contract are available to the public, so we can immediately inspect those reports or recommendations. 4. A request to address the City before or during consideration of any issues pertaining to the award of that contract, which opportunity is guaranteed by Government Code section 54954.3, subdivision (a). If this letter is not sufficient to accomplish any of these purposes, please let us know immediately what else is required, so we can comply. If we do not hear from you, we will proceed on the basis that this letter is sufficient. RELEVANT PROCEDURAL HISTORY The City opened the bids for the Project on June 9, 2026. (Ex. 1.) Edwards Construction submitted the lowest bid at $6,038,706.51, with V. Lopez Jr. & Sons the second lowest bidder at $6,653,626.44, which was $614,919 more than Edwards Construction’s Bid. The bid spread ranged from Edwards Construction’s low bid to the highest bid of $10,331,385 from Granite Construction. On June 15, 2026, the City sent Edwards Construction a letter summarily rejecting its Bid as nonresponsive and informing Edwards Construction that the City intended to award the Project to V. Lopez Jr. & Sons (“Bid Rejection Letter”). (Ex. 2.) The City’s Bid Rejection Letter did not provide a detailed factual basis for its determination that Edwards Construction’s Bid was nonresponsive, merely stating that “the amounts for general Shannon Sweeney CITY OF ARROYO GRANDE June 19, 2026 Page 3 conditions and temporary traffic control, among other line items, were significantly lower than the amounts submitted by other bidders and materially below staff’s expectations for that work.” The City’s Bid Rejection Letter did not ask for clarification or otherwise solicit a response. Instead, the City argued “that Edwards Construction has no claim on account of the City’s exercise of this discretion.” As will be seen, this is a misstatement of the applicable laws. Also on June 15, 2026, the City issued its Notice of Intent to Award (“Notice of Intent”), informing all bidders that the City intended to award the Project to V. Lopez Jr. & Sons. (Ex. 3.) The Notice of Intent claimed that “[a]ny proposer wishing to protest this intended award must have done so in accordance with the procedures set forth in the Bid Book” and that “[p]rotests must have been received by within 5 calendar days of the bid opening, which was June 9, 2026. As will be seen, not only is this a misstatement of the applicable laws, but it is also a misstatement of the City’s own Bid Documents. On June 16, 2026, Edwards Construction submitted a letter responding to the City’s Bid Rejection Letter and protesting the City’s decision to award the Project to V. Lopez Jr. & Sons (“Protest Supplement”). (Ex. 4.) Although its response was complicated by the lack of detail in the City’s Bid Rejection Letter, Edwards Construction explained that, because it was based in Arroyo Grande, it did not need to include many of the mobilization costs out of town contractors like V. Lopez Jr. & Sons would incur. Edwards Construction also explained that it owned many of the traffic control devices that would be needed during the Project, reducing the rental charges necessary to complete the temporary traffic control during the Project. On June 17, 2026, the City issued a letter summarily rejecting Edwards Construction’s Protest Supplement and confirming that it intended to proceed with awarding the Project to V. Lopez Jr. & Sons (“Protest Rejection Letter”). (Ex. 5.) For the first time, the City provided an explanation for its determination. But while the City acknowledged receipt of Edwards Construction’s Protest Supplement, it did not provide a meaningful response to Edwards Construction’s explanation. The City did not acknowledge Edwards Construction’s explanation for its lower general conditions costs in any way, and merely acknowledged receipt of Edwards Construction’s explanation for its lower temporary traffic control pricing without further addressing it. The City concluded its Protest Rejection Letter by claiming that “[t]his will be the City’s final correspondence in this matter.” THE CITY CANNOT AWARD THE PROJECT TO A BIDDER THAT DID NOT SUBMIT THE LOWEST RESPONSIVE BID. Although the City may reject all bids, it does not have the discretion to reject Edwards Construction’s Bid and instead award to the Project to V. Lopez Jr. & Sons at a cost increase of $614,919 to the public. Instead, California law mandates that cities must competitively bid public works contracts and may only award the contract to the lowest responsible bidder that submits a responsive bid. (Valley Crest Landscape, Inc. v. City Isaac Rosen BEST BEST & KRIEGER LLP June 19, 2026 Page 4 Council (1996) 41 Cal.App.4th 1432, 1438 [citing Pub. Cont. Code, § 20162] [“Valley Crest”].) Here Edwards Construction is the lowest responsible bidder and it submitted a responsive bid. The City may not award the Project to another bidder. The Legislature enacted the Public Contract Code to protect “the public from misuse of public funds” by “stimulating competition in a manner conducive to sound fiscal practices” and eliminating “favoritism, fraud, and corruption in the awarding of public contracts.” (Pub. Cont. Code, § 100.) “Because of the potential for abuse arising from deviations from strict adherence to standards which promote these public benefits, the letting of public contracts universally receives close judicial scrutiny and contracts awarded without strict compliance with bidding requirements will be set aside.” (Konica Business Machs. U. S. A. v. Regents of Univ. of Cal. (1988) 206 Cal.App.3d 449, 456-457] [emphasis added].) The Public Contract Code is intended to protect the public, and “protect[ing] innocent bidders and their listed subcontractors from arbitrary or erroneous disqualification from public works contracting [is] a purpose fully consistent with the act.” (D.H. Williams Construction, Inc. v. Clovis Unified School Dist. (2007) 146 Cal.App.4th 757, 766.) And even “a reasoned decision based on the reasonable view of the scope of discretion is still an abuse of judicial discretion when it starts from a mistaken premise, even though nothing about the exercise of discretion is, in ordinary-language use of the phrase, beyond the bounds of reason.” (Great West Contractors, Inc. v. Irvine Unified School Dist. (2010) 187 Cal.App.4th 1425, 1459 [internal quotes omitted] [emphasis in the original].) The City may not rely on Mike Moore’s Towing 1 to justify its improper rejection of Edwards Construction’s Bid. Somewhat curiously for the primary case the City cites as its justification for its rejection of Edwards Construction’s Bid, Mike Moore’s Towing does not include a single reference to the Public Contract Code. (See Mike Moore’s 24-Hour Towing v. City of San Diego (1996) 45 Cal.App.4th 1294, 1303.) Instead, the towing contracts at issue in that case were advertised and awarded pursuant to the San Diego Municipal Code, which provided that “contracts for procurement under a request for proposals ‘will be awarded on the basis of the proposal best meeting City requirements,’ including the best economic advantage for the City.” (Id at 1306-1307 [emphasis added].) The San Diego Municipal Code’s open-ended grant of discretion to itself stands in stark contrast with the competitive bidding requirements in the Public Contract Code which require public agencies like the City to award contracts to the lowest responsible bidder that submits a responsive bid. Moreover, even Mike Moore’s Towing, explains that “[t]his test has also been formulated to add an inquiry whether the agency’s decision was ‘contrary to established public policy or unlawful or procedurally unfair.’” (Id. at 1303 [quoting Lewin v. St. Joseph Hospital of Orange (1978) 82 Cal. App. 3d 368, 387].) A case analyzing a statute that gives a city the discretion to determine which bid best satisfied its requirements and gave it the best economic advantage provides little guidance to the interpretation of the Public Contract Code. 1 Although the City cites to page 1211 of Mike Moore’s Towing, that page is not part of the decision, which begins on page 1294. Shannon Sweeney CITY OF ARROYO GRANDE June 19, 2026 Page 5 In contrast with the discussion of the San Diego Municipal Code in Mike Moore’s Towing, multiple cases discussing the competitive bidding requirements in the Public Contract Code have rejected decisions by public agencies like the City. In Konica Business Machines, the court set aside a contract because the deviations in the bid could not be waived under the Public Contract Code. (Konica Business Machs. U. S. A. v. Regents of Univ. of Cal. (1988) 206 Cal.App.3d 449, 457.) In Valley Crest, the court declared the contract invalid under the Public Contract Code even though the landscaper had already substantially performed the contract. (Valley Crest Landscape, Inc. v. City Council (1996) 41 Cal.App.4th 1432, 1443.) In Great West Contractors, the district improperly rejected a bid as nonresponsive when its investigation and evaluation of the bid was really an investigation of the bidders responsibility, entitling the contractor to seek damages. (Great West Contractors, Inc. v. Irvine Unified School Dist. (2010) 187 Cal.App.4th 1425, 1458-1460.) These, and other similar decisions, confirm that the City’s discretion is constrained by the strict requirements of the Public Contract Code. As discussed in greater detail below, the City’s improper determination that Edwards Construction’s Bid was nonresponsive was unlawful because it went outside the four corners of the Bid when evaluating its responsiveness, procedurally unfair because it did not give Edwards Construction an opportunity to respond, and against public policy because it increased the cost to the public and created the appearance of favoritism, the very evils the Public Contract code was enacted to prevent. The competitive bidding requirements in the Public Contract Code, which are strictly enforced by the courts to protect the public fisc and avoid even the appearance of favoritism and corruption, gives lie to the City’s argument that it has the discretion to reject Edwards Construction’s Bid and that Edwards Construction has no recourse for the City’s arbitrary action. Edwards Construction has every right to challenge the City’s decision waste $614,919 in taxpayer dollars by awarding the Project to the second lowest bidder. EDWARDS CONSTRUCTION SUBMITTED THE LOWEST RESPONSIVE BID. The test for responsiveness focuses on the four corners of the bid documents and does not consider information or details outside of the bid and bid documents. (Great West Contractors, Inc. v. Irvine Unified School Dist. (2010) 187 Cal. App. 4th 1425, 1453-1454.) As a threshold matter, a bid is responsive if it responds to the requirements included in the bid documents, regardless of the quality of the responses. (Id. at 1456-1457.) Bids must be evaluated from a practical, rather than hypothetical, standpoint, giving due consideration to the public interest being served. (Ghilotti, 45 Cal.App.4th at 908-909; MCM Construction, Inc. v. City and County of San Francisco, 66 Cal. App. 4th 359, 370.) As discussed above, those public interests are getting the best work at the lowest practicable price and avoiding favoritism and corruption. (See Domar Electric, Inc. v. City of Los Angeles (1994) 9 Cal.4th 161, 173.) Due process considerations require that “a bidder determined to be nonresponsive is entitled to notice of that fact and is entitled to submit materials, in a manner defined by the district, concerning the issue of responsiveness.” (Taylor Bus Serv. v. San Diego Bd. of Educ. (1987) 195 Cal.App.3d 1331, 1343.) Isaac Rosen BEST BEST & KRIEGER LLP June 19, 2026 Page 6 Here the City does not, and cannot, dispute that Edwards Construction submitted a complete Bid that responded to all of the requirements in the Bid Documents. That is the test for responsiveness. (See Great West, supra, 187 Cal. App. 4th at 1456-1457.) Edwards Construction’s Bid is responsive. Instead, the City goes beyond the four corners of Edwards Construction’s Bid to challenge the quality of Edwards Construction’s responses, comparing them not just to the City’s estimates but to the responses submitted by the other bidders as well. This is improper when evaluating a bid’s responsiveness. (See Great West, supra, 187 Cal. App. 4th at 1456-1457.) Nor did the City give Edwards Construction notice and an opportunity to respond to the City’s determination, as it was required to do even for a rejection based on responsiveness. (See Taylor Bus Serv., supra, 195 Cal.App.3d at 1343.) The City’s Notice of Intent claimed that protests of the City’s decision to award the Project to V. Lopez Jr. & Sons “must have been received by within 5 calendar days of the bid opening, which was June 9, 2026.” Five calendar days after the bid opening date of June 9 is Sunday, June 14, the day before the City notified Edwards Construction of its determination that Edwards Construction that the City was rejecting its Bid and instead awarding the Project to V. Lopez Jr. & Sons. Since 1872, over 150 years ago, it has been enshrined in California law that “[t]he law never requires impossibilities.” (Civ. Code, § 3531.) Yet the City’s position is that Edwards Construction was required to protest the City’s rejection of its Bid before the City issued its Bid Rejection Letter, an obvious impossibility. Nor is the City’s position in its Notice of Intent consistent with its own Bid Documents. Under Article 30, Filing of Bid Protests, a Bidder’s protest of another bid must “[b]e filed in writing within five (5) calendar days after the bid opening date.” But that only applies to a Bidder’s protest of another bid. By its express terms, it does not apply to a bidder’s response to a determination of that its bid was not responsive by the City. The City’s Bid Documents are completely silent as to the procedures the City must follow when rejecting a bid for responsiveness on its own, as well as the procedures bidders must follow in response. Due process, however, requires that bidders be given an opportunity to respond. (See Taylor Bus Serv., supra, 195 Cal.App.3d at 1343.) As reflected in its Bid Rejection Letter and Protest Rejection Letter, the City’s arbitrary decision to reject Edwards Construction’s Bid as nonresponsive is a perfect example of why the Public Contract Code and associated case law established these important limitations on responsiveness reviews by public agencies. Multiple issues with the City’s arbitrary approach are evident. For starters, the City’s Bid Rejection Letter merely alleges the “the amounts for general conditions and temporary traffic control, among other line items, were significantly lower than the amounts submitted by other bidders and materially below staff’s expectation for that work” without providing any details or documentation substantiating that claim. (Ex. 2.) Although the City recognizes that “lower pricing is generally favorable,” it goes on to state that “the concern here is that the bid does not present a balanced allocation of costs across the bid schedule.” (Ex. 2 [emphasis added].) Notably absent was any indication that Shannon Sweeney CITY OF ARROYO GRANDE June 19, 2026 Page 7 any of Edwards Construction’s other bid items were unreasonably high. By failing to provide a meaningful basis for its decision, the City’s Rejection Letter makes it impossible to evaluate the merits of the City’s rejection of Edwards Construction’s Bid, not just for Edwards Construction, but more importantly under the Public Contract Code, the City’s taxpayers who the competitive bidding laws were enacted to protect. Issued three days after its Notice of Intent, the City’s Protest Rejection Letter provides limited support for its determination for the first time. (Ex. 5.) But the City’s Protest Rejection Letter fails to justify its rejection of Edwards Construction’s Bid because it rests on an unreasonable and unsupported reading of the Public Contract Code, fails to provide the documents supporting its determination, and fails to engage with the information in Edwards Construction’s Protest Supplement. As further detailed below, the City’s Protest Rejection Letter ignores Edwards Construction’s explanation of its pricing of the general conditions and temporary traffic control bid items in its Protest Supplement. And the City compounds these errors by again refusing to allow Edwards Construction an opportunity to respond, confirming that its determination is final by dismissively stating that “[t]his will be the City’s final correspondence in this matter.” This is precisely why bid rejections that go beyond evaluating the four corners of a bid and require the application of subtle judgment are outside the purview of a responsiveness determination and require additional due process protections. (See Taylor Bus Serv. v. San Diego Bd. of Educ. (1987) 195 Cal.App.3d 1331, 1341-1342 [discussing the additional requirements for responsibility determinations].) Here, by relying on incomplete information the City used its subtle judgment to determine that Edwards Construction could not complete the Project for the listed price. But because the City did not accord Edwards Construction the due process protections required when evaluating the quality of response, as opposed to the responsiveness, it was missing critical information necessary to a full evaluation of the Bid. (Great West Contractors, Inc. v. Irvine Unified School Dist. (2010) 187 Cal.App.4th 1425, 1455 [explaining that bidder is “entitled to at least a ‘due process hearing’ on the purported nonresponsibility”].) The City’s rejection of Edwards Construction’s Bid went beyond the four corners of the Bid without affording Edwards Construction the due process protections required when the quality of responses to a bid are evaluated. The City’s determination that Edwards Construction’s Bid was nonresponsive was arbitrary and an abuse of limited discretion allowed to public entities under the Public Contract Code. EDWARDS CONSTRUCTION’S BID IS NOT UNBALANCED. Edwards Construction’s bid is neither mathematically nor materially unbalanced. The City withheld the bid schedules submitted by V. Lopez Jr. & Sons and the other bidders, making it impossible for Edwards Construction to evaluate the City’s claims or whether the City is holding V. Lopez Jr. & Sons to the same standards it is imposing on Edwards Construction. This is particularly concerning given that the City’s correspondence has repeatedly suggested that its decisions are driven by favoritism. Isaac Rosen BEST BEST & KRIEGER LLP June 19, 2026 Page 8 The City’s Protest Rejection Letter fails to explain how Edwards Construction’s Bid is materially unbalanced. Lacking any relevant requirements in the Public Contract Code or published California cases discussing unbalanced bids, the City instead cites federal regulations. The federal regulations define a “mathematically unbalanced bid” as “a bid containing lump sum or unit bid items which do not reflect reasonable actual costs plus a reasonable proportionate share of the bidder’s anticipated profit, overhead costs, and other indirect costs.” (23 CFR § 635.102 (2026).2) A “materially unbalanced bid” is “a bid which generates a reasonable doubt that award to the bidder submitting a mathematically unbalanced bid will result in the lowest ultimate cost to the Federal Government.” (Id.3) The City also cites 48 CFR § 15.814 for support, but that regulation no longer exists and has not since 1997. (See 48 CFR § 15.) Only a bid that is both mathematically and materially unbalanced must be rejected. (23 CFR § 635.114(d) (2026) [explaining that “[a] bid found to be mathematically unbalanced, but not found to be materially unbalanced, may be awarded”].) The City at least attempts to show that Edwards Construction’s Bid is mathematically unbalanced. But the City’s attempt is flawed. These flaws begin with the mathematical calculations the City made to support its position. The City cites the average of the other four bidders in claiming that Edwards Construction’s Bid underpriced the for Section 4 10 General Construction5 and Section 12 Temporary Traffic Control portions of the Project. But this average includes the bids from JJ Fisher Construction, which totaled 115% of the City’s estimate, and Granite Construction, which totaled 140% of the City’s estimate. Including two bids that significantly exceeded the City’s estimate in the four bids used to calculate the average cost is going to skew the results higher. More importantly, the City’s arbitrary decision to reject Edwards Construction’s Bid as nonresponsive without investigation ignores the reasons why Edwards Construction was able to bid the Project for substantially less than the other bidders, or even the City’s own estimate. As explained in its Protest Supplement, Edwards Construction is based in Arroyo Grande, the location of the Project. (Ex. 4.) Its office, which sits on a 1.57-acre lot, is less than two miles from the Project. In contrast, the second lowest bidder, V. Lopez Jr. & Sons, is based in Santa Maria, approximately 20 miles away. Edwards Construction’s local presence provides obvious benefits, particularly related to the mobilization and demobilization, the very bid items the City is concerned that Edwards Construction underbid. (See Ex. 5.) 2 In contrast with the CFR’s definitions, the City’s Bid Documents require bidders to include their overhead and indirect costs in the Mobilization bid item, highlighting the difficulties inherent in applying cases, statutes, and regulations from different jurisdictions. 3 Although the City claims to quote this provision in its Bid Rejection Letter, the City improperly modifies the quote by omitting the word “Federal” without indicating the modification. 4 Although all of the Sections of the City’s Bid Schedule include multiple bid items, the City’s Protest Rejection Letter treats them as if they are a single bid item. Given the City’s failure to provide the supporting documents this further compounds the difficulty in evaluating whether the City is actually comparing Section to Section as represented. 5 Which the City erroneously refers to as General Conditions in its Protest Rejection Letter. Shannon Sweeney CITY OF ARROYO GRANDE June 19, 2026 Page 9 The General Conditions detail the kind of costs that must be included in the Mobilization and Demobilization bid item. (Ex. 6, § 00 72 13-6.B.) These include “[p]roviding and maintaining the field office trailers for the Contractor, if necessary.” (Emphasis added.) Not only does this recognize that this bid item may vary based on the bidder’s evaluation of whether a field office is necessary, making it impossible to compare the bid items from different bidders, but Edwards Construction does not need a field office trailer because its actual office is close enough to serve as its field office. Similarly, bidders must include costs for “[f]urnishing, installing, and maintaining all storage buildings or sheds required for temporary storage of products, equipment, or materials that have not yet been installed in the Work” and “[a]rranging for and erection of Contractor’s work and storage yard.” Again, this is work that Edwards Construction did not need to include in its Bid because of the proximity of its office. Because Edwards Construction will not need the same level of temporary facilities as out-of-town contractors like V. Lopez Jr. & Sons, it will cost Edwards Construction less for “[m]oving off the job (demobilization), removal, clean up.” Although Edwards Construction’s Protest Supplement explained how its Bid benefited from being a local contractor, the City completely ignored this in its Protest Rejection Letter. Similarly, in its Protest Supplement Edwards Construction explained that it owns many of the traffic control devices that will need to be used during the Project, which again provides an obvious benefit compared to bidders which must rent all of the required traffic control devices. The City at least acknowledged the Protest Supplement in its Protest Rejection Letter, but it did not do so in any kind of material way. Instead, the City simply stated that “[t]he City is in receipt of Edward’s [sic] argument that its ownership of traffic control equipment may explain some of this discrepancy.” But that mere acknowledgement is the sum total of the City’s response. The City simply ignores Edwards Construction’s explanation in its Protest Rejection Letter. This leaves Edwards Construction’s pricing for Section 19 Earthwork, which the City did not address for the first time until its Protest Rejection Letter dated June 18, 2026, three calendar days after it issued its Notice of Intent. For the first time, the City alleged that a particular portion of Edwards Construction’s Bid exceeded the City’s estimate and the bids of the other bidders. In contrast with City’s explanation for Section 10 General Construction and Section 12 Temporary Traffic Control, the City omitted the average of the other bidders from its discussion of the Section 19 Earthwork. Because the City failed to provide the documents supporting its determination, there is no way to determine whether this was an oversight or whether the City omitted the average of the other bidders because it did not support the City’s argument. As the City is aware, two of the four bid items in Section 19 Earthwork are lump sum items. Of the $515,450 included in Edwards Construction’s Bid for Section 19 Earthwork, $303,780 (58% of the total) is a lump sum for Excavation while an additional $42,000 (9% of the total) is a lump sum for Erosion Control. To the extent that these bid items are higher than the City’s estimate, or the bids from the other bidders, which cannot be determined Isaac Rosen BEST BEST & KRIEGER LLP June 19, 2026 Page 10 because the City has not provided documents supporting its determination, the City has utterly failed to explain how they could result in the City having to pay a higher overall price for the Project. They are lump sum costs, independent of the quantity of work actually performed. While the costs for Tree Removal and Class II Aggregate Base are at least unit prices, there is no reasonable argument that Edwards Construction’s pricing for these bid items could result in the District having to pay more for the Project. Edwards Construction’s Bid is $614,919 less than the bid from V Lopez Jr. & Sons. (See Ex. 1.) The City, not Edwards Construction, determined the quantities listed on the bid schedule. Edwards Construction bid a unit price of $690 per tree for the 43 trees the City estimated would need to be removed in the Tree Removal bid item. To exceed the bid from V Lopez Jr. & Sons, the City would have had to have underestimated the number of trees by 892 trees ($614,919 / $690 = 891.2), and that doesn’t even account for the increase in V Lopez Jr. & Sons’ price for the increased number of trees. Encountering 23 times the number of trees the City estimated would need to be removed is outside the bounds of reason. Similarly, Edwards Construction bid $100 per cubic yard for the 1,400 cubic yards of the City estimated would be required for the Class II Aggregate Base bid item. To exceed the bid from V Lopez Jr. & Sons, the City would have had to have underestimated the quantity of aggregate base required by 6,150 cubic yards ($614,919 / $100 = 6,149.2), and that doesn’t even account for the increase in V Lopez Jr. & Sons’ price for the increased number of trees. Although not as extreme as for the Tree Removal, anticipating that the City’s estimate for the quantity of Class II Aggregate Base is 4.4 times lower is outside the bounds of reason. Edwards Construction’s Bid is not unbalanced. THE CITY’S ARBITRARY DECISION CREATES THE APPEARANCE OF FAVORITISM AND THE MISUSE OF PUBLIC FUNDS. The City’s arbitrary rejection of Edward Construction’s Bid creates the very evils the Public Contract Code was enacted to eliminate. As courts have explained, [t]he purpose of requiring governmental entities to open the contracts process to public bidding is to eliminate favoritism, fraud and corruption; avoid misuse of public funds; and stimulate advantageous marketplace competition.” (Konica Business Machs. U. S. A. v. Regents of Univ. of Cal. (1988) 206 Cal.App.3d 449, 456.) By sending the Project out for competitive bidding, but arbitrarily rejecting the lowest responsive bid, the City is failing to take advantage of the competitive market, thereby misusing public funds. This results in an increase of $614,919 in the price of the Project. That increase represents a full 10% of Edwards Construction’s price. That is a significant additional cost to the City, a cost that will fall on the City’s taxpayers. Moreover, the City’s rejection raises the specter of favoritism, graft, and corruption. The City did not notify Edwards Construction of its preliminary determination and give Shannon Sweeney CITY OF ARROYO GRANDE June 19, 2026 Page 11 Edwards Construction an opportunity to address the City’s concerns prior to issuing the Notice of Intent. The City did not even provide a reasoned basis for its rejection prior to issuing its Notice of Intent, instead relying on nebulous concerns about the pricing of unspecified bid items. Instead, the City’s Bid Rejection Letter simply informed Edwards Construction that its Bid was rejected and absurdly claims that Edwards Construction has no recourse for the City’s arbitrary action, as if the City could waive the competitive bidding requirements of the Public Contract Code through self-serving provisions in its Bid Documents. The arbitrary nature of the City’s Rejection Letter creates the appearance that the City wanted to award the Project to award the Project to V. Lopez Jr. & Sons and went looking for a justification to do so, despite the increased cost. This appearance of favoritism is exactly the type of evil the Public Contract Code was enacted to prevent. The City’s belated issuance of its Protest Rejection Letter, which for the first time presented the basis for its rejection of Edwards Construction’s Bid, did not cure the defects. Most notably, the City did not issue the Protest Rejection Letter until after it issued the Notice of Intent. And the City’s Protest Rejection Letter again denied that Edwards Construction had the right to respond to the new allegations included in the letter, including the City’s allegation that Edwards Construction’s price for Section 19 Earthwork was too high, something not even hinted at in its original Bid Rejection Letter. Nor did the City address Edwards Construction’s explanations in its Protest Supplement, the very letter the City was supposedly responding to. These errors again create the appearance of improper favoritism rather than reflecting a meaningful attempt to obtain the best work at the best price. Because the City failed to investigate the reasons why Edwards Construction was able to bid the Project at a lower price than its competitors before improperly rejecting the Bid as nonresponsive, the City’s taxpayers are being denied the protections of the competitive bidding laws. By improperly rejecting Edwards Construction’s Bid, the City is imposing $614,919 in additional costs on its taxpayers for no discernable benefit, exactly the opposite of the purposes for the Public Contract Code. That there is no legitimate basis for this decision, as well as the City’s repeated failure to provide Edwards Construction with the due process protections afforded under the Public Contract Code, suggest that the City’s decision is driven by favoritism rather than the public’s best interest. CONCLUSION Based on the foregoing, as well as the information in its Supplemental Protest, Edwards Construction requests that the City rescind its Rejection Letter and instead recommend that the Project be awarded to Edwards Construction. Edwards Construction submitted the lowest responsive bid, and there is no justification for wasting $614,919 in taxpayer dollars Isaac Rosen BEST BEST & KRIEGER LLP June 19, 2026 Page 12 by awarding the Project to a different contractor at a higher cost to the public. Edwards Construction looks forward to working with the Authority to complete this important Project without further delay. Sincerely, SMTD Law LLP Jonathan J. Dunn JJD/tau Enclosure(s) c: Client (email only) Sidney Sweeney, Arroyo Grande, ssweeney@arroyogrande.org Exhibit 1 Exhibit 2 Exhibit 3 NOTICE OF INTENT TO AWARD Date of Notice: June 15, 2026 Project Title: Halcyon Complete Streets Project Number: PW 2023-15 To All Bidders/Proposers: This Notice serves to inform all interested parties that the City of Arroyo Grande has completed its evaluation of the proposals submitted for the above-referenced project. Based on the results of the evaluation and in accordance with the requirements of the solicitation, the Agency intends to award a contract to: V. Lopez Jr. & Sons, General Engineering Contractors, Inc. 1639 E. Donovan Road Santa Maria, CA 93454 This Notice of Intent to Award does not constitute a contract award. The City Council is scheduled to consider the award of this project at its meeting on June 23, 2026. No contract shall be formed until the City issues a formal Notice of Award and executes a contract with the selected firm. Any proposer wishing to protest this intended award must have done so in accordance with the procedures set forth in the Bid Book. Protests must have been received by within 5 calendar days of the bid opening, which was June 9, 2026. The City appreciates the time and effort invested by all firms that submitted bids. Thank you, Theresa Wren, Capital Improvement Projects Manager twren@arroyogrande.org Exhibit 4 DATE: June 16, 2026 TO: Shannon Sweeney Acting Public Works Director / City Engineer City of Arroyo Grande 1375 Ash Street Arroyo Grande, CA 93420 FROM: Brad Edwards, President Edwards Construction Group Inc. 991 Bennett Ave Arroyo Grande, CA 93420 RE: Protest Supplement – Rejection of Bid for Halcyon Complete Streets Project ATPSB1-5199(035) Dear Ms. Sweeney, This letter serves as a formal "Protest Supplement" on behalf of Edwards Construction Group Inc. ("Edwards") regarding the City of Arroyo Grande’s ("City") letter dated June 15, 2026, which notified us of the City’s intent to reject our bid as non-responsive. We respectfully but firmly refute the City’s determination that our bid was "unbalanced" or "non-responsive". Under Public Contract Code § 20162, the City has a clear statutory duty to award the contract to the lowest responsible bidder. As the lowest bidder for the Project, Edwards is entitled to the award unless the City can demonstrate a material failure to comply with the bid specifications.It is our firm position that the City's invocation of this clause to disqualify the most competitive proposal constitutes a clear abuse of administrative discretion. This determination is devoid of a substantial factual foundation and stands in direct contravention of the core tenets of competitive public procurement as established under California law. In public contracting, a bid is only "unbalanced" in a way that warrants rejection if it is mathematically unbalanced (e.g., front-loading costs in a way that suggests fraud or severe risk to the project's completion) or materially unbalanced (e.g., creating an outcome where the lowest total bid price is no longer actually the lowest price due to skewed quantities). The City’s rejection fails to meet the threshold of a 'material' deviation from the bid instructions. A mere variance from the engineer’s estimate or the 'average' of other bidders does not constitute a valid basis for rejection under the Public Contract Code Arbitrary Misclassification of Price Competitiveness The City’s June 15 letter alleges that Edwards' pricing for general conditions and temporary traffic control does not "accurately reflect the cost to perform the Work" and falls below "staff’s expectations". This reliance on subjective staff expectations is legally prohibited. In Pozar v. Department of Transportation (1983) 145 Cal.App.3d 269, the court held that public agencies have a ministerial duty to follow established, objective criteria in bid evaluations rather than relying on internal, subjective benchmarks or expectations. The "unbalanced" classification is an arbitrary mischaracterization of Edwards’ legitimate competitive advantages. Our headquarters is located at 991 Bennett Ave in Arroyo Grande, providing us with immediate geographic proximity to the Project site. This proximity allows for significant operational efficiencies, reduced mobilization costs, and streamlined traffic control logistics that bidders from outside the immediate area simply cannot match. Our lower pricing for these line items reflects these real-world efficiencies, not a failure to understand or allocate the scope of work. Furthermore, our lower costs for traffic control are legitimately derived from our ownership of a comprehensive inventory of traffic control signage, which eliminates some of the rental and lease overhead that other bidders might have factor into their proposals. Our estimate for traffic control is sufficient to meet all safety requirements and contract specifications. A lower cost does not equate to a failure to perform or a failure to comply with the scope of work. The concept of “responsiveness” in public works bidding refers to whether a bidder has complied with the material requirements of the bid package (e.g., submitting required forms, bonds, and certifications). The City is attempting to reclassify price competitiveness as non-responsiveness. By rejecting the lowest bid based on a subjective evaluation of “balanced costs,” the City is contravening the intent of the Public Contract Code, which is to protect the public from paying higher costs for the same work. This is a misapplication of Article 31. Purpose of Competitive Bidding The core purpose of competitive bidding is to "guard against favoritism, improvidence, extravagance, fraud and corruption, and to secure the best work or supplies at the lowest price practicable" (Konica Business Machines U.S.A. v. The Regents of the University of California (1988) 206 Cal.App.3d 449). By rejecting the lowest bid due to its competitiveness, the City is effectively subverting the goal of avoiding the misuse of public funds. Furthermore, the City’s concerns regarding line-item allocation do not constitute a "material" irregularity. As established in Valley Crest Landscape, Inc. v. City of Davis (1996) 41 Cal.App.4th 1432, a bid variation is only material if it gives a bidder a substantial advantage or benefit not enjoyed by other bidders. Edwards has sought no such advantage; we have simply provided the most aggressive and efficient pricing based on our local presence and operational model. Procedural Deficiency and Burden of Proof Furthermore, the City bears the burden of establishing a factual, objective record to justify the rejection of the lowest responsive bidder. The City’s reliance on "staff expectations" regarding line-item costs is not a substitute for the substantial evidence required to disqualify a bidder. Absent a showing that Edwards’ bid is mathematically or materially unbalanced in a way that prejudices the City or undermines the project's financial integrity, the rejection is unsupported. Mere variance from other bidders’ line-item allocations, when justified by actual operational efficiencies and equipment ownership, does not constitute a material defect. Conclusion The City’s intent to recommend the award to V. Lopez Jr. & Sons despite Edwards’ lower bid would result in an unnecessary and legally questionable expenditure of public funds. We formally request that the City rescind its rejection of Edwards’ bid and proceed with the award to Edwards Construction Group Inc. as the lowest responsive and responsible bidder. We look forward to your prompt response. Please provide written confirmation of receipt of this protest Sincerely, Brad Edwards President, Edwards Construction Group Inc. Exhibit 5