On June 13th, in Consulting Engineers and Land Surveyors of California, Inc. v. Professional Engineers in California Government, (2006) 2006 Cal. App. LEXIS 874, the Third District Court of Appeal struck down provisions of a union agreement between the state and civil service engineers limiting the state’s right to contract with private engineers, holding that the provisions conflict with Proposition 35 and are unconstitutional.

The Court characterized the dispute “as another round in a long-standing battle by state employees to prevent the State of California from contracting out to private companies the performance of state services." This battle began in a series of cases in which Courts interpreted Article VII of the California Constitution, the Civil Service Act, “to forbid, in most circumstances, private companies from contracting with the state to perform services that can be accomplished by state employees.” (See e.g., Professional Engineers v. Department of Transportation (1997) 15 Cal.4th 543, 570-572.) 

In response to these Court decisions, California voters approved Proposition 35, the “Fair Competition and Taxpayer Savings Act,” adding Article XXII to the Constitution, which provides in pertinent part:

Section 1: The State of California and all other governmental entities, […] shall be allowed to contract with qualified private entities for architectural and engineering services for all public works of improvement. The choice and authority to contract shall extend to all phases of project development […]

Section 2: Nothing contained in Article VII of this Constitution shall be construed to limit, restrict, or prohibit the State or any other governmental entities […] from contracting with private entities for the performance of architectural and engineering services.”

Thereafter, (and apparently in response to Proposition 35), the Professional Engineers in California Government (“PECG”), a union representing civil service engineers, and the State entered into a collective bargaining agreement. Provision 24 of the agreement gave preference to civil service engineers over outside engineers, permitted termination of existing outside engineering contracts and transfer of work to union engineers, and required actions, such as termination of outside contracts to minimize the displacement of state engineers due to outside contracts.

The Consulting Engineers and Land Surveyors of California, Inc. (“CELSC”), a private engineer trade organization, challenged the validity of the Provision 24 and sought injunctive and declaratory relief on the grounds that the Provision 24 was an impermissible restriction of the State’s right to contract for architectural and engineering services and as an unlawful attempt to resurrect the Civil Service Act, in violation of Proposition 35.

The trial court granted a permanent injunction against the implementation of Provision 24 and PECG appealed. The Third District Court of upheld the injunction on the grounds that the terms of the agreement “limit the ability of the State to contract freely for architectural and engineering services,” and “on their face, directly conflict with Article XXII.”

The Court also found Provision 24 to be in conflict with the stated goals of Proposition 35. “The mandatory preference for civil service engineers, without a concomitant requirement of costs savings, does not ensure the best value for California taxpayers, and it undermines the goal of promoting fair competition. Moreover, common sense dictates that the review and termination of existing contracts is not conclusive to speeding the completion of backlogged projects. In other words, the provision […] contravenes the goals of Proposition 35 and thwarts the intent of the electorate.”