On November 5, 2007, the California Supreme Court held that the State of California could not enter into a memorandum of understanding with an engineering union which restricted the State from hiring and retaining private engineering firms where such restrictions were barred by a recent amendment to the state constitution. (See Consulting Engineers and Land Surveyors of California, Inc. v. Professional Engineers in California Government, 2007 Cal. LEXIS 12680.)

In November 2000, California’s voters approved Proposition 35, adding art. XXII to the state constitution.  Art. XXII allowed the state to contract with private entities to obtain architectural and engineering services for public works of improvement.  Proposition 35 specified that art. VII, which the courts had usually interpreted as barring such contracts, would not be construed to limit the state from contracting with private companies for such services.

After Prop. 35 was passed, the state and Professional Engineers in California Government (PECG), a union representing engineers employed by the state, entered into a collective bargaining agreement, known as a memorandum of understanding (MOU). Article 24 of the MOU provided that, except in extremely unusual or urgent circumstances, the state must make every effort to use state employees to perform architectural and engineering services for public works projects, before resorting to contracts with private companies. 

Art. 24 of the MOU mandated the preferential use of civil service engineers over outside engineers, except under specified circumstances.  It also permitted termination of existing outside engineering contracts and transfer of the work to civil service engineers after the contracts are reviewed by a committee dominated by PECG members.  Finally, it required that steps be taken, such as termination of outside contracts were possible, to minimize the displacement of state engineers resulting from contracting out engineering services.  Although cost savings appeared to be a consideration with respect to the termination of existing engineering contracts, the court noted there was no requirement that the preference given to civil service engineers for new projects must be based on cost effectiveness.

Consulting Engineers and Land Surveyors of California, Inc. filed a petition for a writ of mandate, seeking to enjoin the implementation of Art. 24 of the MOU.

The Court found that the effect of all of these requirements was to restrict the ability of state authorities to freely contract out engineering services.  The mandatory preference for civil service engineers, without a concomitant requirement of costs savings, did not ensure the best value for California taxpayers, and it undermined the goal of promoting fair competition.  Moreover, the court observed, common sense dictated that review and termination of existing contracts would not be conducive to speeding the completion of backlogged projects.  Art. 24 thus contravened the goals of Prop. 35 and thwarted the intent of the electorate.

The court found further that substantial evidence supported the trial court’s finding that the implementation of art. 24 of the MOU would (1) disrupt ongoing public works projects and waste public funds by terminating existing contracts, (2) produce great and irreparable injury to the public and to the parties to existing architectural and engineering services contracts, and (3) result in the loss of benefits that would flow to the public from such future contracts.

The California Supreme Court affirmed, holding that art. 24 of the MOU fatally conflicted with Prop. 35.