Opinion
KANE, J.
This is an appeal from an order and judgment directing issuance of a peremptory writ of mandate ordering defendants (State) to fund a social service contract entered into between plaintiffs (County or San Francisco) and two private corporations pursuant to Welfare and Institutions Code,
section 12300 et seq. The background facts are relatively simple and may be summarized as follows:
By statute enacted in 1973, the Legislature introduced a host of so-called in-home supportive services for those recipients of public assistance who can remain in their own homes when such services are provided. In-home supportive services include such things as grocery shopping, laundry, cleaning, and housekeeping (§ 12300). While the full power to supervise every phase of the administration of social services, including homemaker and chore services, is vested in the state Department of Health (DOH) (§ 10600), the implementation of the homemaker and chore program is delegated to the counties. According to section 12302, each county is required to develop and submit a plan to the DOH that provides for the delivery of services; and in order to implement the plan, a county may contract with private individuals or agencies for the purchase of services. The right of the counties to contract, and to establish procedures, for the purchase of supportive services is circumscribed in the
statute
(§ 12302.1). The statute expressly provides that the cost of the service may not exceed by more than 10 percent the cost allowed by DOH (§ 12303).
Based upon the above statutory scheme, in 1976 County published an invitation for bids for furnishing homemaker services to eligible welfare recipients. Initially, there were six bidders on the proposed contract, of whom three lower bidders were disqualified. Subsequently, the following bids were made: an individual bid by Hadley Hall at $8.03 per hour; an individual bid by Robert Lucas at $5.98 per hour; and a joint bid by San Francisco Home Health Services, Inc. (operated by Hall) and Health Conservation, Inc. (operated by Lucas) at $7.71 an hour. County accepted the joint bid of the two corporations rather than the low bid made by Lucas individually, despite the fact that it had been advised in a letter dated September 23, 1976, that State would reimburse San Francisco only up to $5.50 per hour for homemaker services.
In view of the apparent deviation from the maximum cost allowed, on June 30, 1977, a day before the contract became effective, DOH informed County that the $5.98 bid submitted by the lowest qualified bidder
(Lucas) was the reasonable cost of contract services; that County had provided no justification for awarding the contract in dispute to the joint bidder whose proposal was $639,000 higher than the individual Lucas bid; and that as a consequence State would not approve the contract accepting the joint bid of the two corporations.
Thereupon, County brought this action to compel State to perform its duties under section 12300 et seq., and especially to provide state and federal funds for payment of services under the contract. After a trial, the superior court found inter alia that in awarding the contract in dispute to the joint bidder, County had complied with all relevant statutes and regulations, and concluded that pursuant to statutory authority State was obligated to provide the requisite funding. A peremptory writ issued ordering the approval and funding of the contract awarded to the joint bidder.
Although the parties raise a number of issues on appeal, the fundamental question to be decided is whether homemaker and/or chore services contracts awarded by counties pursuant to the statute are subject to approval or disapproval by State. If this issue is to be resolved in the affirmative, the next crucial question arises: whether the disapproval of the contract at bench by State was reasonable and justified in the circumstances here present.
In discussing the first point, we initially note that the funding of the in-home supportive services does not constitute a state task alone. The brunt of the burden in furnishing these social services rests on the federal government which contributes matching funds (up to 75 percent) to a state’s efforts and expenditures. However, the contribution by the federal
government to the financing of state social welfare is neither automatic nor unconditional. In order to qualify for the sizable federal aid, a state must comply with the conditions embodied in title XX of the Social Security Act (42 U.S.C. § 1397 et seq.). The most salient of these requirements are: that a single state agency must be designated which is responsible for the administration or the supervision of administration of the services (including the overall control and oversight of tit. XX activities) (42 U.S.C. § 1397b(d)(1)(C); 45 C.F.R. § 228.6(e) (1977)); that the services contracts must conform to federal law which requires that such contracts “Provide for a stated number of units of service at a specific dollar rate, or for a specific dollar amount, or for costs to be determined in accordance with acceptable cost allocation methods” (45 C.F.R. § 228.70(a)(5) (1977)); that the award be made to the responsible bidder whose bid is “most advantageous” to the state or local government (45 C.F.R. § 74.154(e)(1) (1977)); that the state is accountable for the federal funds (cf. 45 C.F.R. § 228.6(e)(4) (1977)); and, finally, that it is the state, not the counties that the federal government looks to for reimbursement or offsets where indicated. In recognition of these stated responsibilities, the federal statute vests the designated state agency with authority to make rules and regulations governing the administration of the state program (45 C.F.R. § 228.6(d) (1977)).
The California statutory scheme is in full conformity with federal law. At all relevant times, section 10600 provided in pertinent part that “the State Department of Health is hereby designated as the single or appropriate state agency
with full power to supervise every phase of the administration of services
for which grants-in-aid are received from the United States government or made by the state in order to secure full compliance with the applicable provisions of state and federal laws.” (Italics added.) State’s supervisory power is further underlined by section 10603.1 which provides that
“The State Department of Health
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Opinion
KANE, J.
This is an appeal from an order and judgment directing issuance of a peremptory writ of mandate ordering defendants (State) to fund a social service contract entered into between plaintiffs (County or San Francisco) and two private corporations pursuant to Welfare and Institutions Code,
section 12300 et seq. The background facts are relatively simple and may be summarized as follows:
By statute enacted in 1973, the Legislature introduced a host of so-called in-home supportive services for those recipients of public assistance who can remain in their own homes when such services are provided. In-home supportive services include such things as grocery shopping, laundry, cleaning, and housekeeping (§ 12300). While the full power to supervise every phase of the administration of social services, including homemaker and chore services, is vested in the state Department of Health (DOH) (§ 10600), the implementation of the homemaker and chore program is delegated to the counties. According to section 12302, each county is required to develop and submit a plan to the DOH that provides for the delivery of services; and in order to implement the plan, a county may contract with private individuals or agencies for the purchase of services. The right of the counties to contract, and to establish procedures, for the purchase of supportive services is circumscribed in the
statute
(§ 12302.1). The statute expressly provides that the cost of the service may not exceed by more than 10 percent the cost allowed by DOH (§ 12303).
Based upon the above statutory scheme, in 1976 County published an invitation for bids for furnishing homemaker services to eligible welfare recipients. Initially, there were six bidders on the proposed contract, of whom three lower bidders were disqualified. Subsequently, the following bids were made: an individual bid by Hadley Hall at $8.03 per hour; an individual bid by Robert Lucas at $5.98 per hour; and a joint bid by San Francisco Home Health Services, Inc. (operated by Hall) and Health Conservation, Inc. (operated by Lucas) at $7.71 an hour. County accepted the joint bid of the two corporations rather than the low bid made by Lucas individually, despite the fact that it had been advised in a letter dated September 23, 1976, that State would reimburse San Francisco only up to $5.50 per hour for homemaker services.
In view of the apparent deviation from the maximum cost allowed, on June 30, 1977, a day before the contract became effective, DOH informed County that the $5.98 bid submitted by the lowest qualified bidder
(Lucas) was the reasonable cost of contract services; that County had provided no justification for awarding the contract in dispute to the joint bidder whose proposal was $639,000 higher than the individual Lucas bid; and that as a consequence State would not approve the contract accepting the joint bid of the two corporations.
Thereupon, County brought this action to compel State to perform its duties under section 12300 et seq., and especially to provide state and federal funds for payment of services under the contract. After a trial, the superior court found inter alia that in awarding the contract in dispute to the joint bidder, County had complied with all relevant statutes and regulations, and concluded that pursuant to statutory authority State was obligated to provide the requisite funding. A peremptory writ issued ordering the approval and funding of the contract awarded to the joint bidder.
Although the parties raise a number of issues on appeal, the fundamental question to be decided is whether homemaker and/or chore services contracts awarded by counties pursuant to the statute are subject to approval or disapproval by State. If this issue is to be resolved in the affirmative, the next crucial question arises: whether the disapproval of the contract at bench by State was reasonable and justified in the circumstances here present.
In discussing the first point, we initially note that the funding of the in-home supportive services does not constitute a state task alone. The brunt of the burden in furnishing these social services rests on the federal government which contributes matching funds (up to 75 percent) to a state’s efforts and expenditures. However, the contribution by the federal
government to the financing of state social welfare is neither automatic nor unconditional. In order to qualify for the sizable federal aid, a state must comply with the conditions embodied in title XX of the Social Security Act (42 U.S.C. § 1397 et seq.). The most salient of these requirements are: that a single state agency must be designated which is responsible for the administration or the supervision of administration of the services (including the overall control and oversight of tit. XX activities) (42 U.S.C. § 1397b(d)(1)(C); 45 C.F.R. § 228.6(e) (1977)); that the services contracts must conform to federal law which requires that such contracts “Provide for a stated number of units of service at a specific dollar rate, or for a specific dollar amount, or for costs to be determined in accordance with acceptable cost allocation methods” (45 C.F.R. § 228.70(a)(5) (1977)); that the award be made to the responsible bidder whose bid is “most advantageous” to the state or local government (45 C.F.R. § 74.154(e)(1) (1977)); that the state is accountable for the federal funds (cf. 45 C.F.R. § 228.6(e)(4) (1977)); and, finally, that it is the state, not the counties that the federal government looks to for reimbursement or offsets where indicated. In recognition of these stated responsibilities, the federal statute vests the designated state agency with authority to make rules and regulations governing the administration of the state program (45 C.F.R. § 228.6(d) (1977)).
The California statutory scheme is in full conformity with federal law. At all relevant times, section 10600 provided in pertinent part that “the State Department of Health is hereby designated as the single or appropriate state agency
with full power to supervise every phase of the administration of services
for which grants-in-aid are received from the United States government or made by the state in order to secure full compliance with the applicable provisions of state and federal laws.” (Italics added.) State’s supervisory power is further underlined by section 10603.1 which provides that
“The State Department of Health
shall advise public officers regarding the administration of services by public agencies throughout the state, and
shall supervise the administration of such services to all persons receiving or eligible to receive such
services.” (Italics added.) (See also §§ 10553.1, 10609.1, 10613.1.) Consistent with the federal statute, section 12302.1 sets out in detail the requisite terms of the in-home services contracts, including the all-important requirement that such contracts must be entered into as a result of competitive bidding (see fn. 2,
ante).
Last, but not least, following the federal mandate, section 12303 sets an upper limit to the cost of in-home services contracts by providing that the allowable cost of services must be determined by
DOH, and that the payment made under such contracts may not exceed by more than 10 percent the cost allowed by the department (see fn. 3,
ante).
While the statutory provisions referred to above do not contain explicit language to the effect that the homemaker and chore services contracts are valid only if approved by the state, the statutory scheme as a whole reaffirms the premise that the state agency in charge of administration of social services does possess implied authority to approve or disapprove such contracts.
First, as indicated above, the statute grants
full power
to DOH, the designated single, financially liable state agency,
to supervise every phase of the administration of services.
This all-inclusive supervisory power necessarily embraces the power of fiscal control. In order to exercise fiscal control in an efficacious and meaningful way, however, the state must have authority to disapprove ill-considered, wasteful or overly burdensome social services contracts which unduly deplete the limited state welfare funds on the one hand, and shut off the all-important federal contribution on the other. The implied power to disapprove social service contracts, therefore, must be deemed to constitute an indispensable element of the full fledged supervisory power granted to DOH by way of express statutory mandate.
Second, as also set out earlier, the statute delegates the power to determine the maximum allowable cost of homemaker and chore services contracts to DOH (§ 12303; fn. 3,
ante).
It is plain that this cost-setting power of the state agency would be meaningless and futile if not combined with authority to enforce it. In short, the enforcement of the cost-limiting provisions postulates a state power to disapprove homemaker or chore services contracts in case they are in conflict with or contravene the cost-limitation mandated by the statute.
Third, the authority of the state to approve or disapprove the homemaker and chore services contracts is supported by sound legal policy. As mentioned earlier, state welfare funds are limited in amount even if contributed to a large extent by the federal government. The limited nature of the financial resources makes it imperative that the funds available be used in a prudent, thrifty and equitable way in view of the overriding objective that all eligible and needy welfare recipients be provided the in-home services to which they are entitled under the
statute. It is obvious that this statutory goal may be attained only if the designated single state agency has control over the allocation of the funds among the numerous counties and has the authority to strike a balance among the competing claims. Should the supervisory power of the state be curtailed and the respective counties be given a blank check in the state funding of such contracts as San Francisco advocates, the legislative objective to provide in-home supportive services to
all
needy and eligible welfare recipients would be frustrated, and the profligate and unreasonable spending of certain counties would result in depletion of the limited welfare resources at the expense of other equally eligible and needy welfare recipients.
Fourth, the state’s power to disapprove wasteful and undesirable social services contracts is buttressed by the administrative directives issued by DOH and the longstanding practice established between State and the counties. Thus, guidelines attached to Social Services Letter No. 76-7 issued to all county welfare directors on July 16, 1976, emphasizes that
“County awards contract, contingent on Department of Health approval .
. .” and that
“The county will submit the
contract... to the Department of Health
for
approval.” (Italics added.) The invitation for bids likewise underlined that “Following the public hearing before the Board of Supervisors on material pertaining to the bids,
all material pertaining to the award will be sent to the Department of Health,
State of California,
for final
approval.” (Italics added.) County’s own understanding that the social services contracts (including the homemaker and chore services agreements) are subject to State’s approval is further demonstrated by the fact that in response to an inquiry County’s attorney stated that
“It is advisable that
upon completion of
the
new
Bid Proposal Package
the same
be submitted to the State Department of Health
and any appropriate federal agency
for approval
and that approval be directed to your Department in writing.” (Italics added.) Also, in a similar action (San Francisco Home Health Service v. State of California, action No. 717-372), County’s purchasing agent acknowledged that the in-home supportive services contracts called for approval by State.
The above samples clearly indicate that all the parties to this lawsuit interpreted the
applicable statutes and regulations to the effect that State had power to approve or disapprove the types of social services contracts involved in this case, It goes without saying that the construction of a statute or regulation by the officials charged with their administration is highly significant and entitled to great weight
(Nelson
v.
Dean
(1946) 27 Cal.2d 873 [168 P.2d 16, 168 A.L.R. 467]; 3 Sutherland, Statutory Construction (4th ed. 1974) § 65.05, p. 174).
In summary, we conclude that as a matter of statute, sound legal policy and the administrative interpretation of the statutory and regulatory provisions, State has the power to approve or disapprove the in-home supportive services contracts entered into between the counties and private individuals or entities pursuant to the Welfare and Institutions Code. The authority of State to disapprove the in-home supportive services agreements includes the special power to deny the funding of such contracts where the circumstances surrounding the contracts so indicate. Therefore, the next crucial issue awaiting determination is whether in the situation here present State was justified in denying the funding of the homemaker contract entered into by County.
In passing upon the question of justification, we attach special significance to the September 23, 1976, letter written by DOH to County. In that letter, the Director of DOH expressed his concern about the statewide cost of the homemaker and chore services and the equitable allocation of the limited resources available. The director pointed out that during two consecutive fiscal years San Francisco received one-third to one-half more funds for such services than the other California counties. In order to curtail the extravagant and lavish spending of the welfare funds on the part of County, the director advised County that effective December 1, 1976, State would reimburse San Francisco only up to $5.50 per hour for homemaker services and $4.84 per hour for chore services.
We believe that both the cost limitation set up by State and the disapproval of the homemaker service contract at issue must be held entirely reasonable and justified in light of the circumstances of the case. As we have pointed out, State has not only a right, but a statutory, mandatory duty, to determine the maximum allowable cost payable for the in-home supportive services contracts. Moreover, the figures ascertained as to San Francisco must be found not only reasonable, but generous indeed. As appears from the September 23, 1976, letter, the upper limit figures were arrived at by considering the special circumstances of San Francisco, and “The figures of $5.50 per hour and $4.84 per hour are 22 percent and 31 percent, respectively, above the statewide average hourly cost for contracted services of $4.51 and $3.69.” At the same time it is undisputed that while the maximum allowable rate for the homemaker services in question was $6.05 per hour ($5.50 plus 10 percent), the contract in dispute adopted the joint bid which provided a rate of $7.71 per hour, well in excess of the authorized maximum hourly charge. Under these circumstances, State was not only justified, but directly mandated, to disapprove the contract at bench in order to prevent excesses and to ensure an equitable allocation of funds to all counties.
The foregoing discussion makes it unnecessary to engage ourselves in a lengthy discussion with respect to the remaining contentions raised on appeal. San Francisco’s argument that State failed to discharge its statutory duty under section 12303, subdivision (a), because it did not determine the allowable cost of services statewide, may be briefly disposed of. While the cited section provides that the allowable cost must be determined by DOH, nowhere does it appear that State must make a uniform determination of costs throughout the whole state,
nor is there any requirement that the determination must be made in any particular manner.
County’s additional argument that the September 23, 1976, letter set up maximum rates only as to contracts entered into prior to December 1, 1976, and that there were no maximum charges as to homemaker and chore services contracts concluded after December 1, 1976, cannot be accepted for three simple reasons: One, the September 23, 1976, letter as a whole clearly conveys the idea that State wished to curtail County’s spending, not only as to past, but also future contracts, i.e., agreements entered into subsequent to December 1, 1976. Two, Mr. Wilson
testified “That the $5.50 figure was considered by the Department to be a rate that was reasonable for the future, not just the present. That subsequent to December 1st, we believe that $5.50 was a reasonable rate.” Three, the issue whether the disapproval of the contract was proper must be determined not only upon the September 23, 1976, letter, but upon the record as a whole. When so viewed, the record at hand convincingly demonstrates that the disapproval of the homemaker service contract in dispute was fully justified. County’s last contention, that the regulations and/or directives of the state agency were in excess of State’s statutory authority, requires just passing attention. For one thing, the Director of DOH has a statutory authorization to adopt regulations, orders or standards of general application to implement, interpret or make specific the law enforced by DOH (§ 10554.1). For another, as spelled out in detail above, State has an unquestionable right to approve or disapprove the in-home supportive services contracts. As a consequence, all the regulations or directives reaffirming that right must be held valid in their entirety.
In view of our conclusion, it is unnecessary to discuss State’s alternative contention that the bidding process was improper. Suffice it to say, however, that our review of the record fails to find any evidentiary support for such an assertion.
The judgment (order) directing the issuance of a peremptory writ of mandate is reversed.
Taylor, P. J., and Rouse, J., concurred.
Respondents’ petition for a hearing by the Supreme Court was denied February 21,
1919.