November 1, 2010

Competitive Bidding — Tips & Traps


Fall 2010

Mistakes happen in competitive construction bidding. Bidding instructions are often confusing, and bids are evaluated by contracting authorities whose expertise varies greatly. Contractors also frequently receive pricing from subcontractors and suppliers only minutes before the bid deadline, leaving no time to verify that they have not excluded or omitted work items or to check their assumptions and calculations. Having a strategy for catching and responding to mistakes is critical.


Only "responsive" bids can be considered for award. To be responsive, a bid must comply with all essential requirements of the invitation to bid, which are typically the requirements that affect price, quality, quantity, or delivery.

Invitations to bid often make other requirements essential (e.g., "bidders shall attend a pre-bid conference"). Although compliance with such requirements may have nothing to do with price, quality, quantity, or delivery, failure to comply will make a bid subject to rejection by the contracting authority or to protest by other bidders on responsiveness grounds.

Contracting authorities may waive bid requirements or mistakes if doing so does not give the bidder an unfair advantage over other bidders (e.g., a bidder's failure to return the required number of signed bids is waivable), and clerical errors may be corrected if the error is obvious and the bidder confirms the correction in writing.

Other bidders may protest waivers and argue that the use of mandatory as opposed to permissive language in the invitation to bid (using "shall" instead of "may") made the requirement one that cannot be waived. Unless a disappointed bidder can show substantial prejudice, courts will usually defer to the contracting authority's decision on such issues.

Bidding Traps

Every mandatory requirement in an invitation to bid that is seemingly unimportant is a trap. "Bids shall be completed and signed with black ink" and "bidders shall sign in at the pre-bid conference," are perfect examples.

Other traps, more difficult to spot, include requirements that the only person who can sign bids for a bidder is someone identified in a prequalification form. Another is requiring that the bid bond be in a form substantially similar to a sample bond form included in the bidding instructions. Despite the sample form, sureties sometimes supply their own bid bond form or attach a rider to the sample. At first glance the forms and riders appear harmless, but a close reading frequently reveals provisions that are substantially different from those of the sample form — such as provisions limiting the period within which claims may be brought against the bond. Savvy contracting authorities will find those differences and will declare the bid non-responsive.

Most traps can be avoided. Keep a checklist of all mandatory requirements and confirm that all documents provided by others that will be included in a bid (e.g., a bond or a subcontractor certification) satisfy the requirements of the invitation to bid. Do not assume that documents provided by others — even sureties — are suitable.

Mistakes Justifying Withdrawal

When a mistake makes a bid substantially less than it should be and the rules preclude correction, a bidder may try to withdraw its bid without forfeiture of its bid bond. Before the bid deadline, bids may be freely withdrawn — which is of little help because bids are rarely submitted early and pricing mistakes often become apparent only when compared to other bids.

After the bid deadline, contracting authorities will not typically allow withdrawal for errors in judgment, such as underestimating necessary labor or equipment, selecting a deficient work method (e.g., assuming a 30-inch pipe would work when a larger, more expensive pipe is necessary), and failing to apply reasonable productivity estimates.

Withdrawal is allowed for arithmetic and clerical errors, omission of pricing for a required item, misplaced decimals, and errors in transferring numbers between forms. A bidder must immediately inform the contracting authority upon discovery of the mistake because withdrawal may be prohibited after the contracting authority relies on the bid.

A mistaken bidder must also clearly and convincingly show that the mistake was inadvertent. If the bidder's bid worksheets do not clearly show a mistake, the contracting authority has no way of knowing whether the "mistake" was really an intentional gamble — such as the unbalancing of a bid to take advantage of suspected quantity errors in the contracting authority's bid forms. Contracting authorities and courts will not permit withdrawal and release a bid bond if a bidder cannot clearly and convincingly prove that a mistake was unintentional.

To avoid costly disputes over bid mistakes, bidders must understand the rules and act quickly. Bid mistakes are always subject to the applicable rules and by the facts of the particular situation. Bidders lessen the risk and impact of a bid mistake by considering the details described above.

For more information on this topic, please contact or call (888) 598-7070.


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