On public construction projects, bid prices are generally a matter of public record. On private projects, of course, this is not the case. The private project owner has no legal obligation to disclose bid prices to the bidders. A recent Tennessee court decision illustrates, however, the drawbacks to keeping this information too close to the chest.
Of the four bids received, the low bid was approximately $3.3 million and the second low bid was $5.2 million. The private project owner suspected a mistake. The owner declined to disclose the bid price spread to the low bidder, but said the bid was lower than the owner’s estimate. The bidder confirmed the accuracy of its bid and signed the contract.
The contractor was unable to complete performance at its bid price and discovered a critical mistake it had made in pricing the work. The contractor sued the private project owner for fraudulent exploitation of a known mistake in a bid. The owner prevailed. The owner had no duty to disclose the bid price spread. And the owner had given the low bidder an opportunity to review and confirm its bid price.
Couldn’t the project owner have avoided all these problems simply by providing the bid spread to the low bidder? After all, this information is frequently shared with other parties to the project. The most common examples would be the owner’s construction lender and the contractor’s bonding company.
On the other hand, companies that bid work to private sector owners may have an expectation of confidentiality. What do you think? As always, I invite your comments below.
Featured in next week's issue of Construction Claims Advisor:
- Minnesota High Court Finds “Best Value” Proposal Responsive
- Contractor Recovers Payment from Bond and then Sues for Lost Profit
- Cost-Plus Contract Converted by Change Order to Fixed-Price
Bruce Jervis, Editor
Construction Claims Advisor