ConstructionPro Week, Volume: 5 - Issue: 31 - 08/12/2016

Can a Bidder Rely on Subcontractor Price Quotations?

By Bruce Jervis

 

When a contractor is preparing to submit a binding bid on a contract, the contractor is necessarily reliant on the price quotations it receives from prospective subcontractors and suppliers. It is impossible to price a bid without incorporating the cost of parties furnishing labor and materials to the project. Unfortunately, many of the subcontractor quotations contain terms and conditions inconsistent with the contractor’s preferred subcontract terms.

 

A recent California public project is an example. A glazing contractor submitted a price to a prime bidder. The price quotation contained a requirement for an advance deposit, a price escalation clause, and a disclaimer of subcontractor responsibility for liquidated damages or bonding. The bidder incorporated the price into its bid and listed the glazing contractor as its sub.

 

After contract award, the contractor sent the glazing contractor a copy of the contractor’s standard subcontract form. The form disregarded or directly contradicted the terms of the price quotation. The glazing contractor refused to enter into a subcontract, and the contractor was forced to hire a costlier sub.

 

The contractor went to court to recover its increased cost, arguing that trade practice entitled it to rely on the glazing contractor’s price alone while ignoring the quotation’s terms and conditions. The court disagreed. A bidder is not allowed to rely on a price quotation without factoring in the terms and conditions that relate directly to price.

 

Regardless of whether one is a general contractor or a trade contractor, how can this situation be managed? Is it practical, or even possible, to reconcile terms and conditions prior to bid submittal? And once a bid has been accepted, isn’t there a potential disagreement with every subcontractor and supplier? Your comments are welcomed.

 

COMMENTS

This is a difficult situation. As a GC, we make it standard practice to post our subcontract with the subcontract ITB with the specific instruction that "this is our subcontract". Most subs will honor it when awarded. The tricky ones will try to modify it - whether they have listed contradictory terms in their proposal or not. Things move fast on bid day. The alternate terms are not always caught. Further, often the sub estimator accepting the job will waive or not discuss what he knows will be an issue in effort to get the project. We then issue the subcontract, and another guy in "legal" or their CFO will start with the mark ups. Even worse, we have had subs execute our subcontract and then come back and try to get deposits or refuse to mobilize until some other term is modified. The crazy part is they don't even both to "bill" the deposit. They just demand it before placing the order. If they would just bill it in time, we might be able to bill the client accordingly in a mobilization req. and have be a non-issue altogether. It's the head in the sand approach that causes everything to come apart in our experience.
Posted by: Dennis Kane - Friday, August 12, 2016 10:30 AM


It is a valid risk and it is recommeded that the main contractors analyse, assess and incorporate a reasonable allowance in the to bid to mitigate the impact to an extent.
Posted by: Pradeep Kumar - Friday, August 12, 2016 12:25 PM


Difficult yes - but one must not lose sight of fundamental principles forming a Contract: OFFER ACCEPTANCE CONSIDERATION INTENT CERTAINTY - Also of the Counter Offer. Perhaps best practice is to release the Terms and Conditions to the SC and Suppliers when sourcing their OFFER.
Posted by: Leslie Foster - Friday, August 12, 2016 1:40 PM


I agree with Leslie Foster. It is alsoessential that you read any bid thoroughly. I have always taken the attitude that"These are our Terms and Conditions, you may change your price NOW, but not the Conditions because they will BE DEEMED the accepted Terms and Conditions"
Posted by: Peter Bennett - Tuesday, August 16, 2016 12:26 AM


 









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