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.