ConstructionPro Week, Volume: Construction Advisor Today - Issue: 146 - 02/17/2012

Should Fixed-Price Bids Be Corrected After Contract Award?

By Bruce Jervis

It seems self-evident that once a contractor enters into a fixed-price contract on publicly bid work, the base price of the contract has been established. But what if the contractor subsequently claims it made a mistake? Is a contractor entitled to an upward reformation of the contract price to correct a bid mistake?

 

The answer is yes, but only in certain narrow circumstances. The bid mistake must be clerical or mathematical or involve a misreading of the specifications. The public project owner must have known, or should have known, of the mistake. The public project owner must have failed to request pre-award verification of the accuracy of the bid. And the contractor must provide clear and convincing evidence of its intended bid amount. 

 

These are stringent requirements. This was illustrated in a recent case where the government did not request pre-award verification of the accuracy of the bid and the contractor was still denied upward reformation of the contract price. The bid price had been close to the government estimate, so there had been no reason to suspect a mistake or seek verification. And the contractor had not provided sufficient evidence of its intended bid amount.

 

Do you think these requirements are adequate to prevent abuse of the competitive bidding process? The contractor in the recent case alleged it transposed numbers from a subcontractor price quotation. However, the allegation came seven months after contract award and only after the contractor experienced performance problems with the subcontractor. Should post-award reformation of the contract price ever be allowed? I welcome your comments.

Featured in Next Week’s Construction Claims Advisor:

  • New York Court Enforces “Pay-If-Paid” Clause
  • Low Bid Improperly Rejected as “Mistaken”
  • Agency Failed to Show Where Bid Deviated from Specifications

 

 

Comments

We have had several cases where a sub-contractor asked for more money after contract award because he did not review all of the plans and specs, even though we have notes on every drawing that bidders are to review ALL of the plans and specs.

As an example: on a detention project the Structural drawings address masonry reinforcing for structural requirements, but the Architectural drawings had additional reinforcing and grouting for security requirements. The masonry sub underbid the job because he only bid off of the Structural drawings and did not look at the Architectural drawings, even though there was a note on both the Architectural and Structural drawings to refer to the other drawings and to build to the more stringent requirement.

On another project that we had, an electrical sub-contractor made a significant mistake in his bid and alerted the General prior to award. We separated the electrical from all of the bids, selected a General (fortunately the same one as all of the Generals had used the electrical bid) and re-bid the electrical as a separate prime.

Some circumstances in the example are unclear.

Were there other bidders who might have been lower in price (or at least cried foul) if the adjustment had been made?

When did the Owner's rep become aware of the mistake? Was it prior to award or after?

Also, clerical or mathematical errors are typically easier to prove than a misreading of the specifications. Typically on public work, a Prime Bidder would be allowed the opportunity to withdraw his bid if this situation was discovered prior to award with the understanding that no adjustment would be made if he decided to keep his bid as is and accept the contract. It would seem unethical to adjust a bid upwards after a low bidder submits a firm price for any reason on a firm bid project.

IF the specifications are clear (and specification writing has gotten worse over the years) then I believe an adjustment can be made IF the bidding contractor has prepared a document prior to the bid that documents his schedule of values. We have done this for years for purposes of validating potential change orders and having a basis for those change orders. Given that some sub bids come in only a few minutes before the bid has to be submitted, there is often no way to verify or document your subs math, etc. However, the schedule of values prepared in a spreadsheet on a computer validates when it was prepared as the "properties" section of that document shows when it was last modified. This gives you much validation and credibiity to submit after the bid if there is a math error.

HTI Memorial Hospital Corp. solicited bids for construction of a pumping station and water line to service a new hospital facility near Nashville. The bid schedule included quantities of work to be unit priced and then extended for line item totals. But the solicitation contemplated the award of a fixed-price contract. The unit prices were to be used for pricing change orders.

 

 

COMMENTS

 









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