ConstructionPro Week, Volume: Construction Advisor Today - Issue: 115 - 07/08/2011

Are Subcontractor Price Quotations Enforceable?

The formation of subcontracts on bid construction work has always been tricky. A bidder on a prime contract relies on a price quotation from a would-be subcontractor when pricing the prime contract bid. If the bidder is awarded the contract, is it obligated to use that subcontractor? Is the sub obligated to perform at its quoted price?

 

In a recent North Carolina case, a public project owner added to the mechanical work prior to the date set for bid submission. The bidder on the prime contract neglected to tell its prospective mechanical subcontractor, which priced the work “as per” the drawings and specifications it had been provided. The bidder incorporated that price into its bid and was awarded the prime contract. The mechanical sub refused to honor its price, saying it had not been informed of the full scope of work. A court ruled there was no binding agreement, as there had been no meeting of the minds.

 

What is your experience with subcontract formation? As a prime contractor, do you expect your subs to honor their price quotations after contract award? Do you truly rely on those prices or do you shop the work around after contract award? As a trade or subcontractor, do you expect to receive the work which you priced if the prime contractor is successful in its bid? I welcome your comments.

 

Featured in Next Week’s Construction Claims Advisor:

  • Government May Default Contractor without Considering Reprocurement Cost
  • Licensed Individual Could Contract Under Fictitious Business Name
  • Limit on Uncompleted Work Applied to Bidder’s Subcontractor

 

Bruce Jervis, Editor
Construction Claims Advisor

 

Comments

Duh... This has the unpleasant aftertaste of something worse than a lack of meeting of the minds. If I as Owner, knew that the Contractor was trying to do this to one of his subs, I would have him disqualified as incompetent if not dishonest.

Sounds like a perfect example of miscommunication. If the additional information was issued before the bid went in as an addendum #3, then the mechanical subcontractor should have noted on his quote that he included addendum #3. The mechanical contractor on his proposal should note what is included, excluded and addendums reviewed. If the mechanical contractor did not email or fax his quote then the general should have contacted the sub for one. The general should ask the mechanical sub if he saw addendum #3.

 

Hi. We have been in this situation before, not where the GC was trying to be "shady" but we bid a job that wasn't awarded for a few months and there were revisions to the plans between the time our quote was issued and the time we actually got our subcontract agreement. Thankfully it was a small amount and we "ate it" but my remedy to that ever happening to us again is that on every quote our estimator hands us I put the comments "this quote as per plans and specification documents in hand as of this date ____." I also quantify our footage most of the time and try to put all page numbers of plans that corrolate with our scope of work bidding. I have these things on our bid template so it's really a no brainer, I just have to fill in the info. Same with Addendums etc.

 

Contractors are using a subs price to get a job and then after the bid is awarded to them, they shop the subs price and pocket the difference.

 

Clearly the prime failed to provide the full scope of work. All our proposals ref the dated plans and specs as well as any and all adds called out by date and #, any good prime will require that on a sub proposal.

 

As a contractor, I believe estabishing a relationship with sub-contractors. If Our company is awarded a bid project and we've used that sub-contractors numbers, we honor it. If our bidding sub wants no part of our award, we take it to the next lowest bidding sub. The sub who submitted the award and refused will not be included on our vendors list or they are removed entirely.

 

All too often in today's business environment, honesty and integrity are lacking - on both sides. As a product rep, I see it both ways: GCs, who beat up on their subs, or shop a subcontract to death, post bid; or Subs, who refuse to honor their bids, or purposly bid low, hoping to make excess profits through change order abuse. This industry is fortunately small enough that those who don't play fairly are soon well known.

 

I had a HVAC sub bid a job per plans and specs, he also acknowledged all addendum. Bid submittal deadline was 2:00pm, we received his price at 1:30pm he was the low bid compared to the other sub bids so we used his number. We were the low bidder at the bid opening, at 2:30 pm on the same day he sent a revised bid adding $20,000.00 to his bid. He would not honor his original bid.

 

In California, both public and private, the law says, "Of course they are", with a couple of express exceptions.

 

In this case, it appears that the prime was either unscrupulous in trying to get a sub to cover an addendum he didn't transmit to the sub or, if he assumed that all subs would be responsible for checking on-line postings for addenda (the kindest assumption that one could make toward the prime), he should have been aware that there is no legal requirement for the sub to do so and, likely, no requirement in the bid documents to do so that applies to subs, as opposed to primes. As a responsible prime, he needs to institutionalize the practice of having subs acknowledge each and every addendum as part of any bid that the prime may rely upon. That is just "Contracting 101"

No one is subject to anything unless there is a signed contract.
Every job changes in so many ways from the bid date to the actual start of work that it is impossible to say that anything is per plans and specs. 
First of all most plans are faulty and need to be changed.
Next, most GC's do not divulge their method of construction until after the bid and when they make their schedule open to discretion by others.
An example is a recent job that I bid and during the precon meeting with the GC it was noted that they planned on building the large project in different sections. This entirely changed the course of our work by having to do partial testing of all of our systems. The GC was not willing to admit that this impacted our work severly and we walked on the project instead of losing money.
So it is a judgement call for many subs and in about 99% of all cases the judgement goes against the sub after they sign the contract. But until that time of signing, nothing is set in concrete and plans and specs never tell the whole story. It ends up a judgement call.

 

And as to GC's shopping out subs, you have to be kidding me. Unless your related in some way to the GC, your going to get shopped. When times are bad...everyone turns into a whore and everyone knows they do (except of course the architect and owner).

We recently were informed by our attorney to include the folowing statement with all proposals, "In the event of award, this Scope of Work and Proposal is contingent upon our company and the General Contractor, Owner, and or Construction Manager agreeing to a mutually acceptable contract for construction". We had one project that we could not agree to the general contractor's terms and conditions (mostly with the indemnity clauses)to which we eventually had to say no thanks to the GC. Since we noted this statement with our original scope of work and proposal, we were covered by the courts in the State of Maryland.

 

 

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