Not All Bidders’ Errors Are Fatal Flaws

by on November 4, 2014

posted in Public Works, Uncategorised,

It happens all too frequently: your city or county receives a good bid on a public works project, and then discovers that the low bidder has made a mistake on the bid or omitted a necessary page of information.  An appellate case decided earlier this year, Bay Cities Paving & Grading, Inc. v. City of San Leandro holds that seemingly important bid flaws are not always fatal.  

In the case, the city called for bids on a large public works project and provided a “Contract Book” containing required forms and also mandating the inclusion of a bidder’s bond.  A contractor provided a bid that was $500,000 lower than the next bid submitted.

Page of bid bond missing

The low bidder’s bid package included the bond, but the first page of the bid bond was missing.  Noticing the misstep, the bidder submitted to the city the first page of the bond after the bids had been opened.  The bid bond surety, also after the bids had been opened, delivered a letter to the city indicating that the bond was approved and authorized by it and that the omission of the first page of the bond document did not affect its commitment under the bond.

Complaining that a basic rule of competitive bidding is that bids must conform to specifications, the second low bidder filed suit.  It claimed that there were no terms to which the surety was agreeing to be bound, since the first page was missing.  An argument was also made that omission of the page was not “inconsequential” because it gave the low bidder an unfair competitive advantage, in that it could have withdrawn its bid without penalty after noticing the error or that it could have contested the enforceability of the bond and thus escaped potential liability.

Criteria for determining validity of bids

The Court rejected all of the challenges to the award of San Leandro’s project.  In doing so, it provided some guidelines that are useful when determining the validity of mistakes made in bids that your city may encounter.

A bid may be accepted, despite irregularities, if:

  • The mistake could not have affected the amount of the bid;
  • Cannot have given the bidder an advantage, i.e., the mistake is inconsequential;
  • The requirement for “strict compliance” with bid specifications does not preclude the city or county from waiving inconsequential deviations;
  • A deviating bid must be set aside only if the mistake is “capable of facilitating corruption or extravagance, or is likely to affect the amount of bids or the response of potential bidders.

The question of whether a deviation is inconsequential is always a question of fact.  The Court said that these considerations must always be examined from a practical, rather than theoretical, standpoint.  They must also be viewed in light of the public interest (obtaining the lowest possible responsible bid) rather from the interest of a disappointed second low bidder.

In the San Leandro case, all of the objections were technical with theoretical implications.  Bowing to them would be adverse to the public interest and contrary to public policy, according to the decision.



tags: bid bond, construction, low bidder, public works projects,

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