We posted Part I (General Contractor’s Mistakes) of this blog post on February 10, 2012 and Part II (Subcontractor’s Mistakes) of this blog post on February 14, 2012.
State and federal public works contracts employ different rules when deciding whether a mistaken bid can be corrected. On discovering a mistake in a contractor’s bid after bid opening, the contractor may seek to attempt to convince a public works owner to reform its bid price. On State public works projects, the bidder would have virtually no chance of success. However, pre-award and even post-award correction of mistaken bids is allowed under certain circumstances in federal contracts.
1. State Contracts.
In J.J. Welcome & Sons[i] and in Red-Samm Mining Co v. Port of Seattle,[ii] the Washington courts held that an upward correction of a contractor’s bid price after bids have been opened, is not available due to the State competitive bidding laws which only allow a public works owner to accept the bid as submitted. A post-bid-opening reformation of a bid would defeat the purpose of the competitive bidding system, which is to ensure that the public works projects will be awarded to the lowest, responsive and responsible bidder.[iii] Even where the bidder is without fault or negligence in creating the situation that results in the mistaken bid, reformation is not allowed.[iv] In J.J. Welcome, Western Union made a typographical error in J.J. Welcome’s bid which resulted in J.J. Welcome’s bid being $10,000 lower than the bid which J.J. Welcome intended to submit. The only recourse available to J.J. Welcome for the mistaken bid was withdrawal of its bid[v] or to perform the work for the mistaken price. Washington courts have held that as a matter of ensuring the integrity of the competitive bidding process, a post-bid-opening attempt to increase a bid price will not be allowed.
2. Federal Contracts.
In federal contracts, a bidder who promptly and before the award alleges a mistake and thereafter presents clear and convincing evidence of the bidder’s mistake and how it occurred, as well as the intended price (a price must have been intended) may have its bid corrected to reflect the bidder’s intention.[vi] The Federal Acquisition Regulations (“FAR”) addresses how awarding agencies are to deal with mistakes made by prospective contractors in a sealed bidding process. The FAR addresses the general objective of the government in dealing with mistakes made by bidders, requiring an examination by the Contracting Officer of all bids for obvious mistakes, and notice to the bidder of such discovery.
Only the bidder may allege error in its bid. Sometimes another bidder will allege an error in the low bid to have it rejected. Generally, the government will not consider such a protest.
There are some important limitations with respect to the type of mistake that is correctible. To be considered for correction, the bid must be responsive as submitted. Corrections are generally not permitted for mistakes of judgment. To obtain a correction, it is not enough to show that some cost factor was omitted from the bid computation. The bidder must be able to show that the omission of an intended amount, although not necessarily to the last dollar.
- Correction does not displace the low bidder.
If the bid is low as submitted and would remain low even with the claimed correction, there is no practical limit on the type of evidence that may be submitted in support of a request for correction. The most common types of evidence are bid worksheets, supplier quotes, published price lists and sworn statements. The intended bid should be established with as much precision as circumstances will allow, but there is no requirement that the exact price intended be established. If a bid is both low as submitted and with the claimed correction, and the government denies the correction attempt, the bidder may accept the award at the lower price with the understanding that it will not bar the bidder’s right to later apply for relief. Acceptance of the award reserving the right to relief is the most sensible approach since refusal to perform may subject a low bidder to a possible termination for default action if it is ultimately determined that the low bidder was not entitled to the correction.
- Displacement of the low bid.
Where the bid correction sought would result in displacing the otherwise low and acceptable bid, a stricter rule of evidence is followed. Correction in these cases is permitted only where the existence of the mistake and the bid actually intended are ascertainable by clear and convincing evidence.[vii]
- Post-award correction.
Post-award correction is judged by an entirely difference standard. Where an error is first alleged after award, the contractor can obtain correction or rescission in such cases only by establishing that the Contracting Officer was on (1) actual notice; or (2) constructive notice of a mistake at the time of the award. [viii]
[i] 6 Wn.App 985, 497 P.2d 953 (1972).
[ii] 8 Wn. App. 610, 508 P.2d 175 (1973).
[iii] J.J. Welcome & Sons at 990.
[v] Id. at 989.
[vi] See FAR 14.407
[vii] FAR 14.406-3(a).
[viii] Wender Presses, Inc. v. United States, 343 F.2d 961 (Ct. Cls 1965).