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Bid mistakes in public and private construction

By Attorney Kenneth E. Voss
Hurtado SC

Few contractors can say they have never made a mistake in bidding. So the question remains: What are a bidder's legal and practical remedies in the event it does make an error?

The answer is not only important for prime contractors, but also for the many subcontractors who, from time to time, bid as primes. Even if it never bids as a prime, it is important for a subcontractor to understand the consequences of an erroneous bid because, in certain circumstances, the subcontractor's remedy may be contingent upon the prime's situation.

In cases of bid errors, because of the complexity of the law as it applies to varying fact situations and the public or private nature of the work, it is critical that competent legal advice be sought without delay.

Prime bidders on public works bids

Wisconsin Statute Section 66.0901(5), while entitled Corrections, does not even use the word in the body of the text! It speaks rather of errors, omissions and mistakes discovered before and after bid opening.

The statute deals with corrections of errors in bids for public works contracts. It defines "municipality" to include virtually all municipal bodies, including the state. The Department of Transportation, however, is excluded from the definition of "municipality," allegedly because the statutory procedures are too burdensome given the many contracts WisDOT has to administer.

Somewhat different rules apply to Department of Administration bidding. Pursuant to Wisconsin Statute 16.855, a prime bidder may withdraw its bid at any time before opening and submit a new bid. Where an error is discovered within 72 hours after opening, the prime can withdraw its bid but may lose its bid bond if it was negligent in making the error. If it cannot settle the matter with the DOA, it will have to sue in Dane County Circuit Court.

Before the bid opening

Where a public bid is discovered to be erroneous before bid opening, the bidder may, if it is low and wants to perform the contract without regard to the error, simply do nothing! The bid cannot be corrected at this point.

Bidders that do not want to be bound to a contract because of the error must notify the owner of the mistake before bid opening. Upon doing so, the bid will be returned. If the bid is returned, a revised bid will not be permitted. Only if all bids are rejected and the project is readvertised may a new bid be submitted.

After bid opening and prior to award

After bids are opened and prior to award, the story is somewhat different. The low bidder, if it has an error in its bid, must first determine whether or not it wants to avoid entering into a contract with the owner.

There are three options available at this point:

  • The bidder may withdraw its bid and secure return of the bid bond provided that the bidder promptly (as soon as convenient after it discovers the error) notifies the owner of the mistake, submits satisfactory evidence of the mistake and explains that it was not caused by the bidder's negligence in examining the plans and specifications or conforming with the statute.

  • The bidder may correct its bid, if, in addition to taking the steps above, it demonstrates that its bid, as corrected, remains the low bid.

  • If, in spite of the error, the bidder wishes to remain eligible for award of the contract, it may either elect to do nothing or seek a correction that would not affect its low bid status.

If a bidder is unable to correct its bid and decides that it does not want to enter into a contract, it may be faced with forfeiting its bid guarantee or bond. If the bidder cannot convince the owner otherwise, the bidder will have to seek return of the bond by filing suit and demonstrating to the court that it is free of "inexcusable" neglect in making the error.

On private projects, where there is no controlling statute, the courts will apply the common law. Under the common law, a bid can be withdrawn at any time before the contract is accepted. Thereafter, the contractor has essentially no relief for an error.

Sub-bidders on public works

For subcontractors there is no controlling statute relating to bid errors involving either public or private works. However, the 1992 decision of the Wisconsin Court of Appeals in Sandroni vs. Waukesha County Board of Supervisors can have serious consequences for sub-bidders on either public or private works.

Essentially, Sandroni says that a prime bidder has the right to rely on the bid of a sub-bidder, and if the prime names the sub in its bid and uses its bid in preparing the prime bid, the sub-bidder is contractually bound if the prime is awarded the contract. But the prime is not bound to the sub if the prime chooses, even after award, to contract with a different subcontractor.

This means that on public works projects, the sub-bidder must give notice to withdraw or correct its bid to the prime before the prime submits its bid to the owner. At that point the prime can still substitute another sub-bidder if it wishes.

Once the prime bid is submitted to the owner, however, the prime bidder is subject to the withdrawal rule discussed earlier. If the prime wants the job, it can let its bid stand, and if it's low, the sub-bidder will be held to its bid.

The sub-bidder may be able to persuade the prime to attempt a correction after bid opening, but if the correction would affect the prime's standing as low bidder, the prime is likely to refuse and the sub will still be stuck with its erroneous bid.

In the case of private construction, essentially the same rules apply as with public construction, except that since there is normally no formal bid opening and the prime is free to withdraw its proposal prior to acceptance by the owner, the prime is in a somewhat better position to seek correction of its (and the sub's) bid prior to acceptance or even, in a worst case, to withdraw its bid.

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