Here’s the scenario, you’ve spent the past two weeks studying the plans and specifications for a commercial construction project. You’ve attended the mandatory pre-bid conference, done all your takeoffs, gotten all your subcontractor and supplier pricing lined up and you’ve checked and double-checked your figures and finally, you seal everything up to be submitted. The bid opening comes around and, good news, you’re the apparent low bidder. The bad news is you’re the apparent low bidder and the second lowest bidder’s amount is 30% higher than your bid. Clearly, mistakes were made. Are you going to be on the hook for providing the work for the erroneously submitted bid amount? Will you be allowed to withdraw your bid or will you have to forfeit your bid bond? What recourse do you have?
The rules and laws that apply to dealing with bid mistakes vary from state to state, locality to locality and can even differ among different agencies within the same state, county or municipality. Typically mistakes of fact on your bid will allow you to withdraw the bid without having to forfeit your bid bond. Mistakes of fact are clerical or mathematical in nature and include things like typographical errors, transposition of numbers and misplaced decimal points.
Other criteria are usually required to be met for a bid to be withdrawn in addition to the clerical error. The mistake in the bid must be the result of a clerical error, the bid has to have been submitted in good faith, there is credible evidence that can prove the clerical error with other paperwork and that the contractor notified the owner of the mistake promptly. Other requirements include it being unconscionable for the owner to enforce the contract due to the clerical error or where reliance on the bid would be detrimental to the owner. The most important thing is to notify the owner of the mistake as promptly as possible.
Ok, so we’ve covered how to handle a clerical mistake after a bid opening. What if you’ve made a mistake of judgment? Mistakes of judgment include things like inaccurately estimating the amount of labor or materials needed for a job or misinterpreting the specifications on a project. If you’ve made an error in judgment and don’t realize it until after the bid opening there is very little recourse to take at this time.
You typically will not be allowed to withdraw your bid at this point due to an error in judgment without some penalty. If you are the low bidder you will probably end up forfeiting your bid bond and could be forced to pay the difference in your erroneous bid and that of the next lowest bidder. In most instances, regardless of whether it’s public work or private work you will be allowed to withdraw or modify your bid prior to the bid date.
Estimating and submitting bids for construction work is stressful enough and no one wants to have to deal with the added stress of having to deal with trying to withdraw due to silly mistakes. The best way to do that is to never make another error on a bid you submit which of course is easier said than done.
There are some simple steps you can take to minimize the chances of making a mistake in the future. Whether it’s your first bid or your 5,000th you should have procedures in place that you follow for each job you estimate. Be sure you read and understand the bidding documents; get clarification from the architect or owner on anything that you are unsure of.
Make sure you give yourself plenty of time to review all subcontractor and supplier pricing by setting a cutoff date far enough ahead for you to review them and ensure their accuracy. Attend pre-bid meetings and site visits regardless of whether they are mandatory or not. Be sure and double check all figures and calculations and have someone else independently check those figures and calculations for you.
Estimating a project is hectic work but by gathering all the necessary information and taking the time to check and double check your bid for mistakes you can greatly decrease the chances you’ll have to deal with bid errors after putting in all those hours of hard work.
AGC Strategic Partner
AIA Innovation Partner
I once oversaw the bidding process as the architect for the project. The low bid was half the second bid. This meant hundreds of thousands of dollars difference. I told the owners I was concerned and then phoned the low bidder and asked if he was confident of his bid. He said he was. I cross examined him and said I was concerned. He hung up the phone. Then in the middle of the night I got a phone call at home. The low contractor said his new computer system was supposed to merge the materials and the labour costs, but some how it had only tallied the labour.
I went back to the client and told them what happened. I also told them of the possible scenarios of awarding to the low contractor. Bankrupt contractor, bad feelings in the community, poor workmanship, extra architectural fees, and a one year nightmare.
The client in their wisdom took the second highest bid. Great job and satisfied client. Thank you from the low contractor.
A very good read on an important topic – thank you for posting this article. It underscores the importance of being organized and utilizing consistent estimating practices, including making lists and checking them twice. It works for Santa, so why wouldn’t it work for estimators? On the owner’s side of the fence, why would any owner want a substantially low bidder building their project? The incentive to cut corners and work less safely, and perhaps outside of the specs, is greater when the contractor has a financial need to undo the mistakes made during the bidding process. The opportunity for conflict increases as well, and who wants those hassles in the middle of a project? The importance of professionally prepared estimates cannot be overstated. Estimating trade associations like ASPE, CERT, and AACE all provide programs and activities to help the professional estimators develop in their careers by providing continuing education, certification, standards, best practices, and networking with fellow estimators and project managers that allow an avenue for continual improvement.
I’ve been an estimator for more than 40 years and have made mistakes about 5 or 6 times. It is highly embarrassing and can be devastating to your career.
In all but one of those instances, we were able to withdraw our bid without penalty; one was a missing bid for a sub category that it was not obvious was needed, one was a misunderstanding of the meaning and requirements of an alternate, and the others were clerical errors that were not caught.
You mention giving yourself sufficient time to check your work; in all my years, I have never been able to control that; subs wait till the last moment to turn in their bids regardless of our instructions about when bids are due and regardless of how good a relationship we have with them.
I don’t believe I am alone in saying that it is almost impossible to have enough time to check our work like we need to do.
Thanks for the comment, Richard. Good point about outside factors affecting the ability to sufficiently check your work before submitting the bid.
I retired a few years ago after working as a Senior Estimator for one of the largest private construction firms in the nation for more than 26 years, bidding projects in excess of $350M. I have to agree with the statements Richard Rosene made above – there is not typically “time” to do extensive reviews of subcontractor and supplier proposals. On one project I was in charge of, for the Corps of Engineers, I received a subcontract bid proposal for almost $85M in the last five minutes before the bid was due. MEP bids never came in before the final 15 minutes before bids were due and that was if you were really lucky. Why that late? Because their vendors hold out until then. You can typically thank rampant “bid shopping” for that! Sure, you do everything possible to ascertain the approximate bid amounts coming in and determine (in great detail) the scope on which they are proposing, but you still have to rely in the end on their expertise and trust them. Did I ever make a mistake? Absolutely. Did I ever attempt to withdraw a bid? Absolutely not. That action would have resulted in the loss of all bonding capability for future projects. You just had to move on and make it all work somehow. I’ve always heard construction estimating is like playing poker where you bet your entire life on the results but you’re not allowed to look at your cards before you ante up. Pretty good description so far as I’m concerned. Good points in the article, but they simply didn’t apply in the world in which I worked.
Is a financial statement from liberty mutual required to be physically present in my surety bond for a bid . Please note it was not a requirement in the bid package either. State of New Jersey
Stanley,
I can’t answer that question. You should probably contact the owner or general contractor you are submitting your bid to so they can provide you with an accurate answer.
I would be thankful If anybody can answer this question.
your company was awarded a lump sum contract to construct a new Elementary School. your job is to verify that the bid amount does not contain any major errors that could cause the project to lose money. The boss wants an answer from you within 24 hours.
how can we verify ? what are the major things to check ?