Both contractors and owners understand how important the bidding process is. What is at stake is obvious: contractors know that if the bid is too high and not accepted, the work will go to someone else. If the bid is too low, the contractor may lose money. Owners know that if the accepted bid is unrealistically low, the bidder may not be able to fulfill the obligations of the contract.
The bidding process is expected to protect the owner from unjustified high prices through a competition between equally knowledgeable and capable bidders. However, it doesn’t always work that way.
Most of the legal issues relating to the bidding process arise from the tactics that owners and contractors use to avoid the consequences of their mistakes.
The starting point of legal analysis is the principle that a deal is a deal. A party in a contract is normally held to perform the contract once the deal is made, even at a loss. Either or both sides may recognize early in the process that a mistake has been made, and that problems are going to be inevitable. Sometimes a contractor misinterpreted the design documents or underestimated the quantities of materials required, or based a bid on a non-binding estimate by subcontractors or suppliers who change position after the contractor is committed. From the owner’s perspective, these are not good reasons to allow more time or money to the contractor.
It is not usually clear where the mistake came from. It seems that there are usually several mistakes, including the failure to review and catch the mistake before the deal is made. The law recognizes the reality that several mistakes may converge together and produce a damaging event or occurrence. Therefore, there might be responsibility on both sides. This provides good reasons for all sides to be flexible in resolving the problems.
The first action of a legal counsel should be to guide the client to an objective evaluation of what has happened. There may not have been a mistake, or the mistake may be someone else’s fault, but the first task is always to understand what really happened. Remember that the individual who made the mistake could have difficulty in recognizing the mistake. Only after this, can you evaluate all options with the goal of performing all obligations, mitigating possible losses, and preserving relationships if possible.