Parting Company with a Contractor

There are a variety of actions a public agency may take that have the effect of parting company with a contractor, either before or after a contract has been executed.

Prior to Award:

• Math Error in Bid:  In the event a bidder makes a mathematical error in its bid, especially for a unit price bid, most bidding documents provide that the owner may and should make corrections, with the unit price taking precedence over the multiplication of the unit price times the estimated quantities, and the owner's summation of the unit price extensions taking precedence over the contractor's summation of the items.  In the event such corrections are made, the bidder who may have been identified as the low bidder at bid opening may no longer be the low bidder.

• Claim of Error:  After bid opening, a bidder may discover that they have made an error in their bid, especially as they compared their bid price to those of the other bidders.  There are generally two types of claims of errors, those relating to clerical or administrative errors, and those relating to errors of judgment.  In a claim of error, the bidder requests to be relieved of their liability for their bid.  If the owner accepts the claim of error, the bid would no longer be considered.  There is no negotiation of the bid price that is permitted through a claim of error.
  
  
• Non-Responsive Bid:  After bid opening, once the bids have been evaluated by the owner, the owner may determine that the bid is non-responsive, meaning it did not respond to the requirements of the bidding documents.  Common reasons for non-responsive bids include bids submitted after the deadline, unsigned bids, and failure to submit a sufficient bid guaranty with the bid.  Bids with irregularities that are material (those that give an advantage or benefit to the bidder not enjoyed by other bidders) must be rejected by the owner as non-responsive, while those bids with immaterial irregularities may be accepted or rejected at the owner's discretion.

• Bidder Not Responsible:  A bidder with a low responsive bid may be rejected by an owner for not being a responsible bidder, or not having the capabilities or qualifications to perform the project.  Bidder responsibility standards vary by jurisdiction, but generally there should be responsibility criteria that are included in the bidding documents to put the bidder on notice of how they will be evaluated.  Such bidder responsibility criteria should be relevant and to the extent possible, fairly objective, although there is disagreement often between owners and contractors about this.

After Award, But Prior to Contract Execution:

• Revocation:  At times, an owner may revoke an award before the contract has been executed.  Reasons why this may occur include the contractor failing to execute the contract or provide the required bonding and insurance, a protest filed by another bidder, or a change in direction or funding for the project.

After Contract Execution:

• Termination:  There are two primary types of termination:  termination for cause and termination for convenience.  Termination for cause carries with it an additional burden of proof by the owner, and may be disputed more intently by a contractor than termination for convenience. 

Bidding Webinar:  I will be teaching a 60 minute Webinar on bidding issues on August 12, 2010.  For more information and to register, visit the website of Government Educator.