Good at math?

Larry Caudle / October 12, 2007

Contractors often have several weeks to review plans and perform the necessary take-offs and productivity analyses required to bid a public project. However, they rarely receive critical subcontractor quotes and material vendor prices until just hours or even minutes before bids are due. Courts have considered hundreds of cases where bidders made mistakes in their quotes and sought to avoid entering into contracts with project owners. These “common law” rules eventually made their way into formal public procurement laws. Although modern federal and state statutes governing a bidder’s right to withdraw its bid are similar, some states’ laws vary considerably from the majority. Also, courts in one state might interpret identical laws differently.

Mistakes that happen

Typically, mistakes in judgment do not warrant bid withdrawal while mistakes of fact do. Mistakes of fact are often clerical in nature and typically include: (1) errors transferring numbers from one source to another; (2) errors resulting from transposing numbers; (3) misplaced decimals; (4) typographical errors; and (5) simple mathematical errors. In most instances, courts examine the underlying facts and circumstances under which a mistake is alleged to have been made in determining whether it is one of fact or judgment.

A recent decision in Wisconsin has arguably expanded the traditional notion of “clerical error” in favor of contractors. In James Cape & Sons Co. v. Wisconsin Department of Transportation, 700 N.W.2d 243 (Wis. 2005), a highway contractor submitted a bid of over $16 million for a new interchange project and was deemed to be the low bidder. Suspecting it had made a mistake, the contractor immediately reviewed its bid and discovered it had failed to record a price increase received from a subcontractor just minutes before the bid was due. The contractor’s bid estimate included a price of $425 per cu yd it received from a bridge subcontractor several hours before the bid deadline. However, the subcontractor had telephoned the contractor just minutes before the bid was due and increased its price to $555 per cu yd. This difference translated to a net increase of over $450,000 in the extended price for bridge work.

The department properly refused to allow the contractor to amend its bid to correct the mistake in light of the fact it was privy to the amounts bid by other contractors. Amendment would have essentially given the contractor “two bites at the proverbial apple.” Similarly, however, the department refused to allow withdrawal on the grounds of mistake and thus the contractor was left with the option of either performing the contract or forfeiting its bid bond. In essence, the department determined that the contractor’s failure to substitute the subcontractor’s revised price into the master bid spreadsheet was not a mistake of fact that warranted withdrawal of the bid. The contractor filed suit in state court seeking return of its bid bond.

The court agreed with the contractor. It regarded the mistake as one not involving negligence or carelessness and likened the failure to insert the higher subcontract price into the bid to other clerical errors generally regarded as warranting withdrawal such as transposing numbers or committing a math error.

The court’s decision in James Cape & Sons may not have been decided the same way in another state. Contractors bidding in multiple states should have a general understanding of the procurement statutes governing bid mistakes and should not necessarily expect courts of one state to interpret identical statutes similarly.

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