PUBLIC WORKS CONTRACTORS WHO MAKE MISTAKES CAN WITHDRAW THEIR BID
May 24, 2011
A new law allows public works contractors to withdraw their bids if they make a “mistake” in their bid. The law, effective March 4, 2011, applies to all contracting units covered by the Local Public Contracts Law. A mistake is defined in the statute (N.J.S.A. 40A:11-2) as:
“Mistake” means, for a public works project, a clerical error that is an unintentional and substantial computational error or an unintentional omission of a substantial quantity of labor, material or both, from the final bid computation. (N.J.S.A. 40A:11-2(42))
In order to use this “mistake” provision to withdraw a bid, the bidder must submit a written request via certified mail to the public entity within five (5) business days after opening of the bid. If the public entity plans to award the contract within the five (5) days, then the low bidder should be contacted to make sure he is not contemplating withdrawal of his bid. The bidder must include in his request to withdraw any pertinent documents demonstrating that a mistake was made.
There are four criteria that must be met for a bid to be withdrawn. These criteria are:
- The enforcement of the contract, if actually made, would be unconscionable.
- The mistake relates to a material feature of the bid;
- The mistake occurred notwithstanding the fact that the bidder exercised reasonable care in preparation of the bid.
- If the bidder is allowed to withdraw his bid, it will not seriously prejudice the contracting unit except for the loss of bargain to the contracting unit.
The public entities purchase agent, legal counsel or administrator should review the request to withdraw along with the documentation to determine if the criteria have been met for the withdrawal of the bid. Once a determination is made regarding the withdrawal of the bid, a recommendation should be forwarded to the governing body. The governing body should act on that recommendation at its next regular meeting. If the governing body approves of the withdrawal of the bid, then the decision should be memorialized by resolution and include a provision for a return of the bidder’s bid bond. Once the bidder is allowed to withdraw its bid, this bidder is disqualified from bidding on the same project, even if all bids are rejected. (N.J.S.A. 40A:11-13.2)
Allowing a bid to be withdrawn can often be beneficial to the public entity. Pressing a contractor to proceed on a contract where the bid is “under priced” can often lead to a contractor trying to cut corners on a project or a contentious contractual relationship. Change orders are not a legal way to correct these types of mistakes since change orders are restricted to use in the circumstances set forth in the regulations.
Please contact our office to obtain model public works bid specification language that we suggest be incorporated into your bid specifications.
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This Scarinci Hollenbeck Legal Update has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel.