There is no denying that private construction work is generally down in the present economy. Yet during this lull in private work, it is anticipated that funds from the American Reinvestment and Recovery Act will ultimately provide increased opportunities for contractors to compete for public work. However, bidding on and performing public work can be risky for the uninitiated. Contractors not used to dealing with local governments and state agencies should be cognizant of the pitfalls of bidding on public contracts, particularly respective to bid mistakes. The government is anxious to lock in the low bidder, and the bidder must balance entering into a contract with an insufficient price against paying out on a mandatory bid bond.
Local governments in Georgia can be forgiving of a bid mistake, but the erring bidder must act promptly. A bidder that has made an "appreciable error" of a certain type may withdraw a bid without forfeiture of its bid bond after bids have been opened under the following circumstances. First, the error in the bid must be "documented by clear and convincing written evidence." O.C.G.A. § 36-91-52(b)(1). Second, the error must be "clearly shown by objective evidence drawn from inspection of the original work papers" used in the preparation of the bid. O.C.G.A. § 36-91-52(b)(2). Third, and perhaps most crucially, the bidder must serve written notice on the governmental entity prior to the award of the contract and no later than 48 hours after the bids have been opened. O.C.G.A. § 36-91-52(b)(3). Fourth, the bid must have been submitted in good faith and the mistake is due to a "calculation or clerical error, an inadvertent omission, or a typographical error as opposed to an error in judgment[.]" O.C.G.A. § 36-91-52(b)(4). Fifth, the withdrawal of the bid must not place the governmental entity or other bidders in a materially worse position. O.C.G.A. § 36-91-52(b)(5). In other words, the erring bidder must act promptly and be able to show from the bid documents themselves that the error was clerical and inadvertent, in order to withdraw the otherwise low bid. In the event the conditions for withdrawal are met, action on the remaining bids will proceed as if the withdrawn bid had never been received and the bid bond will not be forfeited to the local government soliciting the bid, but the withdrawing contractor will be barred from taking any part in the contract, even as a subcontractor.
The Georgia Department of Transportation (DOT) has much more stringent rules regarding the withdrawal of an opened bid. On DOT construction projects, the bid bond will be returned to the bidder if the bid is withdrawn before bids are opened. O.C.G.A. § 32-2-68(b). However, once the bids are opened, if the bidder withdraws the bid or refuses to execute a contract, the bid bond is forfeited to the DOT as liquidated damages. Id. The DOT has the discretionary power to permit a bidder to withdraw its bid in the event of an "obvious error," but is not obligated to do so. O.C.G.A. § 32-2-69(d). For example, in a case before the Georgia Supreme Court, a bidder on a DOT project miscalculated a quantity of concrete, causing an omission of $299,000 from its otherwise low bid amount. The contractor argued that the error was "obvious," but the court held that the DOT was within its right to reject withdrawal of the bid and to require a forfeiture of the bid bond. See Department of Transportation v. American Insurance Company, 268 Ga. 505 (1997). Alas, the lesson to be learned is that if you are a contractor new to bidding on public work, make certain that you understand the necessity to ensure the accuracy of your bid, and the potential consequences of the withdrawal of an incorrect bid. The good news is that on public projects other than DOT work, certain types of bid errors may not result in forfeiture of the bid bond.
For more information regarding this article, please contact Mr. Ebbs at 770.818.1414 or by email at [email protected].