February 11, 2008

EDITOR'S NOTES

Drastically low-balling the competition is a risky, though frequent business tactic when it comes to submitting project bids. Contractors that engage in such practices reason that they can adjust the price through change orders and claims once the project is underway. Often, the ploy works. After all, bid proposals are an inexact science. In one case, however, a city allowed bidders 24 hours after bid opening to withdraw their proposals if they had a “material and substantial mistake.” The low bidder knew of gross errors in its bid, but chose to proceed anyhow, then later argued to increase the price when it was time to sign the contract. Consequently, it lost the contract and its bid bond. The subcontractor initially responsible for the bid error was liable for half of the bid bond payment, ruled the state appellate court.

Fixed-price contracts are one way to try to avoid some of the monetary pitfalls indigenous to construction projects. However, as any seasoned contractor or owner can attest, a fixed price does not guarantee a claims-free project. Even if the price is fixed, it behooves the contractor to keep meticulous records on all aspects of the project as one California contractor lamented after a state appellate court overturned a jury verdict.

The final case is a lesson in the logistics of a supersedeas bond. This type of bond delays a court-ordered payout while the losing party appeals the decision. In this case, the bond protected a surety, but not the contractor it had originally bonded.

We wrap up this week’s issue with a discount offer to subscribers. Subscribers interested in attending the IBC Legal Conference on construction law in London next month can receive a 10 percent discount on registration. Please see the bottom article details.

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