Construction Bidding: Subcontractors Take Care

Submitting a bid for a project becomes a binding contract the moment it is submitted to the contractor/owner for consideration.  Even if your bid on a project is too low, you can be stuck with it.  Depending on the project and the value of the contract, a careless price calculation in a bid could be costly.

Facts:

Civil Construction Co. v. Advanced Steel Structures Inc. involved two BC companies.  Civil is a general contractor who sued Advanced Steel, a subcontractor, when Advanced Steel did not stand behind their bid.

Civil was bidding on a project with the City of Richmond in 2009.  Advanced Steel submitted a bid for the steel components of the bids to Civil.  Advanced Steel's bid stated that their price was valid for acceptance within 30 days.  However, their bid did not include one addendum to the project plans that was issued just prior to the bid deadline.  Civil included Advanced Steel's quote in their bid to be the general contractor for the City's project on the same day Advanced Steel's quote was received.  Thirty-three days after the deadline, Civil's bid was formally awarded by the City.  The same day, Civil formally awarded the contract to Advanced Steel.  However, Advanced Steel considered their bid to be too low and told Civil their quote was no longer valid, since it was formally accepted by Civil three days after their quote expired (thirty three days after submitting its quote to Civil).  When Advanced Steel refused to complete the work in their bid, Civil awarded the bid to another company at an increased cost of approx. $33,000.

Issue:

Was Advanced Steel liable for the increased cost to complete the steel component of the project?

Court Decision:

At trial, the court found that Advanced Steel was liable to pay the increased costs of the project to Civil.  The court said:

When Civil had to have the same work done by another subcontractor at a greater price, because Advanced declared its bid to be no longer valid, it became entitled to the claim that is made against Advanced for the difference.

The court stated that in construction bidding, there are two contracts that come into existence: contract A and contract B.  The first contract, contract A, is formed when a general contractor uses a subcontractor's bid in tendering its own bid to the owner.  If the project contract is not awarded to the general contractor, there is no obligation by the subcontractor to perform the work.  However, if the project is awarded to the general contractor, both parties are obliged to enter into another contract, contract B, which is typically a formal contract in writing on the basis of the subcontractor's bid/quote.  In this particular case, the court found that Advanced Steel's "30 day" clause was satisfied the moment Civil submitted its bid to the City. 

Advanced Steel also argued that they should not be bound by their quote, since Civil's bid included an additional addendum that Advanced Steel's quote did not.  The court disagreed.  The court said that:

Civil could not force Advanced to sign a construction contract that included a scope of work beyond Advanced's bid unless Advanced agreed to that.

At the same time Advanced had a duty to enter into a construction contract B that reflected the scope of the work that it offered to do in its bid for the price it stipulated, and Civil had a duty to enter into that construction contract as well if that was all Advanced would agree to.

In other words, Advanced Steel was bound to do only the work it quoted in its bid for the price it stated. It would have been able to claim an extra for the additional work.

Lessons Learned:

1.     Ensure bids and quotes are carefully prepared and factor in the time in which the general contractor may award the bid to the subcontractor.

2.     The time in which the bid/quote states a time for acceptance is the timeframe in which the general contractor must insert that bid and submit it to the owner.

 
 
This article was written by Ian C. Moes and Jonathan B. Maryniuk, lawyers with the law firm of Kuhn LLP. It is only intended as a guide and it is important to get legal advice for specific situations. If you have questions or comments about this case or other legal matters, please contact Ian at 604-682-8868