There are three reported cases that deal with a contractor’s ability to withdraw its bid due to the contractor’s mistake.  These cases stand for the premise that if a contractor makes an honest mistake in its bid and that contractor brings the mistake to the public body’s attention before the public body changes it’s position based on the contractor’s bid, the  contractor should be permitted to withdraw his bid without penalty.

The court developed a four prong test to determine whether the contractor should be permitted to withdraw its bid without penalty:

    ( 1 )  the mistake must be of so great a consequence that to enforce the contract as actually made   would be unconscionable;

    ( 2 )  the matter as to which the mistake was made must relate to the material feature of the contract;

    ( 3 )  the mistake must have occurred notwithstanding the exercise of reasonable care by the party  making the mistake;

    ( 4 )  it must be able to get relief by way of rescission without serious prejudice to the other party,     except for loss of his bargain.

Conduit & Foundation Corp. v. Atlantic City  2 N.J.Super. 433, 440 (Ch.Div. 1949)

Whenever I argued these cases in court, I was usually arguing the law in front of a Judge in order to get my client’s bid bond returned.  Some public bodies attempt to impose a “penalty” against the withdrawing bidder because the bidder made a mistake.  The “penalty” was written into the bid specifications and attempted to make the withdrawing contractor liable for the difference that the public body had to pay between the withdrawing contractor’s bid and the next lowest bidder’s bid.  The contractor making the honest mistake should not lose its bid bond or be penalized.

State laws and sometimes federal laws define the value of bid bonds on public projects.  It should be noted that if the project is federally funded, the amount of the bid bond can be greater.  In any event, the contractor’s liability should be limited by the amount of the bid bond.

As the Supreme Court noted in the Meadowbrook Carting case, a contractor could make a calculated decision to withdraw his or her bid and forfeit his bid bond if his bid was mis-estimated (not a mistake but a judgment error).  So how does the public body distinguish between a bidder who wants to withdraw his bid because he made a judgment error (such withdrawal is NOT permitted) and a bidder that has made an honest mistake?  The answer is that the Court will apply the four prong test described above.  The McElwee Group, LLC v. Atlantic County Utilities Authority, 2009 WL 5062349 (App.Div.)

"Who is the Owner?"

When the client asks me, after explaining the bidding scenario, whether or not he/she has a successful bid protest, my first question is always "who is the owner?"  While it often seems like an irrelevant question, the identity of the owner dictates which laws will be followed when analyzing a defect in a bid.

This is particularly true in a recently decided case, T.N. Ward, Inc. v. South Jersey Transportation Authority, and Hunter Roberts Construction Group, LLC, Docket No. A-3900-09T4.  In this case, the second low bidder complained that the low bidder listed two subcontractors under one category (for example two subcontractors were listed under the structural steel category), without specifying the scope of work each would perform.  Under local public contracts law ("LPCL" – the law applying to municipalities, not the State), if the bidder lists two subcontractors for a trade, the bidder must submit with its bid a certificate which “shall set forth the scope of work, goods and services for which the subcontractor has submitted a price quote and which the bidder has agreed to award to each subcontractor should the bidder be awarded the contract.” N.J.S.A. 40A:11-16b.

Therefore, under the LCPL, if the names of two bidders were submitted under the structural steel and ornamental ironwork category, the bid would be defective if it were not accompanied by a certification describing the scope of work to be performed by each such subcontractor in accordance with a price quote from each such subcontractor. However, the owner of the project in the case was that State of New Jersey, not a municipality or township. 

Accordingly, LCPL was not applicable; but, State Bidding Law was.  The Court noted: "The Legislature has not seen fit to include a similar provision the State Bidding Law (the ability to list two subcontractors is not included in projects owned by the State).  That law lists the same five categories for which separate plans may be included in the specifications N.J.S.A. 52:32-2a.”  The court stated that had this been a project bid under LPCL, the low bidder's bid would have been defective.  However, since the owner was that respective State, and the applicable law of that State was different, the low bidder's bid was not defective.  The moral of the story is to know "who is the owner”, follow the appropriate laws and, as always, follow the instructions on the bid forms.