This post is one in a continuing series on the basic tenets of public bidding in Pennsylvania. The subject of today’s post is bid mistakes and withdrawal of bids. I am often asked whether a bidder can withdraw its bid due to a mistake in price. The answer is not so simple.
Typically, public bids are binding on the bidder for 60 days after bid opening, unless the bidder and the public entity execute a written consent for a longer period. If the bids are not accepted within that time frame, or if a contract is not executed within 60 days of the contract award, the bidder is permitted to withdraw its bid and escape liability on its bid and its bid security or bid bond. Otherwise, the bidder is legally bound by its bid, and cannot withdraw its bid, unless it can satisfy the stringent requirements for a bid withdrawal.
Bid withdrawal is governed by state statute. If a bidder makes an honest and good faith mistake in calculating its bid price, the bidder can withdraw its bid. But the bidder must act quickly.
First, written notice to withdraw the bid must be given within two business days of bid opening. Second, and more importantly, the bidder must submit credible evidence that the reason for the price bid being substantially lower was a clerical mistake, and not a “judgment” mistake, and was actually due to an unintentional and substantial arithmetical error or an unintentional omission of a substantial quantity of work, labor, material or services made directly in the compilation of the bid. Third, withdrawal of the bid cannot result in a contract award on another bid of the same bidder, its partner, or to a corporation or business venture owned by the bidder or in which it has a substantial interest. Fourth, if a bidder is permitted to withdraw its bid, the bidder cannot supply any material or labor to, or perform any subcontract or other work agreement for any person to whom a contract or subcontract is awarded in the performance of the contract for which the withdrawn bid was submitted.
If a bidder is permitted to withdraw its bid, the public entity can award the contract to the next lowest bidder or can reject all bids. If the latter occurs and the bid is re-advertised, the withdrawing bidder may be liable for all re-advertising and other associated costs, if it is determined that such costs would not have been incurred but for the withdrawal. The withdrawing bidder is also prohibited from resubmitting a bid on the re-bid.
The Pa. bid withdrawal statute can be found at 72 P.S. § 1601, et seq. If you need assistance with a bid withdrawal, call or email me for a free consultation.