Avoid Problems Later by Conditioning Your Bid
Kegler Brown Construction Newsletter July 1, 2006
Do you want to avoid having to live with unfair contract terms? Once a subcontractor submits a bid, if you do not like the terms of the contract that follow, it may be too late. If you try to back out of the bid once you are awarded the contract, the contractor can claim that it relied on your bid in securing the project. You might even be responsible for damages to the contractor, such as the price difference from your bid to the next lowest bid. Subcontractors who fail to condition their bids are left between a rock and a hard place – they must either accept whatever one-sided contract terms are given to them or they risk facing a claim for damages by the contractor.
However, there is a practical solution. A conscientious subcontractor can avoid problematic contract terms down the road by including conditions in its bid proposal. If you are an American Subcontractors Association member, the ASA website at asaonline.com has a bid proposal form available to you to print out and simply attach to your bid. If you are not an ASA member, you should consider drafting bid proposal terms addressing the following:
- Choose a form contract that works best for you (for example, the AIA A401-1997) and state that the parties will execute that contract form if the bid proposal is accepted.
- Disclaim all warranties that are not provided in the form contract that you have chosen.
- Attach your own schedule of values and indicate that progress payments will be paid accordingly.
- Require an equitable adjustment for an increase of the cost of material more than 5% from the time of the bid proposal.
- Include a provision that you shall be entitled to an equitable adjustment of the contract price for delays, acceleration, and other schedule changes.
- Provide that your bid is only available for a certain period of time and is not guaranteed should the schedule slip.
- Indicate that all waivers of lien and bond rights are conditioned upon receipt of funds.
To determine the best bid terms for you and your company, you may want to discuss your trade and its unique issues with an experienced construction law attorney.