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We Won the Contract, But Then Discovered a Mistake in our Bid. Now What?

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Authored by attorney Anthony J. Mazzeo

The euphoria you feel upon being notified by a contracting officer that your company has been awarded a federal contract on which you recently bid can quickly turn to dread if you discover that a mistake caused you to underbid the work. Being bound to a contract based on a mistaken bid can spell big trouble for most companies. The general rule is that a bidder bears the consequences of a mistake in its bid unless the contracting officer has actual or constructive notice of the mistake prior to award. Fortunately, the Federal Acquisition Regulations contains several provisions that allow for correction of some mistakes.

After opening sealed bids, contracting officers are obligated to examine the bids for mistakes and, if a mistake is suspected, to request verification of the bid. In some cases a mistake will be apparent, such as misplacement of a decimal point or mistakes in unit designations (e.g., cubic yards for cubic feet). Other mistakes, such as failure to include a part of the work in the bid may be less obvious. In some cases, a bid price that appears unreasonably low in comparison to other bids could indicate an error. One key factor in the ability to have the bid modified or the award rescinded is when the mistake is discovered.

Mistakes identified before contract award are the easiest to correct. Apparent mistakes in a bid can be corrected by the contracting officer after obtaining verification from the bidder. Other mistakes alleged by the bidder prior to award may be corrected or the bid withdrawn if the bidder can provide clear and convincing evidence that a mistake was made and of the bid properly intended.

When mistakes are alleged after an award, correction becomes more difficult. Correction will be permitted if it will be favorable to the government or when the mistake is proven by clear and convincing evidence and the mistake was so apparent that the contracting officer had constructive notice. A bidder’s allegation that it is entitled to rescission or reformation of its contract in order to correct or mitigate the effect of a mistake is submitted as a claim under the Contracts Dispute Act. The mistake must generally be a clear-cut clerical or computation error, or misreading of specifications. Awards will not be modified or rescinded for a bidder’s mistake of judgment

The bottom line is that, while there are mechanisms that may allow for correction or withdrawal of an award, all contractors need to be meticulous in preparing and submitting bids, to prevent the possibility of being held to a price based upon a unilateral mistake.

These articles are meant to bring awareness to these topics and are not intended to be used as legal advice.

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