Construction Information Technology Blog

Is 18 Bidders enough?

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In a recent meeting with contractors the conversation turned to the current state of the market in their region. Several of them stated they were making the business decision to no longer bid on projects with “more than 10 bidders”. To reinforce how challenging the current market is they noted that many recent projects have had as many as 18 or more bidders. It would seem to be a hyper competitive market for contractors but an ideal time for owners to be buying construction. Or is it? No doubt it is better to be the buyer of construction rather one of the bidders in what is essentially an auction. The risk management antennae need to be way up for both parties in times like this.

For Owners their bidding process needs to be squeaky clean or the risk of legal action from disgruntled bidders is increased. There is no shortage of case law in the construction industry flowing from the bidding process and I would venture to say that much of it arises from times when the market is very competitive and bidders are unhappy with what they expected to be fair bidding processes. While there have been many attempts over the years to develop front end language to the contrary, it is generally held that the Owner has an obligation to treat all bidders fairly and equitably.

That being the case there are several fundamental steps an Owner needs to take to protect themselves from claims of unfair treatment or other problems arising from the bidding process:

• All bidders need to be provided with the same set of bid instructions, drawings, specifications and addenda.
• Keep accurate records of what documents were distributed, who received them and when they were distributed. This also helps avoid problems and claims arising after the contract is awarded.
• Make sure addenda are distributed to all bidders in a timely fashion. Addenda issued close to closing time can result in someone receiving it late and not incorporating it into their bid. 
• Use complete transmittals and obtain delivery receipts for all information distributions. This avoids situations where a bidder claims they didn’t receive a document.
• Make sure the closing time and method of determining that time are explicitly clear. ‘Up to 2:00’, ‘Before 2:00’, ‘At 2:00’ all seem to be the same but there is case law on when is 2:00? Is there a time clock in the closing location, someone’s watch or some other more or less precise way of determining the actual time? 
• Make sure the process for bid amendments is clear and practical. There are many examples of problems that have arisen from faxed amendments that didn’t arrive in time. 
• Non-compliant bids that for example do not include a mandatory requirement, no matter how small it is, are fraught with potential for trouble. Despite any language in the documents giving the Owner discretion, the interpretation of that discretion is generally very narrow if not nonexistent.
• Transposing and incorporating information from bid amendments into the bids results requires great care as errors or omissions can lead to an incorrect evaluation of the bids. 

These are just a few examples of the potential problems that can and are likely to be challenged in a more competitive environment when every project is hard won. The good news for those who are looking for ways to avoid these types of issues is that technology can go a long way to avoiding or even eliminating many of the issues identified above. Online bidding systems that completely integrate document distribution and bid submission are far more efficient than the traditional paper process. They go a long way to protecting the Owners and Contractors interests by making sure that no matter how many are bidding on a project, none of them will be let down by errors in the process.