Builders and Contractors Exchange
Weekly Bulletin: 25 Apr 2005
Bid Or Proposal Rejected?
What's A Bidder Or Offeror To Do On Virginia Public Procurements?
Part 2
By: Neil Lowenstein
In a previous article we addressed bid and proposal protests for Virginia public projects, but noted that different rules apply to commercial projects. There is no equivalent of the Virginia Public Procurement Act that applies to commercial projects, so there is no formal protest process; commercial owners are entitled to contract with whomever they want on whatever terms they desire. An exception to this is when the owner's decision violates a law, such as a Civil Rights law prohibiting discrimination based on race, religion, nationality, creed, etc. No law, however, requires a commercial owner to accept the lowest price or best quality, or even to require procurement competition at all. Accordingly, a commercial owner can unilaterally determine who it thinks best suits its needs, price, schedule, etc., and contract with that entity on whatever terms it can negotiate.
What about bid shopping? Generally, this is not a prohibited commercial process, although it is not a good business practice. Depending upon the nature of the bid negotiations, the owner may be held bound to a bidder on a breach of contract theory. This analysis falls back to the three basic requirements of a contract-an offer, for consideration, accepted by another. If an owner makes an offer to enter into a contract if the bidder makes a certain bid, and the bidder does so (thereby accepting the owner's offer), a binding contract may be formed that would entitle the bidder to breach damages if the owner does not follow through and contract with the bidder.
The practical complication is that the nature of the offer (and the acceptance) is not usually clear. For example, in preliminary discussions the parties often do not discuss such things as the contract form they intend to use, and so really just make an agreement to agree, which courts generally do not deem binding. This result can be altered by the specific terms of the offer and acceptance, preferably in writing, but that is not often done. Examples could include language in an owner's solicitation stating that the solicitation is not an agreement to contract but is just a request for a quotation, or language in the contractor's proposal that reserves the contractor's right to withdraw its bid at any time and for any reason.
The bottom line is that protests generally do not lie for private procurements, but there may-under the right circumstances-be alternative avenues of relief not available in public procurements, such as breach of contract claims for damages. We will continue to address related protest topics in future articles, including federal procurements.
Questions?
If you have any questions about this article or any other related matters, please contact:
This article is meant to bring awareness to this topic and is not intended to be used as legal advice.