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By James Acret
Contractor submitted a $8,150,000 bid for construction of an elementary school. The next low bid was $9,100,000. The school district's budget was only $6,968,445.
The bid contained a clerical error in that it omitted $786,000 for "plumbing." The estimator erroneously entered "1" on the line for "site utilities" and also on the line for "plumbing" when she intended to enter the "1" only on the line for "site utilities."
The project manager for the district immediately recognized that the bid likely contained a material mistake because it was far below prices of the other bidders, whose numbers were tightly bunched. The project manager expressed this opinion to the district's facilities director and outside legal counsel.
Two days after the bid opening, the contractor notified the district by letter that it had made a clerical error and wanted to withdraw its bid. Employees of the district were aware of the technical requirements for withdrawing a bid under Public Contract Code §5103 and settled on a plan to maximize the likelihood that contractor would fail to meet those technical requirements. They decided that district employees would communicate no information to contractor dealing with rescission of bids but would defer inquiries to the district's outside counsel.
When the contractor offered to supply any additional information needed to support its letter, district employees merely stated that the letter had been sent to legal counsel who would contact contractor if additional information was required. (Counsel never contacted contractor.)
The district awarded the contract after refusing to allow the contractor to withdraw its bid on grounds that the contractor's letter did not meet the technical requirements of §5103.
The trial court concluded that the district was equitably estopped to rely on the technical provisions of §5103 and relieved the contractor of its bid. Affirmed. Emma Corp. v. Inglewood Unified School District, 114 Cal.App.4th 1018, 8 Cal.Rptr.3d 214 (2004), petition for review den.
Public Contract Code §5103 requires a bidder within five days after the opening of bids to submit a written notice to the agency specifying in detail how the mistake occurred. Contractor's letter did not comply with this requirement. Although the primary purpose of the Public Contract Code is to protect taxpayers and to ensure fairness in the bidding process, the Legislature also intended for mistaken bidders to be relieved of liability on mistakenly low bids resulting from clerical error.
Equitable estoppel may be asserted against governmental agencies when, in the judgment of the court, the injustice that would result from failure to uphold an estoppel is of sufficient dimension to justify any effect upon public interest that would result from the raising of the estoppel.
Here, the district deliberately engineered an attempt to enforce a contract it knew was mistakenly low and tried to extract the bid bond amount from the contractor to cover the project's true cost. The agency deliberately misled the bidder from timely complying with the statute. "Taxpayers do not have an interest in lowering the cost of public projects by unfairly cheating mistaken bidders out of a portion of a project's true costs."
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©2004 Howrey LLP
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