GAO: Agency Shouldn’t Have Allowed Bid Correction

When a contractor submits a sealed bid that includes a mistake, the contractor may be allowed to correct its bid, if there must be clear evidence of the error on the face of the bid.

According to a recent GAO decision, however, absent clear evidence, it is unreasonable for an agency to allow a bid correction.

Herman Construction Group, Inc., B-415480 (Jan. 5, 2018) involved a construction procurement for renovation and expansion at the Department of Veterans Affairs Palo Alto Health Care System Campus. Five bidders responded to the IFB, including Herman and Talion Construction, LLC.

After the bid period closed, the VA announced that Talion Construction, LLC had submitted the lowest bid and been selected for award. Talion’s bid price was $6,635,332. Herman Construction Group, Inc. submitted the second-lowest bid: $7,820,508.

After award, Talion contacted the agency and explained it had made a mistake in its bid regarding the cost of drywall installation. Talion asked to revise its bid price to $7,771,658–still the lowest bid, but more than $1 million higher than the awarded bid price.

According to Talion, it had used $500,000 as a placeholder for its bid while waiting for a bid from its anticipated subcontractor. The day before bids were due, Talion’s drywall subcontractor faxed its bid of $1,498,770 to Talion for incorporation into the proposal. According to Talion, this number was not included because Talion typically utilizes subcontractor bids made on the day of proposal submission and had failed to include the drywall subcontractor’s bid price in Talion’s final bid.

To support its contentions, Talion provided the agency with a copy of the fax it received from its subcontractor the day before bids were due. Talion also provide the agency with both its original and “corrected” bid worksheets. The original bid worksheet retained the $500,000 placeholder whereas the corrected worksheet utilized the $1,498,770 number. Notably, both worksheets still named Talion as the drywall contractor, not the subcontractor.

Based on the evidence provided, the agency allowed Talion to correct its bid. Even with the correction, Talion was still the lowest priced bidder and named the awardee. The second place offeror, Herman, subsequently filed a bid protest. While Herman raised multiple allegations regarding the VA’s award to Talion, GAO focused only on the allegation that Talion was unreasonably given the opportunity to correct its bid.

In the unique context of sealed bidding, FAR 14.407-3(a) affords agencies the discretion to allow an offeror to correct its bid after the bid submission deadline, provided the correction will only increase the bid, and “clear and convincing evidence establishes both the existence of the mistake and [what] the bid actually intended[.]” For its part, GAO will review all of the evidence used to establish the existence of an error, and “will not question an agency’s decision based on this evidence unless it lacks a reasonable basis.”

GAO was not convinced such clear and convincing evidence existed here. While Talion may have known the $500,000 place holder in its bid was an error, GAO wrote “there is nothing irregular about the entry for drywall installation that would lead one to believe that a mistake had been made.”

Consequently, there was nothing in the original bid to tip the agency off that there was something amiss with Talion’s bid, particularly since Talion’s bid listed Talion, not its alleged subcontractor, as the drywall installation contractor. Accordingly, GAO considered Talion’s explanation of its internal procedures to be “uncorroborated and self-serving, as well as not offering clear and convincing proof of a mistake, because the explanation has no connection to the worksheet other than the amount of the mistaken value.”

Turning its attention to the agency, GAO concluded clear and convincing evidence of a mistake did not exist. Therefore, “the agency improperly permitted Talion to correct the mistake in its bid.” GAO recommended the agency cancel its current award to Talion and either re-award to Talion at its original price, or make award to Herman.

GAO’s decision in Herman Construction highlights the importance of accuracy in sealed bidding. Taking Talion at its word, Talion’s internal procedures resulted in Talion submitting an incorrect bid that appeared complete. Self-serving or not, Talion’s statements about its procedures were not enough to constitute “clear and convincing” evidence of a bid mistake in the eyes of GAO. Having made a mistaken bid, Talion was stuck with it.