Mistakes in tenders

By - , Build 109

There may be legislation to fall back on if things turn sour, but it’s better to submit an accurate tender in the first place.

Regrettably, no matter how hard we try we all make mistakes. As the saying goes, the person who never made a mistake never made anything. But the act of making a mistake means something has been missed, and whether it’s for $10 or $50,000 is beside the point.

Unfortunately, our tender system usually rewards the person who has made the most mistakes without dropping a real clanger that would trigger an investigation into the submission. When one price is much lower than the others, the client’s representative will usually ask the tenderer to check and confirm their price before the contract is awarded. This gives them a chance to have a thorough look at their submission and withdraw if appropriate. Ethically, the tenderer shouldn’t be given the opportunity to adjust their tender for the error. Prices may become known soon after a tender has closed, particularly in provincial centres, and it wouldn’t be fair to allow one contractor to have a second go.

Mistakes are easy to make

There may be several valid reasons why one tenderer’s price is considerably lower. They may have a particular methodology that gives a considerable saving or have surplus materials from another job that they have credited against the new contract at no cost.

Or, even more likely, they have made a mistake. It’s easy to do – the cursor isn’t run far enough up the spreadsheet, the calculations aren’t multiplied, two pages of the pricing schedule have stuck together, or a part of the works is completely overlooked. If it’s just a small error, it can win the job ahead of those who haven’t been as sloppy in their tender preparation, which is galling for those who assembled an accurate submission.

Underpricing mistakes

Presuming there is a contract for the works, contract law will bind the contractor to deliver the work for the price offered (and accepted). But is it as simple as that? What if the builder has made a mistake and there isn’t the money in the contract to cover the works? Is there anything the builder can do to get more money?

This is the awkward bit because the contract binds both parties strongly to what they have agreed to. For an agreed amount of money, the contracted works must be done. But there is a little protection in the law that says there must not be ‘an unequal exchange of value’. This means that you’re not entitled to something unless you’ve paid for it.

The law uses terms like ‘unconscionable bargain’. Does this mean that, if the builder has forgotten to multiply their roof calculation by two to take cognisance of both sides, the client has to pay for the part of the roof that the builder missed in the tender? That all depends on how the submission and the contract have been presented. If it was as easy as saying, ‘Hey I missed out half the roof, I need another six grand’, chaos would reign in the industry, and deliberate mistakes would be factored into every tender submission.

Acts may help

The Contractual Mistakes Act 1977 helps out when a mistake in the contract results in a substantially unequal exchange of values. The Act gives the Courts the ability to vary or cancel a contract that has been entered into in error.

The main stumbling point is that the mistake has to be known to the other party. So if a priced schedule of quantities had been submitted that showed the area of the roof to be less than it should have been – and the client noticed this and decided to take advantage of it – there might be a possibility of success. But the schedule of prices is usually only a tool for the administration of the monies. It is often rearranged by contractors to ‘front-end load’ the monies so the income comes earlier than would have otherwise been the case.

The Contractual Remedies Act 1979 provides remedies for misrepresentation, repudiation and breach of contract. This is not a cure all, as there has to have been misrepresentation (innocent or fraudulent) that induced the aggrieved party into the contract.

These two Acts are not especially good defences against the damaging results that making a mistake in your tender can lead to, but it is important to know they exist. Every situation is different, and you should analyse yours and make comparisons with the Acts before seeking legal advice.

Best to keep away from the wolf

It was British author Robert Burton who included the wise saying ‘He who goes to the law, takes a wolf by the ears’ in his 1621 work The anatomy of melancholy. He cautioned rushing off to the Courts, because the results will always be uncertain until handed down. The Courts have never pretended to be fair – they are there to interpret the law and apply it. The two Acts mentioned above are very specific and usually a bit of a long shot, but they could be the secure handholds on the wolf’s ears that stop you from being savaged.

Of course, if you’d produced a mistake-free tender, you wouldn’t be anywhere near the wolf!

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This article is not intended as legal advice.

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