Supplemental Conditions

A Lesson In Being Wary of Under Budget Bids

Posted in Contracts, Public Contracts

Owners should never be “thrilled” with bids that come in substantially under budget because it usually means something is either wrong with their construction documents or their contractor intends to make up there thrilling under budget bid with scope related change orders.

According to ENR, Taisei Construction Company has filed a lawsuit against San Joaquin Delta College, which seeks $25 million, claiming the College “substantially increased the scope of work” on a project to construct a new math and science building.  The story goes on to say that the College estimated the cost of construction to be $65 million but was “thrilled” when Taisei bid just $35 million for the project.  Shockingly, the contractor is claiming that the actual cost of construction was close to the College’s original estimate.

Two things could have happened here.  Either, College’s construction documents (the drawings) were woefully inadequate for the contractor to accurately prepare its bid.  In other words, the contract document did not fully show the contractor what was intended to be constructed.  In which case, the College can proceed against its design profession (construction speak for the architect or engineer) who prepared the contract documents.  Or, the contract documents were in fact 100% complete and the contractor simply deliberately underbid the job in order to be awarded the contract with the intent to make up its price through change orders.

Either way, the College could have prevented this lawsuit.  First, it should have assured its contract with its design team required the design team to prepare a fully complete set of construction documents that were fit for construction, rather than simply preparing a set of documents showing the general intent of the architect, which is often the case.  The College apparently did not do that because College officials are quoted in the article as saying “here was no such thing as a perfect set of design drawings.”  Second, it should have assured that its contract with Taisei required that Taisei fully familiarize itself with the drawings and to raise any objections to the drawings prior to construction.  Finally, and perhaps most importantly, it should have asked why the Taisei’s bid came in $30 million under budget!

Three simply things that could have potentially avoided a $25 million lawsuit.