Time and time again I see the old adage “if it is too good to be true it probably is” applying to a project gone array. This was apparently the case with the Palo Alto, CA Library project where the low bidder came in $8 million below the next low bid. Whatever dreams the local authority in Palo Alto had of saving money with the low bid have turned into a nightmare as the project has become riddled with delays, saddled with $1.7 million in change orders, and threatened with a messy lawsuit.
Typical of a project dispute, the contractor is blaming incomplete design drawings and owner directed changes. Meanwhile, the owner is demanding answers and trying to hold angry taxpayers at bay. Also typical, I am sure there is enough blame to be spread around. First, while I fully understand the public policy behind lowest responsive responsible bid laws, the unintended consequence of low bid laws is often a situation where an owner accepts a bid that is indeed too good – in this case $8 million too good – to be true. What was the owner thinking here? Did it really think that the winning contractor possessed a magical bid process that allowed it to submit a bid $8 million less than the next low bid? $8 million is significant to say the least and it should have been a huge red flag to this owner.
Meanwhile, on the contractor’s part, its bid was either erroneous or willfully low. There really is no way else to explain how it came in $8 million less than the next low bidder. If – or rather when – the parties get around to litigating this dispute, attacking the contractors bid is the first place, that lawyers representing the owner will go.
Because lowest is not always best for a public entity, this case is another example of why public bid laws need to be relaxed to allow for alternative bidding methods, like the DB/CM bidding. Otherwise, as is often the case, the owner ends up with much more than they bargained for.
Wally Zimolong
Wally represents contractors (and subcontractors) and developers. His clients build and develop residential, commercial, and industrial properties nationwide. Wally enjoys working with the owners of the businesses he represents because they tend to be entrepreneurs and all around interesting people.
