Contract Bidding and the Process Involved in it

Contract bidding is one of the most happening parts of federal projects.  For contractors pursuing public works projects (city, state, and federal), bidding is how they acquire new jobs. A lot goes into creating the project proposal. The estimating, materials, subcontractor pricing, insurance, it all takes time. When their bid is smashed, they lose time and spend fortune plus the revenues are unrealized.

The Process

Nearly all the public works projects demand bid security along with the proposal.  These are usually issued in the form of a Bid Bond. The contractor uses a Bond Request Form to in order to update the surety about the upcoming event. They state an estimated contract bidding price on the bond request form, which is the focus of the underwriting decision. It is the approximate expected amount in case the contract is awarded.

The Issues

Remember, bid documents might not approve any new, higher amount, which further result in lost opportunity. For placing a contract bid, you also need to submit a Consent of Surety is also required. The surety should mention "we promise to issue the P&P bond." This too may be capped, "This Surety Consent must be valid in support of the contract amount not exceeding $600,000." Here again, if the bid is  smashed at the end, the  document  would  be required to re-issue nd spending  a  higher amount.

  

How to Prevent / Solve the Problem

Here are some strategies we recommend to solve the problem:

1. Don't shortchange the estimated contract bidding amount. Try not to cut it close. There is never a problem when contract bid is lesser than the amount.

2. Don't order the bond too early. Try to gather the contract bidding pricing or at least get indications from subs and suppliers. Using the engineer's published estimate (in the bid advertisement) may not be a sufficient basis for the bond request.

3. Ask if the bond, surety consent or power of attorney will have a maximum dollar value that may come into play. Knowing about it is half the battle.

Honor Cap

Now, comes the variation. What action is appropriate when there is a last minute increase  in the  federal list building price, and there is NO CAP on the bid bond or surety consent. In this case, there is nothing to prevent the contractor from proceeding with the "higher than authorized" bid amount.