January 2003
By ALEXANDER A. MIUCCIO, CIC Legal Counsel
Contractors on public projects usually accept, by the submission of their bids, the terms set forth in the agency's solicitation of bids, which become part of the contract ultimately entered into between the governmental agency and the successful bidder. The agency's bid solicitation is an offer, the con-tractor's bid is an acceptance of the offer at a specific price, and the result is a contract.
Sometimes, however, the agency's solicitation of bids does not constitute an offer, to be accepted or rejected by prospective bidders. Rather, it may be merely an invitation to prospective contractors to submit bids which the public agency may then accept or reject. In that case, the contractor's bid constitutes the offer and the acceptance of such a bid by the government creates the contract.
The difference between a bid solicitation which is an offer, and one which is an invitation to prospective bidders to submit offers is more than a mere formality. The distinction may determine which terms control, those set forth in the agency's solicitation of bids or those set forth in the contractor's bid, when contract disputes arise. This point was illustrated in the recent case of Niagara County v. R & D Engineering.
Background
The Niagara County Water District entered into a contract with R & D Engineering, P.C. pursuant to which R & D was to provide engineering services in connection with the expansion of one of the district's facilities. The engineer prepared a set of purchase specifications for three new vertical turbine pumps to be installed during the expansion work. The district solicited bids for the pumps and subsequently accepted the bid of Gould Pumps, Inc. to supply the pumps pursuant to the specifications. The district and the supplier signed a contract approximately one month later, which incorporated into the contract the terms of the bid and appended documents submitted by the supplier.
The pumps were delivered and installed by a contractor. Thereafter, the district commenced an action complaining that there were excess vibrations in the pumps, that the pumps were defective and that they were unsuitable for their intended purpose. The district moved for partial summary judgment against the supplier for breach of express warranties. The lower court denied the motion and the district appealed.
Arguments
The district argued that the terms set forth in the solicitation of bids were controlling. It asserted that the solicitation was an offer which was accepted by the supplier when it submitted its bid. The solicitation contained an express warranty which, according to the district, was breached by the supplier. The district also argued that vibration specifications set forth in the contract were performance specifications, placing the risk of non-performance on the supplier apart from its warranty.
The supplier argued that its bid and the appended documents, one of which was entitled "standard terms and conditions," were controlling. The bid and appended documents contained numerous comments and clarifications of the bid solicitation, which the district accepted when it signed the contract. According to the supplier, the district expressly agreed in the contract that the bid and appended documents would take precedence to the extent that any terms set forth therein contradicted the terms in the district's solicitation. The standard terms and conditions contained a warranty only against defective material and workmanship, which, according to the supplier, took precedence over the express warranty contained in the bid solicitation. The supplier also argued that the vibration specifications were design specifications, not performance specifications.
Decision
The appellate court agreed with the supplier and affirmed the lower court's denial of the District's motion.
According to the court, the solicitation of bids was not an offer that the supplier could accept or reject. Rather, it was an invitation to prospective bidders to submit bids which the district could accept or reject. The district accepted the supplier's bid and the appended documents, and expressly agreed in the contract that the bid would take precedence over the terms of the district's solicitation of bids. Therefore, the warranty, contained in the supplier's standard terms and conditions which was limited to defective material or workmanship, took precedence over any express warranty contained in the district's solicitation of bids. The supplier was under no obligation other than those set forth in the terms and conditions of its bid.
The court also determined that the vibration specifications were design specifications and not performance specifications. According to the court, although there were detailed vibration specifications in the contract, as well as reference to performance requirements, the language of the contract as a whole established that the vibration specifications were design specifications. The court noted that there were at least seven pages of the details of construction for the pumps and their motors. Accordingly, the supplier was not "free to choose the materials, methods and design necessary to meet the objective or standard of performance."
Conclusion
Although bid solicitations normally constitute offers to be accepted by bidders, there are some instances, as in this case, when the solicitation is merely an invitation to submit offers in the form of bids. The acceptance of the bid creates the contract. The terms set forth in the bid may take precedence over the terms set forth in the solicitation of bids, particularly when, as here, there is an express agreement that the bid and appended documents will take precedence to the extent there are contradictions between the solicitation and the bid.
About the author: Mr. Miuccio is a partner in the New York City- based law firm Altieri, Kushner & Miuccio, P.C. and legal counsel to the Construction Industry Council of Westchester and Hudson Valley, Inc. Robert Mark Wasko, senior associate with the firm, assisted in the preparation of this article.