When submitting bids for projects, prime contractors routinely rely on bids from subcontractors. But can a subcontractor back out of a bid it submitted to a prime contractor after the prime contractor is awarded a project? I hate giving a non-answer, but as with most legal questions, it depends.
If a subcontractor reneges on its bid post-project award, a prime contractor could attempt to hold the subcontractor to its bid by suing the subcontractor for promissory estoppel. The Florida Supreme Court has identified the following elements of a claim for promissory estoppel:
A promise which the promisor should reasonably expect to induce action or forbearance on the part of the promisee or a third person and which does induce such action or forbearance is binding if injustice can be avoided only by enforcement of the promise. The remedy granted for breach may be limited as justice requires.
Put in the context of a promissory estoppel claim against a subcontractor that revokes its bid, a prime contractor could argue that the subcontractor’s bid was a promise that the subcontractor should have reasonably expected to induce the prime contractor to submit a bid on a project. The prime contractor could further argue that the subcontractor’s bid induced the prime contractor to bid on a project, and if the subcontractor is not held to the bid, the prime contractor will suffer an injustice because it was forced to find another subcontractor that charged more for the same work.
In a very recent federal court case, PKG Contracting, Inc. v. Smith & Loveless, Inc., a prime contractor sued a subcontractor for allegedly revoking a bid that the prime contractor relied on in submitting a bid for a wastewater treatment plant. The prime contractor asserted a promissory estoppel claim against the subcontractor.
The subcontractor filed a summary-judgment motion and argued that it should win as a matter of law because the prime contractor waived its claim when it responded to the subcontractor’s sales agreement by sending the prime contractor’s own contract for the subcontractor’s work.
The subcontractor also contended that it should prevail because the prime contractor did not act reasonably in reliance on the subcontractor’s bid. In particular, the subcontractor noted that the prime contractor seemingly ignored the subcontractor’s terms and conditions in its bid.
The court denied the subcontractor’s summary-judgment motion because there were factual issues that would have to be decided at trial. The court noted that the case would turn on:
whether [the prime contractor] relayed its acceptance of [the] sub-bid unconditionally and then submitted what may have been a non-conforming written Purchase Order, or whether [the prime contractor] responded to [the] sub-bid with the non-conforming Purchase Order. If the former, [the prime contractor] arguably preserved a promissory estoppel claim, which would not be waived by a subsequent dispute over the terms of the proposed Purchase Order. If the latter, [the prime contractor] arguably rejected [the] sub-bid and consequently, waived a promissory estoppel claim.
The court concluded that a “rational fact finder” could not only reach one conclusion based on the written evidence before it. Translation–there will have to be a trial to determine whether the subcontractor’s bid was accepted unconditionally or whether the prime contractor instead rejected the sub-bid and made a counteroffer to the subcontractor.
Bottom Line: If a subcontractor revokes its bid after a prime contractor is awarded a project based, in part, on the subcontractor’s bid, the prime contractor may be able to recover the cost difference between the revoking subcontractor’s bid and any replacement subcontractor the prime contractor uses.
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