Question

The City issued a request for bids for the construction of an events centre with the closing stated as June 15 at 4:00 p.m of the current year. The tender stated that no changes could be allowed to bids after submission. XYZ Construction submitted its bid a week in advance of the closing date. However, on June 12, XYZ Construction advised the City that it needed to increase the price of the events centre project in its bid, as it had discovered a major calculation error in its bid submission. The City refused to allow a change to XYZ's bid. After the specified close date, the City awarded the construction contract to XYZ Construction, as it was the lowest bidder. XYZ Construction refused to perform the work. This caused the City to award the contract to the company with the second-lowest bid, thus increasing the City's cost for the project. The City sued XYZ Construction. What is the legal position of the parties?

A) XYZ will win, as it advised the City in advance of the closing date that it needed to revise its bid.
B) XYZ will win, as it had only bid on the construction job but had not signed a construction contract to build the events centre.
C) XYZ will win, as bidders are not obligated to accept a contract based solely on the fact that they have bid on it.
D) The City will win because the lowest bidder is always selected and obligated to perform.
E) The City will win, as XYZ was bound by a subsidiary agreement when it submitted its bid.

Answer 1

The legal position is (E) that The City will win, as XYZ was bound by a subsidiary agreement when it submitted its bid.

Step-by-step explanation:

The legal position in this case revolves around the principle of competitive bidding and the binding nature of bids. XYZ Construction, by submitting a bid, entered into a contractual relationship with the City based on the terms specified in the request for bids. The tender explicitly stated that no changes could be allowed to bids after submission, creating a binding agreement.

While XYZ Construction discovered a calculation error and sought to revise its bid, the City's refusal to allow changes was in accordance with the terms specified in the tender. The City, having awarded the construction contract to XYZ Construction as the lowest bidder, had the legal expectation that XYZ Construction would perform the work as agreed upon in the bid submission.

Option (E) correctly reflects that XYZ Construction was bound by a subsidiary agreement when submitting its bid. Competitive bidding processes are governed by legal principles that require bidders to honor their submitted bids. Deviating from this would undermine the integrity of the bidding process and contractual obligations. Therefore, the City's decision to award the contract to the second-lowest bidder and sue XYZ Construction is legally justified under the terms of the competitive bidding process and the binding nature of the bid agreement.