Last week, contractors and subcontractors bidding on Tennessee Department of Transportation projects received an alert from Brian Egan, TDOT Director of Construction, warning of a noticeable increase in unbalance bids [pdf]. While the rules differ among each state, you should take Egan’s warning to heart since the consequence of submitting of an unbalanced bid can be costly.
According the TDOT memo, lump sum bid items such as stakes, lines and grades, clearing and grubbing, traffic control, mobilization, and removal of structures are being bid at significantly more than the estimated or anticipated actual costs. The consequence for submitting an unbalanced bid: "Proposals may be rejected by the Commissioner if any of the unit prices contained therein are obviously unbalance, either excessive or below the reasonable cost analysis value."
There is a caveat. If a bid item is found to be "mathematically unbalanced" but not "materially unbalanced," then the bid may nonetheless be accepted. A "materially unbalanced bid" is one that generates a reasonable doubt that the award to the bidder will result in the lowest ultimate cost to TDOT. In other words, there can be a two-step analysis.
What does all this mean? It means that contractors and subcontractors should avoid submitting unbalanced bids of any nature. I previously wrote about how courts tend to treat an unbalanced bid and what you can to do avoid disputes. In this instance, TDOT may accept an unbalanced bid, but not if there is suspicion it will cost the agency more. Other states likely have the same rules as TDOT that allow the awarding agency to flatly reject unbalanced bids.