SHAFER and MILLER, INC. )
vs. ) CASE NO. 76-1375BID
Respondent. )
A hearing was held in the above-captioned matter under Section 120.57(1), Florida Statutes, after due notice, at Miami, Florida, on January 27, 1977, before the undersigned Hearing Officer.
For Petitioner: James E. Glass and
For Respondent: Donna H. Stinson, Esquire
Whether Petitioner should be granted an equitable adjustment to increase the contract price in the amount of $337,714 for a mistake in bid on project No. BR-7702/8701, Library/Auditorium, Florida International University.
In April 1974, Respondent advertised for bids for the construction of a library-auditorium building at Florida International University, Miami, Florida, State Project No. B.R. 7702/8701. Respondent's representative for this project was the architectural firm of Ferendino/Grafton/Spillis/Candela, Coral Gables, Florida. The advertisement for bids specified that sealed bids would be received until 2:00 p.m. on May 16, 1974, at which time they would be publicly opened and read aloud. In fact, the advertised time period was extended until the same hour on May 23, 1974. The advertisement provided that bids must be submitted on the proposal form furnished by the architect/engineer and be accompanied by a bid bond or an equivalent cash amount in a sum not less than five per cent of the amount of the base bid as a guarantee that the bidder would
enter into an agreement with the owner if this bid was accepted. It further provided that the bid would remain in force for thirty (30) days after the time of opening. The advertisement also contained the following statement:
"The Department of General Services reserves the right to reject any and all bids and to waive informalities in any bid whenever such rejection or waiver is in the interest of the State of Florida."
(Exhibit 1a, testimony of Williams)
In preparing its bid on the project, Petitioner utilized two company forms. One included columns for the various portions of the work with blocks opposite each portion for the insertion of the names of subcontractors and the amounts of their bids. The other form was a recapitulation of the low subcontractors' bid by the various segments of the contract, and the form also included spaces and amounts for the work to be accomplished by the contractor itself. The normal procedure followed by Petitioner in this and prior projects was to enter subcontractors' bids on the subcontractor's bid tabulation form when received over the telephone and, when all such bids had been received shortly before the deadline for submission of bids by the prime contractors on the project, to enter each low subcontractor bid on the recapitulation form. This would then be totaled to arrive at Petitioner's bid to be submitted to Respondent. (Testimony of Kearns).
The subcontractor tabulation form for the instant project listed an item for "PRECAST STRUCTURAL." Opposite this entry in blocks on the form had been printed the names of subcontractors from whom Petitioner expected to receive bids, including Pre-Stressed Systems, Inc. (P.S.I.), Meekins, Stresscon, and Houdaille. However, since there were two different pre-case structural items called for under the specification, i.e., joists under section 3-B and
pre-case panels under section 3-C, the words and figures "3B Joists" and "3C panels" were penciled in above and below the printed words "PRE-CAST STRUCTURAL" to show the need for entering bid figures for both items. However, there was no separation of these items in the various blocks for subcontractor's bids. (Exhibits 1b, 1c, Testimony of Kearns)
Usually bids of major subcontractors were not received until the morning of the final day for submission of the total bids, and many were not received until immediately prior to the time the bid must be tallied and submitted. On the morning of May 23, 1974, the day for bid opening, Petitioner's employee, Edward A. Kearns, Jr., an estimator, was responsible for preparing Petitioner's bid. The only bid Petitioner had received for precast joists was that submitted by P.S.I. in the base amount of $460,000. This sum was entered on the bid tabulation from in pencil under the printed name P.S.I. Bids for the pre-cast panels were received from two of the subcontractors whose names were printed on the form an the amounts were entered in pencil as follows: "Meekins - 399,800, Stresscon - 400,00." No bid was entered for Houdaille. About 11:00 a.m., a telephonic bid on the panels was received from Cast-Crete Corporation of Kissimmee. This bid was considerably lower than that of Meekins and, because Petitioner had not heard of or dealt with Cast-Crete in the past, it asked all three bidders on the panels to verify the requirements and prices. While awaiting the return of this information, the Cast-Crete bid was not entered on the bid tabulation form. Thereafter, Cast-Crete informed Petitioner that it was raising its bid somewhat and this information was placed on a separate
subcontractor bid form for cast-Crete, but not entered on the tabulation form containing all bids. The final Cast-Crete bid was in the amount of $337,714.
By this time, Petitioner's office was quite hectic in that other bids were coming in at a fast pace and the phone was ringing continuously. Many bidders sought clarification on items or had to give their bids to Kearns which was time-consuming. As the time for submission by Petitioner to Respondent drew near, Kearns took the low subcontractor bids from the bid tabulation form and transferred them for each category of work to the recapitulation form. On this form, there was a single line for "Precast structural" and, on that line, Kearns entered the bid that had been received from P.S.I. for precast joists, but forgot to include any bid for the precast panes. Since no breakdown for joists and panels was shown on the recapitulation form, he assumed that bids for all portions of the work hand been included. All items on the recapitulation form were added and Petitioner arrived at a total base bid of $3,999,259, which did not include the bid for precast panels in the amount of $337,714. (Testimony of Shafer, Sr., Kearns, Exhibits 1b, 1c, 1f)
Petitioner's employee, Ron Shafer, Jr., previously had been sent to the place of bid opening at Florida International University with the formal bid letter with the amounts left blank. Shortly before 2:00 p.m., Petitioner provided him by telephone with the amounts to place on the be bid form and submit to the Respondent's representative. He submitted the formal bid just prior to the deadline. The bids were thereafter opened and, although Ron Shafer, Jr., noted that Petitioner's bid was some $400,000 lower than the next lowest bidder, he was unaware of the circumstances of the mistake and returned to the office. The representative of Respondent had opened the bids and an officer of the architectural firm, Freeman J. Williams, was also present. Nothing was said at the time concerning the large disparity between Petitioner's bid and the other bids, and Williams saw no need to ask Petitioner to verify its bid at that time. (Testimony of Shafer, Jr., Williams, Exhibits 1d, 1v)
Meanwhile, after Kearns had tallied the final bid figures and they had been called in to the employee at Florida International University, Petitioner's personnel sat around the office and discussed the job for several minutes. They then started to gather up all the sub-bids to put in a folder when they discovered a "subcontractor's bid form" for Cast-Crete Corporation and realized that it had not been included on the tabulation sheet or on the final recap sheet. Immediate attempts were made to telephone the architect about the mistake. When Williams was reached at his office some thirty minutes after he had left Florida International University, Petitioner requested that its bid be withdrawn after explaining the circumstances. Williams suggested that Petitioner immediately send a telegram to Respondent explaining this situation. Petitioner did so in the following language:
"In reviewing our bid, we discovered we had omitted the cost of precast panels manufacturers bid from our tabulation sheet, in the amount of
$282,714. We, therefor, regretfully must with- draw our bid on the FIU library and auditorium building. We could, however, accept award of contract if this amount could be added to either of our base bids. Please advise.
SHAFER AND MILLER, INC.
R C Shafer"
In the telegram, an additional mistake was made by using the figure of $282,714 which did not include the erection of the panels in the amount of $55,000 that had been the subject of a separate bid by Cast-Crete. After receipt of the telegram, Respondent's representatives requested that Petitioner come to Tallahassee with their pertinent documents relating to the bid to discuss the matter. They did so and thereafter heard nothing further until June 5, 1974, at which time a letter was received from the Department of General Services, dated May 31, 1974, advising that, subject to final approval by the Governor and the Cabinet, it was propose to recommend acceptance of Petitioner's low bid and award the contract to it in the amount of $4,122,000 for Base Bid 1 and Priority
1 Alternate A, Priority 2, Alternate C, and Priority 3, Alternate D. The meeting of the Cabinet at which the award was to be recommended was stated in the letter to be held on June 4, 1975. Since Petitioner did not receive the letter until June 5, it had no opportunity to be present at the time matter was considered. By separate letter of May 31, 1974, the Department of General Services enclosed four copies of a standard form of agreement and performance and payment bond to be executed and returned. (Testimony of Williams, Shafer, Sr., Kearns, Exhibits 1e, 1g, 1h)
Petitioner contacted legal counsel, James E. Glass, on June 5. He checked into the matter and found that the contract had already been awarded on June 4 by the Cabinet. He then telephoned Arnold Greenfield, General Counsel for the Department of General Services, and asked if the state could rebid the job at which time Petitioner would submit its original intended bid. Greenfield stated that the project was critical from a budget standpoint and that the state would not rebid it, and insisted that the Petitioner proceed or else forfeit its bid bond and be subject to suit for any excess costs of performance. Glass reminded Greenfield that Petitioner proceed or else forfeit its bid bond and be subject to suit for any excess costs of performance. Glass reminded Greenfield that Petitioner could seek injunctive relief in the matter, and the latter then stated that if Petitioner would proceed with the contract, Respondent would acknowledge its right to claim a modification of the contract. This conversation was confirmed in a letter from Greenfield to Glass, dated June 7, 1974, wherein it was stated "We further understand that your client may wish to seek a modification of such contract, after execution." Glass, in a return letter dated June 12, returned the executed contracts and bonds, stating that Petitioner was doing so in order to act "equitably and in good faith", and was fully reserving its rights to contest the erroneous bid by judicial action for equitable relief. Thereafter, Petitioner received notice to proceed with the work and in due course satisfactorily completed the contract within the required period. This was evidenced by a certificate of acceptance of the building by the using agency, which was approved by Respondent on December 4, 1975. (Testimony of Glass, Exhibit 1e, 1g, 1h, 1i, 1j, 11, 1m, 1s)
In December, 1974, Petitioner had submitted its claim for an equitable adjustment in the amount of $337,714 which was the amount of the omitted Cast- Crete bid. During the ensuing year Petitioner submitted audits of its expenses on the job to Respondent and in January, 1976, further audit information was provided at the request of Respondent. On May 6, 1976, Respondent informed Petitioner that it would not approve any increase in the contract amount. Thereafter, on June 11, Petitioner filed its petition herein seeking an equitable adjustment in the amount of $337,714. The petition was referred to the Division of Administrative Hearings by the Respondent on August 2, 1976, and the undersigned Hearing Officer was assigned to conduct the hearing therein. (Exhibit 1r, 2, 4, 5, 6)
By a Motion to Abate, dated August 23, 1976, Respondent requested that the matter be held in abeyance pending the submission of the petition to the project architect and his rendering of a determination indicating whether the relief should be granted or denied, as a "condition precedent to the contractor obtaining consideration of said petition in any proceeding authorized by Chapter 120, Florida Statutes." Respondent stated in its motion that the contract clearly provided that nay and all claims or disputes should be first submitted to the architect for determination, and that thereafter, either party could obtain administrative review of the determination by filing a written appeal to the Department of General Services within thirty days. The motion further stated that since this prerequisite had not been accomplished, there was no basis for an administrative appeal at that time. On the same date, Respondent advised the architect of the situation and requested expeditious consideration of the matter. On August 27, the architect issued its determination stating "From our personal knowledge of the events during the bid opening process, and the subsequent events that led to the awarding of the bid, we concur in the contractor's request." In November 1976, Respondent's general counsel advised the Hearing Officer that settlement efforts were in progress but requested that the matter be scheduled for hearing nevertheless. Notice of hearing was issued on December 15, 1976, and the case was heard on January 27, 1977. (Exhibits 1t, 1u, Pleadings)
Petitioner's intended total bid, including alternates, amounted to
$4,459,714. A change order of $194 was issued during the course of the work, amounting to a total of $4,459,908. Petitioner's direct costs on the project were $4,094,890. Overhead was computed at 2.85 per cent of direct costs in the amount of $116,705, for a total cost of $4,211,595. Overhead was computed based on the ratio of total general and administrative expense to total direct costs incurred on all of Petitioner's jobs in process for the year ending May 31, 1975. However, the audit reports included payment in the amount of $335,634 to Cast-Crete Corporation. The actual amount paid to that firm was $325,234 - difference of $10,400, making Petitioner's actual costs $4,201,195. During the course of the contract, Respondent paid Petitioner $4,122,194, resulting in a net loss to Petitioner of $79,001. An anticipated profit for performance of the contract was computed on the basis of the average profit on other jobs of 4.4 per cent, amounting to the sum of $180,377. The latter two sums total $259,378, and it is found that figure is the reasonable amount of Petitioner's claim. (Exhibits 2-5)
CONCLUSIONS OF LAW
Paragraph B-19 of the Instructions to Bidders provides the following: "B-19 Withdrawal of Bids
Bids may be withdrawn on written or telegraphic
request received from Bidders prior to the time fixed for opening. Negligence on the part of the Bidder in preparing the bid confers no right for
the withdrawal of the bid after it has been opened."
In its bid, Petitioner agreed that its proposal would remain in full force and effect for thirty days after the time of opening and it would not revoke or cancel the proposal or withdraw from the competition within that period. The above-quoted bid provision establishes that Respondent was under no duty to permit withdrawal of the bid under the circumstances. However, having been put on notice as to the mistake prior to award, Respondent could well have
anticipated the institution of judicial or administrative proceedings if it awarded the contract to Petitioner at the erroneous bid price.
During the course of the hearing, a question arose as to whether or not Respondent, not having appealed the adverse determination of the architect within the required period stated in Article 8.5 of the Agreement, should be foreclosed from contesting Petitioner's claim. That contractual provision provides as follows:
"8.5 Claims and Disputes: Except where under the terms of this contract the Architect's determination
is final, and except as otherwise specifically provided in the contract, all disputes arising under this contract, including claim by Owner for damages for delay in completion of the construction within the
time agreed upon in Article 4 of the Agreement, shall be decided by the Architect, subject to written appeal within thirty (30) days to the Department of General Services. Hearings in connection with such appeals shall be held before one or more Hearing Examiners, appointed by the Executive Director of the Department of General Services to hear such appeals, whose findings, if approved by the Executive Director or
the Governor and Cabinet, shall be final and conclusive upon the parties thereto as to such disputes. In the meantime, the Contractor shall diligently proceed with the work as directed. In the determination and settlement costs and charges of the proceedings upon either or both parties, as it may deem equitable under the circumstances, which costs and charges may include, but shall not be limited to, any professional, legal or technical advice and counsel it may require; and if it deems it equitable, it may award to the successful party, in any dispute, damages for delays, or for necessary costs and expenses, caused by the proceeding, if it finds that the appeal or refusal to accept the Architect's determination was without reasonable
cause. The determination of all such matters in the manner provided in this Article shall be a condition precedent to any right to legal action of either party against the other or any matter of dispute arising under this contract."
Respondent maintains that it should not be foreclosed from contesting the claim by virtue of the fact that Petitioner had filed its petition under Chapter 120 without submission of the claim to the architect initially. On the other hand, Respondent denied the claim without requiring that it be processed through the architect. It further contends that since the Hearing Officer "suspended" the proceedings after the matter finally was referred to the architect, there was no need for Respondent to appeal the architect's determination since both parties had agreed to this procedure and no objections were thereafter raised by Petitioner.
In considering the above problem, it is questionable whether a decision of the architect should have been sought in the first instance, since the question for determination was not a dispute arising under the contract, but a mistake in bid which occurred before the contract was executed. Further, any
determination necessarily involved a question of law and, therefore, probably was not a proper subject for determination by the architect at all. In any event, it is concluded that the parties, having agreed to present the matter for decision by a Hearing Officer, cannot now be heard to raise procedural objections of this nature.
This case is controlled by the principles enunciated in State Board of Control v. Clutter Construction Corporation, 139 So 2d 153 (Fla 1962), which involved an almost identical situation. There, a contractor had submitted an erroneous bid for the construction of a classroom building at a state university. Shortly before the time for opening of bids, Clutter's employees either through the malfunction of a computing machine or due to the simple negligence of one of the employees in adding subcontractors' bids and arriving at a total, omitted an amount of $100,000 less than the true total of all bids received from the subcontractors. Immediately after the bids were opened, Clutter's employees noted the error, and Clutter thereafter requested permission to withdraw its bid and have returned to it its $80,000 bid check. The Board declined to do so and suit was instituted. The lower court enjoined the Board from accepting the contractor's erroneous bid and held that if all bids were rejected and the project re-advertised, the contractor could not enter a bid higher than its original intended price. The Board did re-advertise and the contractor's bid was the lowest of several bids and he received the contract.
The reviewing court in its decision, noted that no rule should be established that would permit the withdrawal of such erroneous bids under circumstances that would be profitable to the bidder or would permit any collusion or connivance among bidders to the detriment of the public. However, it said:
"Conversely, where a bidder is able to establish by clear and convincing evidence that he has made an honest mistake not due to gross or wilful negligence, and is willing and able to do that which is necessary to protect and preserve the public interest, common honesty as well as principles of equity would dictate that he be granted some form of relief, particularly when the potential loss resulting from the mistake
is so substantial as would work an unjust hardship if relief were denied."
In discussing the application of the above principle, the Court set out the following guidelines:
"In order to establish that the mistake is one for which equitable relief may be granted, it must be established that it is one of such consequence that enforcement would be unconscionable; it must relate to the substance
of the consideration, that is, a material feature; the mistake occurred regardless of the exercise of ordinary care; and it must be possible under the circumstances to place the other party in status quo.
The term "negligence" or its equivalent, in this connection, generally means ordinary negligence, which will not necessarily bar granting equitable relief.
Otherwise qualified, it generally means carelessness or a lack of good faith in calculation which violates a
positive duty in making up a bid so as to amount to gross negligence or wilful negligence, when it takes on a sinister meaning and will furnish cause, if established, for holding a mistake of the offending bidder to be one not remedial in equity. It is thus distinguished from a clerical or inadvertent error in handling items of a bid, either through setting them down or in transcription. If the mistake is found to be remedial, but occurs in connection with competitive bidding on public works, other factors enter into the consideration of whether equitable relief should be
granted. It should be further established by clear and convincing evidence that the bidder acted in good faith; the error when discovered was properly communicated to the public body, and the offending bidder is able and willing to do equity by complying with such reasonable requirements as may be deemed necessary to protect and preserve the interest of the public body to whom the bid was offered. Whether the mistake was discovered and request to withdraw the bid made before or after the contract was consummated are important factors bearing upon entitlement to relief."
The Court found that the contractor in question had met all of the foregoing elements necessary to be granted equitable relief. In like manner, it is here concluded that Petitioner has met those requirements. Petitioner's mistake was caused by the simple negligence of its employee, Kearns, resulting from an inadvertent error in overlooking a subcontractor's bid. Although a substantial sum was involved, the evidence does not point to any fraud, collusion, or attempt to subvert the bidding process in any manner. When discovered before award, immediate steps were taken to remedy the situation. Respondent, however, refused to permit withdrawal of the bid and insisted on performance of the contract. Upon the acknowledgment by Respondent that a claim would lie for the mistake, Petitioner performed the contract satisfactorily.
Respondent maintains that the instant case is governed by Graham v. Clyde, 61 So.2d 656 (Fla. 1952), wherein the Supreme Court held that if the party seeking relief could have avoided his mistake by reasonable care or diligence, a court of equity would not relieve him. The same argument was raised in Clutter and the Court there distinguished Graham by pointing out that case involved a mistake alleged after award, that the error was committed by the complainant himself and not by an employee, and that both were important points upon which the Graham decision rested. It further noted that if simple negligence could bar equitable relief under such circumstances, a court of equity would be powerless to ever give relief against any error occurring in connection with the preparation of a competitive bid and that such result would be contrary to the basic principles of equity. The distinctions noted in Clutter are also applicable to the instant case because the mistake was brought to the attention of Respondent prior to award and was committed by Petitioner's employee. It is therefore concluded that denial of equitable relief to Petitioner would be unconscionable.
In determining the amount that Petitioner should recover, it should be noted that its total intended bid would still have been substantially lower than that of the next lowest bidder. Accordingly, there is not issue here as to the displacement of another, lower bidder. The difference between the amount paid Petitioner and the costs, plus profit, amount to $259,378. Respondent argues
that Petitioner should not profit by its mistake but should be regulated to recovering only the difference in costs of performance. However, it would be totally unfair to expect Petitioner to devote its resources to the construction of the building in question without deriving a reasonable profit therefrom. It is considered that the sum of $259,378 is the proper measure of relief.
However, Petitioner's costs and charges for these proceedings should not be reimbursed. Such costs were not established at the hearing and it is considered that each party should bear its own expenses under the circumstances.
Article 12.2.1 of the General Conditions provides that any change in the contract sum resulting from a contractor's claim shall be authorized by change order.
That Petitioner's claim for equitable adjustment under Project No. BR- 7702/8701 be granted and that a change order be issued increasing the contract price by $259,378.00.
DONE and ENTERED this 21st day of March, 1977, in Tallahassee, Florida.
THOMAS C. OLDHAM
Division of Administrative Hearings Room 530 Carlton Building Tallahassee, Florida 32304
Donna H. Stinson and
Daniel S. Dearing, Esquires Post Office Box 1118 Tallahassee, Florida 32302
James E. Glass, Esquire 2600 First Federal Building
John A. Barley, Esquire General Counsel
Department of General Services Room 110 Larson Building Tallahassee, Florida 32301
