Ever since the inception of public bidding in New Jersey, contractors have had to be especially careful in preparing their bid prices. New legislation may allow them a little more wiggle room.
The prevailing legal standard dictates that public contracts be awarded to the “lowest responsible bidder” — there is no negotiation post-bid, and the bid price is locked in upon the bid opening. If a bidder discovered, post-bid, that he made a gross mistake in calculations, he could not back out without jeopardizing his bonding capacity and/or losing his bid bond. Bid bonds are issued by sureties under an indemnity agreement, which almost universally contains a personal guarantee. Thus, if a bidder backed out of a public contract, there likely were significant consequences, including personal liability. In addition to losing the bid bond and losing money, there is some case law in New Jersey that would support the conclusion that if a contractor on a public works contract backed out, he could be responsible for the difference between his bid and the second lowest bidder’s price. Finally, failure to complete a public contract may reflect negatively on the bidder when he bids on future public projects.
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