The COVID pandemic disrupted production and supply distribution chains. Pent up demand is increasing the need for construction materials, and prices are rising dramatically. And some materials have been rationed or allocated on a limited basis. All of these factors have increased the uncertainties and risks for bidders, and those seeking to rely upon those bids.
Some subcontractors are stockpiling material or making special arrangements to ensure that key materials are available as needed. Still others cannot afford to do that, or cannot secure the materials in a given timeframe at any price.
Subcontractors would be wise to carefully consider these issues in their bid proposals, and Contractors should carefully think about how they seek and rely upon Subcontractor bids.
Subcontractors may want to limit the duration of their bid pricing with a clause like:
“This bid price is limited to 30 days from the date of this bid proposal and may not be relied upon after that date.”
And the bid proposal might contain a price escalation clause as follows:
“In the event of a significant price increase in materials between the date of the bid and delivery, there shall be an equitable adjustment in the contract price or Subcontractor shall be released from its obligations.”
Others will utilize the ConsensusDOCS 200.1 Amendment form that describes what cost escalation for materials may occur.
Subcontractors may also want to try to protect themselves from aggressive schedule demands that may prove impractical if material or labor shortages occur, with language like:
“This bid is conditioned upon an acceptable schedule, and the availability of labor and materials to satisfy that schedule.”
And any bid proposal should be tied to equitable subcontract language and risk:
“This bid is conditioned upon the use of AIA-A401 subcontract, ConsensusDOCS 750 subcontract or other fair subcontract language acceptable to Subcontractor.”
Meanwhile, Contractors should avoid bid shopping, changing scope through “value engineering,” post-bid negotiations, or other changes that could inadvertently relieve Subcontractors of their bid obligations. Any Contractor seeking to rely upon a low bid utilized in its pricing to the Owner should immediately send its Subcontract to the Subcontractor for execution with a note that it relied upon and accepted the bid price in securing the job from the Owner. Contractors might then be in a better position to insist that the Subcontractor perform for the original bid price despite market disruptions and price escalation.