by David Stafford
Sometimes, the worst thing that can happen is to win a bid. Here are a few examples:
Scope of work changes. A job was described as a direct glued over concrete installation, and “the owner will remove all existing carpet and VAT.” The only mention of floor prep, was “flooring contractor will be responsible for minor floor prep.”
When the project had been visited, no removal had been done. When it came time to perform the work, it was apparent shot-blasting was used to remove asbestos adhesive residue leaving a rough, uneven surface. The dealer submitted a change order request for skim coating but it was rejected as being too costly, and “floor prep was supposed to be part of your bid anyway.”
There had been no description of the type or amount of floor prep to be done. The dealer was reluctant to proceed without a firm dollar figure but was threatened with the liquidated damages provision of the contract. So, the dealer did the skim coat, and negotiated a change order for about half of what he should have been paid.
Mistakes in bids. In one large bid, the estimator left out an entire floor; in another, the scope of work was accurate, but the line item for installation labor was left out, resulting in no labor being charged. In one sad case, everything was correct on the bid except for a transposition error—93,675 became 63,975—and, unfortunately for the dealer, all that was required was a final number.
In these examples, the bidder was held to his price. “We are not responsible for your mistakes and we relied on your numbers to make an award; you cannot withdraw bid.” One dealer refused to sign the proffered contract, but was told, “Your offer was signed and accepted, so you have no choice but to perform.”
The dealer’s attorney agreed.
A deposit may be required. When the dealer has taken an order, he has already had to set payment terms. If he tries to go back to his client and get a deposit, he may not be successful. There have been cases where a mill rep told the client a deposit is required but failed to tell the dealer until the order was ready to be placed. The client’s response is usually, “I thought you figured the deposit in your pricing and would take care of it (float the money and then bill me).”
Change in payment terms. A custom job order was placed, but the dealer’s written purchase order did not note terms. The product was shipped and invoiced by the mill with a notation terms were net 30 days, which was overlooked since the mill’s standard terms were already part of the dealer’s accounting database. The bill was paid within the standard discount terms. Four months later, the dealer received an invoice for $2,000 for “improperly taken discounts.”
This was the first time anyone knew terms had been changed.
In a similar case, the mill rep gave a better price but eliminated terms. The dealer found out he was going to lose over $11,000 in terms after he had received the first of three shipments. The mill’s regional manager said, “I can’t do anything about the shipment already made, but we will split the difference and I’ll put terms on one of the other shipments.”
Needless to say, the dealer wasn’t pleased, but had no choice.
The “devil is in the details” and these examples clearly show why.