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Subcontractors' bids are routinely included in contractors' bids prior to the contractor accepting the subcontractors' bids. However, if a contractor does not accept a subcontractor's bid in a timely manner after the contractor's bid is accepted, the subcontractor may not be bound by its bid. This principle is discussed in Rotondo Weirich Enterprises, Inc. v. Rock City Mechanical, Inc., 2006 U.S. Dist. LEXIS 19177 (E.D. Ky. 2006).
In Rotondo, the general contractor on a prison construction project solicited a bid from a concrete subcontractor for the construction and installation of precast concrete cells (the "Cells"). The general contractor also solicited a bid from an HVAC contractor to perform HVAC and plumbing work on the outside of the Cells.
At the request of the general contractor, the HVAC subcontractor submitted a proposal directly to the concrete subcontractor to perform certain HVAC and plumbing work on the inside of the Cells (the "Inside Work"). Incorporating the HVAC subcontractor's bid for the Inside Work into its own bid, the concrete subcontractor submitted its bid for the installation and construction of the Cells to the general contractor. Based upon this bid, the general contractor awarded the concrete subcontractor the subcontract for the construction and installation of the Cells, which included the Inside Work.
A year later, the concrete subcontractor sent the HVAC subcontractor a proposed subcontract to perform the Inside Work. However, the HVAC subcontractor never performed the Inside Work. Thus, the concrete subcontractor was forced to reprocure the HVAC work from a third party. The concrete subcontractor filed suit against the HVAC subcontractor seeking damages under the theories of breach of contract and promissory estoppel.
Addressing the concrete subcontractor's claim for breach of contract, the court found that no contract existed which would require the HVAC subcontractor to perform the Inside Work because the concrete subcontractor never accepted the HVAC subcontractor's bid. As such, the court held that the HVAC subcontractor did not breach any contract with the concrete subcontractor regarding the performance of the Inside Work.
Addressing the concrete subcontractor's claim based upon promissory estoppel, the court found that for promissory estoppel to apply, the concrete subcontractor must demonstrate that it had unequivocally accepted the HVAC subcontractor's bid shortly after the general contractor awarded the subcontract for the Cells to the concrete subcontractor. The court then noted: "Promissory estoppel acts to prevent a subcontractor from withdrawing its bid before the general contractor has a chance to accept. It does not act to hold a subcontractor indefinitely bound while the general contractor tarries for no apparent reason." Therefore, the HVAC subcontractor was not bound by its bid because there was never any acceptance, let alone a timely acceptance, by the concrete subcontractor of the HVAC subcontractor's bid for the Inside Work.
As Rotondo reveals, a subcontractor is not automatically bound by a bid which is incorporated into a contractor's bid. Therefore, contractors that rely upon and include bids from subcontractors in their own bids must note that a subcontractor may not be bound by its bid if the contractor does not accept the subcontractor's bid in a timely fashion.
Gerald I. Katz is an attorney specializing in construction law throughout the United States with Katz & Stone LLP, Suite 600, 8230 Leesburg Pike, VA 22182
author: By Gerald I. Katz