By Michael C. Loulakis, Esq., FDBIA, M.ASCE, and Ashley P. Cullinan, Esq.
Even the best construction contractors can make mistakes in their bids. If the mistake is small enough, a contractor will typically live with the consequences. But what happens when the contractor would lose substantial money if it were forced by the owner to honor its bid?
On federal government contracts, there is substantial judicial precedent that gives a contractor an “out” if it can prove that its bid was erroneous. However, there are fewer cases dealing with this subject for state and local construction contracts, and the outcomes are less predictable. This is evident by a recent decision: West Virginia Department of Transportation, Division of Highways v. Olympus Painting Contractors Inc., where the state’s DOH attempted to hold a contractor to its erroneous bid.
The case
The project involved a solicitation by WVDOT’s DOH for a contract to repair and repaint the Veterans Memorial Bridge in Brooke County, West Virginia. Olympus submitted a bid to complete the contract for $5,606,316.34, and it furnished a 5% bid bond from a surety that guaranteed Olympus would enter into the contract. Olympus was the lowest bidder by approximately $1.6 million.
After the bids were open but before the DOH chose the winning bidder, Olympus informed the DOH that it had made a bid error. Olympus explained that its proposal had been constructed using prices calculated by the company’s owner but written down by a company employee. The problem was that the employee misread one of the numbers for a line item that was for 177 ft of removing and replacing expansion joints, according to the decision. The owner calculated $9,340/ft, but the employee “mistook the ‘9’ in the handwritten documents for a ‘5’ and erroneously input a per-foot unit price of $5,340,” a $708,000 mistake, according to the court decision.
Olympus explained the situation to the DOH and asked the DOH to reject its bid. Olympus cited a West Virginia statute that created a process for government agencies to reject erroneous bid proposals if the following four conditions were satisfied:
- An error was made in the bid.
- The error materially affected the bid.
- Rejection of the bid would not cause hardship on the public entity involved, other than losing an opportunity to receive construction projects at a reduced cost.
- Enforcement of the bid in error would be unconscionable.
The DOH refused to grant Olympus’s request, awarded Olympus the project, and directed Olympus to sign a contract. Olympus refused. This eventually prompted the DOH to contact Olympus’s bid bond surety and demand that the surety pay the DOH the amount of the bond (approximately $280,000). When the surety refused, the DOH sued Olympus, seeking, among other things, payment of the bid bond amount.
After conducting discovery, the DOH and Olympus filed competing motions for summary judgment, with both parties asserting that the trial court’s considerations were to be guided by the statute mentioned earlier. After considering the undisputed evidence, the trial court agreed with Olympus. It found that because the four conditions of the statute were met, the DOH had the ability under the statute to reject Olympus’s bid and “should have done so,” per the decision.
The trial court was also influenced by testimony from a DOH engineer that the $708,000 bid error would have “‘drastically’ altered Olympus’s intended bid and (by) the testimony of Olympus’s owner that the bid error was catastrophic and would have threatened the company’s survival,” per the decision. The trial court found “it was unconscionable for DOH to require Olympus to perform for a price $708,000 below its intended bid.”
The ruling
The DOH appealed the trial court’s ruling to the West Virginia Intermediate Court of Appeals, arguing that the trial court erred in its interpretation and application of the statute. Its key argument was that nothing in the statute allowed a bidder to withdraw a bid after the bid opening. The appellate court conducted a thorough examination of the statute’s legislative history and disagreed with the DOH.
The appellate court noted that the “legal question of whether a contractor may withdraw a bid proposal containing a unilaterally made mistake appears to be a novel one in West Virginia’s courts,” according to the court documents. But the appellate court found that when the legislature created the four conditions of the statute, the legislature was aware that since 1900 courts throughout the United States have permitted the withdrawal of an erroneous bid when “it would be unconscionable to enforce a contract formed on the bid, and where withdrawal of the bid would do nothing more than return the government agency to the status quo before it opened the bid,” per the decision.
After considering the legislative intent, the appellate court concluded that the statute should be read to mean that after bid proposals have opened, “a government agency must reject a bid proposal that a bidding contractor declares to be erroneous, and seeks to withdraw, if the contractor establishes by a preponderance of the evidence” that the four conditions are met. The court then looked at whether the trial court correctly evaluated the four conditions in making its determination.
The appellate court found that the second, third, and fourth conditions required by the statute were satisfied. However, as to the first condition (i.e., whether an error was made), the appellate court considered the DOH’s argument that its conclusions were “entitled to absolute deference,” and that Olympus made no moves to show that the DOH “abused its discretion or acted arbitrarily or capriciously.” At the trial court, the DOH had not raised this argument or any direct evidence to counter Olympus’s evidence of a mistake.
The decision continues: “Instead, the DOH offered its conclusion that Olympus’s bid proposal, compared against the proposals by ... other contractors and DOH’s pre-bid estimate, was not ‘different enough’ to be read as a palpable, patent, obvious mistake — and so, it must not be (a) mistake.”
The appellate court agreed with the DOH that “the courts of this State have long held that the DOH has wide discretion in its application of bidding procedures to protect the public” and “to ensure contracts are awarded to the lowest responsible bidder,” according to the decision. Because the trial court had not done this, the appellate court sent the case back to the trial court for an assessment of whether the DOH’s determination that “the Olympus bid is not an error” was “arbitrary, capricious, or an abuse of discretion,” in light of the evidence.
The takeaways
Even if one corrected the $708,000 bid mistake, Olympus’s bid was almost 15% lower than the next-lowest bid. That is a substantial amount to leave on the table, and it is no wonder that Olympus asked for relief.
Given the circumstances, it is surprising that the DOH fought this so hard. Because Olympus was so low, many owners would have asked Olympus to verify its bid. Owners generally do not want to award a contractor a contract for which it will be in a loss position and risk the contractor not being able to perform. If this case was simply all about the DOH getting $280,000 from the surety under the bid bond, that seems like a harsh action to take.
Although the appellate court sent the case back to the trial court, it is hard to imagine that there will actually be a hearing or trial on this issue. Based on the decision, it appears that the trial court did not find the DOH’s actions proper during the first trial and will likely not do so at a subsequent trial.
Michael C. Loulakis, Esq., FDBIA, M.ASCE, is the president and CEO of Capital Project Strategies LLC in Reston, Virginia.
Ashley P. Cullinan, Esq., is an associate with Smith Currie Oles LLP in Tysons, Virginia.
This article first appeared in the May/June 2026 issue of Civil Engineering.
