Hiring a Contractor
Awarding a construction contract to a single contractor is the archetypal construction project situation. Here, the owner contracts with the general contractor for the completion of the entire project and the general contractor, in turn, contracts with various subcontractors for the completion of various aspects of the project (e.g. electrical, mechanical and plumbing work). It is the responsibility of the general contractor to coordinate the activities of the various subcontractors, and the project is built in accordance with the plans and specifications provided by the owner.
Contracting construction work typically involves either the direct hiring of a contractor or competitive bidding among different contractors. Government contracts differ from nongovernment contracts in that private sector contracts have few constraints, while public sector contracts involve extensive regulations imposed by the government.
Private sector construction contracts may either be directly hired or bid upon. The direct hiring of a contractor is the hiring of a contractor at the individual's own discretion. Competitive bidding gives all contractors a chance to bid on the construction contract and allows the individual to hire the lowest bidder.
Public sector contracts involve competitive bidding. Since the government is a major employer and is political in nature, there is an assumption that there may be impropriety and that the government cannot be trusted to meet and negotiate suitable terms without at least the appearance of impropriety or special favor. Thus, competitive bidding serves the dual purpose of safeguarding against favoritism toward a particular contractor and giving all a fair opportunity to participate.
Bidding Procedure
In most bidding procedures, there will be a "request for bids," which is an invitation to construction companies to make bids on a construction project. (Private owners and governments typically reserve the right to reject all bidders, usually for skill or reputation in trade.) After the request for bids, the bidders typically will obtain "bidding information," which includes the drawings or plans for the project, job specifications, the parties involved, and the proposed contract. Upon receiving the bid documents, the bidder will submit a "bid proposal"; i.e. the offer (usually irrevocable for a certain stipulated period of time). Factors considered in accepting a contractor's bid include: financial ability, reputation, equipment availability, and skill and expertise. After the lowest bidder's offer is accepted, the hirer (the owner or public body) makes a formal award of the contract, typically through written formal notification. If the bidder signs the contract, a binding agreement is created.
Bidding Issues
The Illinois Purchasing Act requires competitive bidding in all public contracts, and all prospective contractors be "qualified bidders" (using considerations such as quality and serviceability, terms of delivery, and site specifications).The Act also requires that "economical procurement practices" shall apply to all purchases and contracts by or for any State Agency. In other words, the state agency may in good faith determine that it is more economical to perform the work with its own employees than to let the contract by competitive bidding. (See Illinois Section 505/2 et. seq.) Further, Illinois courts have held that a public body may not draw specifications in its bid request that would permit only one bidder to qualify for the project, and that all bidders be "resident contractors" (i.e. licensed to transact business in the State of Illinois).
Cases that involve fraud or ill repute in contract bidding usually nullify the contract. For example, if a city or county lacks the statutory authority to enter into a particular contract, the contract is void and the contractor may not recover for work performed. Cases that involve bad faith or bribery are also nullified, with the contractor receiving nothing.
However, accidental bidding discrepancies sometimes occur. The nature of the bidding process means that bidders sometimes miscalculate their bids. Relief is typically granted when the mistake was an honest error in mathematics or a clerical error but the courts have refused to grant relief for errors of judgment. The Illinois courts also have allowed rescission of contracts when enforcement of the contract would be unconscionable or when unforeseen circumstances render the contract unenforceable. In cases of unconscionability, courts either will grant relief to the bidder, a refund of the bid deposit, or an action for rescission of the contract.
When the bidding contract involves a prime contractor and a subcontractor, a subcontractor generally may not hold the prime contractor liable for the prime contractor's use of the subcontractor's bid unless there was an agreement stating otherwise. Thus, if a prime contractor uses a subcontractor's bid, the prime is not compelled to use the subcontractor if the prime is awarded the project; similarly, a prime contractor may not hold a subcontractor liable for the subcontractor's bid unless there was substantial reliance on this bid by the prime contractor in making his or her bid, in which case the court may impose the doctrine of promissory estoppel and hold the subcontractor liable for its bid. Further, Illinois law requires that any person or business entity who enters into a contract for consultant swerves with a State agency shall state in the contract whether the services of a subcontractor will be utilized, along with the subcontractors' names, addresses, and fees charged thereby.
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