High Speed Rail: Can You Withdraw Your Bid If It’s Too Low?

The answer to the above question is it depends on whether the bidding announcement expressly prohibits withdrawals of bids. A withdrawal would be unfortunate for everyone but sometimes it does happen in real life. After you have submitted your bid, it has dawned on you that you would incur a loss if you win the bid at the price you proposed and if you proceed with signing and carrying out a construction contract. You now want to withdraw. Can you do it? When? At what cost?

The high-speed rail bidding announcement says, with no uncertainty, that you cannot withdraw your bid after submission. And if you are the selected bid winner, it even threatens to blacklist you as a work abandoner if you fail to show up to sign a construction contract. How far can the bidding announcement go in terms of its validity and enforcement against bidders, winning or not?

Contract Is Made When Offer Is Accepted

Legally, the bidding announcement is a mere an invitation to bid, not an offer to be accepted to make a contract. It can also be called a request for proposal and terms of reference.

A contract, a construction contract, will come into being only when you make an offer according to the bidding announcement, win the bid, and have your offer accepted by the bid announcer, which is the government project-owner and enter into a construction contract with the owner.

The making of a construction contract still follows the central principle of contracts in the Civil and Commercial Code (CCC): A contract is made when an offer made by the offeror is accepted by the offeree.

The acceptance in a government construction project is deemed made, subject to details in a formal construction contract to be signed by both parties, when the government project-owner issues a letter of award to formally inform the winning bidder that it has won the bid and that it must sign a contract with the owner within a certain period of time, such as 7 days.

Bidding Announcement Is Binding

First of all, a bidding announcement is valid, binding and enforceable against bidders.

Reconciling with the offer-acceptance rule of forming a contract under the CCC, the bidding announcement is simply a tool to entice you, as an offeror, to make an offer and submit your bid to the government project-owner as the offeree to accept.

Beyond the CCC, if the bidding announcement, a special pre-offer document issued by the offeree, lays down specific conditions for you to comply with, those conditions are binding and have legal effects on you. When you are making an offer, you must comply with this bidding announcement; otherwise your offer could be rejected, your bid bond confiscated, or you could be exposed to a claim of damages from the government project-owner.

The bidding announcement for the high-speed rail project linking Bangkok and Nakhon Ratchasima contains a clear condition prohibiting withdrawals of bids submitted by offerors. There is no period of prohibition, which means, from the date of the bid submission to the date a contract is executed; no bids are allowed to be withdrawn. Naturally, this prohibition is to be respected.

What a Bid Violation Entails

The high-speed rail announcement does not specifically impose sanctions for a prohibited withdrawal of a bid.

Obviously, such violation of a bidding condition could lead to the 5% bid bond being confiscated.

The violating bidder could also be exposed to a claim of damages by the government project-owner, although the amount of damages in this case could be hard to prove if the bidder withdraws prior to the announcement of the bid result and if the entire bidding is not cancelled.

A cancellation of the bidding by the project owner following withdrawals of several bidders in contradiction to the bidding condition could entitle the owner to a serious claim to recover expenses of the bidding cancelled and the cost of a new bidding plus 7.5% p.a. interest from the breaching bidders.

The Blacklisted Work Abandoner

The high-speed rail bidding announcement, however, stipulates clear consequences for the winning bidder failing to make a contract after being selected as the winner. And the amount of damages is easier to determine.

In simple terms, if you are the lowest bidder of 11 billion baht in the total contract price capped in your unit-price bid and you withdraw after the bidding result is announced, forcing the owner to select the second lowest bidder of 11.5 billion baht, the extra 500 million baht that the owner has to pay could be classified as a basic amount of damages that the owner can claim from you for a breach of the bidding conditions.

The bidding announcement cross-refers to the Ministry of Finance Procurement Regulation (the MOF Regulation) issued under the Public Procurement Act of 2017 (PPA). It says a bidder who has been selected as the winning bidder but fails to make a contract within a period specified in the letter of award as a work abandoner under the MOF Regulation in addition to the bid bond confiscation and a claim of damages.

Can Early Withdrawals Be Blacklisted?

The answer is no.

It’s striking to note that both the MOF Regulation and the PPA empowers the Permanent Secretary of Finance to blacklist the defaulting bid winner at the recommendation of the project owner, but neither rule authorizes the blacklisting of other bidders who withdraw their bids prior to the selection of the winner.

The legal implication is that a bidder who unilaterally withdraws from the bidding process prior to the finalization of the selection is unlikely to be blacklisted as a work abandoner. Except for a collapse of the bidding process, because of the lack of clarity of the extent of the owner’s damage, the owner would not be incentivized to bring a lawsuit against the breaching bidder and could only end up confiscating the bidder’s bid bond.

 All Bidding Announcements Are Not the Same

Outside the high-speed rail bidding process, bid bond confiscation aside, and without promoting withdrawals of bids in any projects, when life gets difficult and you are forced to backtrack, whether or not you can withdraw a bid liability-free depends on what a bidding announcement says.

In an absence of an express prohibition in the bidding announcement, such withdrawal is possible under the general provisions of the CCC. Namely, if the offeror withdraws its offer, before the offer is accepted by the offeree, the withdrawal is legitimate.

Wirot Poonsuwan is Senior Counsel and Head of Special Projects at Bangkok law firm Blumenthal Richter & Sumet and can be contacted at wirot@brslawyers.com.

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