Question

A contractor has submitted a tender while specifying that it is available for acceptance for a

period of five weeks after the tender submission. However, the contractor withdrew its bid

after two weeks due to an unexpected rise in its workload. Can the owner recover the costs

for employing a different contractor? Explain.

Answer 1

The owner can recover the costs from the contractor who as accepted initially for employing a different contractor, only when the contract conditions are made firm at initial stage itself. In all general conditions contract one should give the provision of EMD or bid bond, in order to avoid or tackle the situation stated above.Earnest money is demanded from each tenderer to ensure the owner that a tenderer/bidder does not withdraw his tender / offer before its acceptance, or refuse or deny to execute the work after it has been awarded to him. This is to safeguard the process of bidding and time and resources spent during process by all. If this is not done, any bidder will withdraw at any stage and the bidding process would become a laughing stock or a joke and hence redundant. If no such financial guarantee is demanded, the bidder would not take the bidding process seriously in terms of time, process, offer and conditions. Not only that after bidding process is over and contract is finalized, the bidder has to start work i.e. performance of the contract. EMD is also a guarantee against that. In short EMD is one type of guarantee that once the bidder enters the bidding process and the owner awards the work or contract to any of the bidder, the bidder can neither withdraw nor change any terms of contract of the bid and has to perform once the deal is done.So, EMD can be forfieted to recover the costs for employing a different contractor.