After all, we disclosed all they asked for in our submitted design. If they didn't catch it, that's their problem. You attend a combined public hearing and press conference in the City Hall of Cesspool. You are part of a small panel of HEI engineers and managers asked to tell about the design and to answer questions from the floor. Explain the rationale for your answer.
Nobody mentions the design shortcoming and cost error.
State your response. Therefore, it is highly likely that the company will suffer a loss for the fiscal year that could be ruinous, depending on corporate reserves, etc. Withdrawing the bid appears to be the only alternative. Not enough information is given in the problem statement to discuss other options. The Chief's proposed action is not permissible.