Opinion ID: 1713620
Heading Depth: 1
Heading Rank: 3

Heading: forfeiture of bid bond

Text: ¶ 62. We come then to the fourth sentence of Wis. Stat. § 66.0901(5): It reads: If the discovery and notice of a mistake, omission or error causes a forfeiture, the bidder may not recover the moneys or certified check forfeited as liquidated damages unless it is proven before a court of competent jurisdiction in an action brought for the recovery of the amount forfeited, that in making the mistake, error or omission the bidder was free from carelessness, negligence or inexcusable neglect. ¶ 63. Acceptance of a bid by a municipality is a precondition to forfeiture of a bidder's deposit. Gaastra v. Village of Fairwater, 77 Wis. 2d 7, 8-9, 252 N.W.2d 60 (1977). Acceptance of a bid explains the phrase that the discovery and notice of a mistake, omission or error causes a forfeiture,  for some mistakes will be discovered after the award of the contract. It also subjects the municipality's conduct to scrutiny when the municipality awards the contract knowing of the bidder's error and then seeks the forfeiture of a bidder's guaranty bond. The fourth sentence specifically contemplates a court proceeding to determine whether a proposal guaranty should be returned to the bidder when a municipality has retained the proposal guaranty. ¶ 64. Both Krasin and Nelson addressed the last sentence of § 66.0901(5). In Krasin, the court specifically analyzed the operation of the linguistic triplet carelessness, negligence, or inexcusable neglect, freedom from which entitles the bidder to recovery of its forfeited proposal guaranty. The three terms . . . as applied to the instant facts are synonymous.  233 Wis. at 519 (emphasis added). The Nelson court amplified this comment: The clear meaning of the statute is that the bidder should not be relieved of the consequences of his mistake where that mistake is due to his failure to exercise ordinary care in the preparation of the bid. As it is used in the statute, neglect should include omission or oversight. An omission or oversight which results in a forfeiture is inexcusable where it is due to the bidder's failure to exercise ordinary care. The statute cannot reasonably be read to require, as the plaintiff seems to contend, that any negligence must also be found to be inexcusable. By definition, negligence or carelessness is conduct which is inexcusable under the circumstances. 72 Wis. 2d at 414-15 (emphasis added). We read these cases to hold that there is a single standard in the forfeiture recovery context by which all mistakes, errors, and omissions are judged: ordinary care. ¶ 65. How does the forfeiture decision relate to a municipality's obligation to determine whether the bidder is entitled to withdraw his bid as relief for a mistake, error, or omissions? ¶ 66. The statute provides greater procedural protection to a bidder than certiorari review. The circuit court has the power of de novo review, and the statutory scheme appears to vest the court with certain equity powers. Gaastra, 77 Wis. 2d at 14. As in this case, the court is entitled to take evidence rather than simply review the municipality's decision. This can be explained by the fact that although the municipality is expected to act in a quasi-judicial manner, it could be injured by a bidder's withdrawal or could gain by retention of the proposal guaranty. Thus, it may not act dispassionately. ¶ 67. Neither subsections (5) [n]or (7) of [the public works bid statute] delineates the circumstances in which a municipality may retain a bidder's bid deposit as a forfeiture. Gaastra, 77 Wis. 2d at 14. Instead, the terms of a proposal guaranty, including the conditions under which the bond is forfeited, are generally a matter addressed in some manner by the municipality. See id. at 9 (citing the municipality's advertisement as evidence of the condition of the bid bond, which would only be retained if the bidder's bid were accepted); see also Wis. Stat. § 62.15(3) (setting conditions for bond forfeiture as liquidated damages where successful bidder for a city public works project fails to file the proper contract and bond); Department of Transportation, State of Wisconsin, Standard Specifications for Highway and Structure Construction §§ 101, 103.7 (1996). The conditions causing forfeiture are a function of the particular factual setting, which in turn is controlled to some extent by other provisions of statutes, municipal charters, and other formal protocols that a municipality might create for the purposes of competitive bidding procedures. ¶ 68. Nothing in § 66.0901(5) itself limits forfeiture to situations in which a bidder refuses to execute a contract for a public works project which has been awarded to it by a municipality. In reality, however, the accepted practice seems to be that the conditions under which a bid bond or proposal guaranty may be retained tend to be limited by bid documents. For instance, in this case, the DOT has limited its rights to retain a proposal guaranty to situations in which it has awarded a contract to a particular bidder and that bidder refuses to execute the contract. ¶ 69. Because bid withdrawal and proposal guaranty forfeiture are usually linked, a circuit court may first review whether a bidder should have been permitted to withdraw its bid before award of the contract. This will entail consideration of whether the bidder has met every condition in the third sentence of Wis. Stat. § 66.0901(5), and has acted in good faith. The court may also examine whether the municipality's refusal to allow timely withdrawal was prompted by the withdrawal's real prejudice to the municipality. If the bidder cannot show by clear and satisfactory evidence that its error, omission, or mistake was not caused by any careless act or omission in the exercise of ordinary care in examining the plans or specifications and in conformance with the conditions of the statute, then it will not be able to show that it was free from carelessness, negligence or inexcusable neglect at a later stage of the hearing. ¶ 70. On the other hand, if the bidder is able to satisfy the withdrawal test but the municipality is able to show how the bidder's withdrawal has prejudiced or will prejudice the municipality, the bidder will have to meet the higher standard that it was free from carelessness, negligence or inexcusable neglect to avoid forfeiture. The law is clear that the bidder has no vested right to withdraw its bid. Nelson, 72 Wis. 2d at 417. It certainly has no right to withdraw without the adverse consequence of forfeiture. That is the purpose of the bid bond. A rule allowing a bidder to withdraw without consequences would seriously undermine the bidder's duties, unless the bidder is able to show that it was free from negligence. A court endowed with the power to conduct de novo review, take additional evidence, and factor in equitable considerations should be able to implement the objective of the statute.