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ohiosam
Senior Reader

What do you think of this?

I did not bid on this, just reporting what I know from reliable sources. There was a piece of government owned farmland that was open for bids to rent. A local farm submitted 2 bids, one in the name they are known by and another, much higher bid, in a separate corporation. Both bids were the 2 highest bids, now they want to withdraw the higher bid and rent it at the lower rate. The government agency is not happy that they are trying to back out of their higher bid and looking if they can reject both bids and go with the 3rd place bid. What do you think of this?
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8 Replies
Advisor

Re: What do you think of this?

I think it depends upon the terms of the bidding. 

 I do not like the tactics the "double top bidder" employed. ..still, the corporation is a separate entity, and thus has the rights and responsibilities of any entity or individual.   Sounds like somebody bought some legal advice to me...especially if the winning bidder can withdraw its bid as a routine condition of the auction. 

It sounds to me like they made the "normal' bid, then stuck in the higher corporate entity as a spoiler, so they could be assured of receiving the parcel to operate. 

I guess it goes to good faith...which is probably the grounds the agency is looking to to justify the third place bid.  Any offer you make in a contract is supposed to be made in good faith, and this bidder seems not to have done so. 

I think everyne assumes that a bidder will offer his best bid, and see what everyone else offers...this bunch wanted extra insurance.  Assumptions are often wrong. 

There is the letter of the law, and the spirit of the law, and much space sometimes in between the two.  That is where lawyers earn their keep, defining those gray areas via litigation and judicial interpretation. 

 If the rules of the bidding process are not written to address situations like this, reat assured that the agency will re-wrate them to prevent this in the future, if that can possibly be done.  I'd really like to know how this one turns out. 

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Senior Contributor

Re: What do you think of this?

You say there were two separate corporations so there are two legal entities.  Each can bid.  I don't see why the government doesn't take the highest bid.  If the highest bid is pulled, then take the second and so forth.

 

Yes, it seems fishy, and it seems like the people wanted the land bad enough to take it a the highest bid if the second highest was not theirs.  Yes, it seems like it was bid in bad faith.  Maybe a lawyer can look at the terms of the bid and see what is enforceable.

 

A public outcry open auction would have prevented this, I think.  Also, maybe next time a deposit will be required that is forfeited in case of non-performance by the bidder.

 

In the meantime, it smells fishy and I don't  think I'd like it, but it may be the government has no way out.  And, after all, the second highest bid is still higher than the third highest which the government wants to now award.  Doesn't the government have a responsibility to award the bid to the highest bidder?  I suppose the government is trying to raise the question of whether the bidder will perform in the second case if they didn't in the first, but doesn't that involve cracking the coprorate veil?

 

Maybe they can get them on the RICO act.  Smiley Happy

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Senior Advisor

Re: What do you think of this?

The highest bidder wins. If they are going to allow them to withdraw, then open it up to all bidders and auction it off. I would exclude the high bidder that withdrew from the new bidding process. Maybe both entities if the same party cast the bids in the original bidding.

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Frequent Contributor

Re: What do you think of this?

It all depends on how the terms of the bidding was structured. 

 

If the bid terms were written in a way that the top bidder can back out with no penalty then someone did a poor job of writing the bid terms.  

 

 In my simple way of thinking if the bidder can back out on one bid the government should be able to reject the second bid and let the next highest bidder have it.       

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Veteran Advisor

Re: What do you think of this?

Let me see--Go to auction and bid--win auction--then back out--wife gets second place-then gets rental property with lesser bid--this could turn the auction practice inside out--maybe have kids bid and get third place and have wife back out--where is the integreity of this leading to--maybe next time a down payment non refundable check might be in order or is this the ''free market no rules"at its finest--to much regulation ??  

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Highlighted
Veteran Advisor

Re: What do you think of this?

Seems like a it is a little underhanded but we probably should not lose sight of the fact that the second highest bid is still higher than any one else.

I would think lawyers would be checking all the fine print and if this second highest bidder wins, which still gets the government better money than anyone else, I expect there would be a 'reputation' factor built into any business others do with this winning bidder.

Probably those overseeing the land for the government will lean heavily on the winner to follow all points of the contract to the letter.

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ohiosam
Senior Reader

Re: What do you think of this?

I think the reason they are looking into rejecting the top 2 bids is the idiom 'Fool me once, shame on you; fool me twice, shame on me'  

 

Legal or not if it was your ground would you want to continue to deal with someone who did this to you? 

 

As I find out how it is resolved I'll post more. 

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Senior Contributor

Re: What do you think of this?

Most tenders would have the provision that 'any or all bids may be rejected' and if they also drop the second bid I would think the third is very close. If the second was much higher than the third place it would sort of be like 'cutting off your nose to spite your face'. 

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