March 23, 2026
This article was featured in the April 2026 edition of the Utility Contractors Association of New England, Inc.’s Construction Outlook.
The Bid Unit of the Massachusetts Office of the Attorney General (“Bid Unit”) closed out March with a decision addressing an awarding authority’s ability to re-bid a public works project. More than 30 years ago, the Massachusetts Appeals Court recognized three valid bases for rebidding: (1) insufficient funds; (2) ambiguous specifications; and (3) new specifications on re-bid. In this case, the Bid Unit examined the awarding authority’s ability to rely on the “insufficient funds” basis for re-bidding.
The case arose out of a park improvements project, which was part of a “broader infrastructure improvements plan for which $40,000,000 ha[d] been appropriated.” In its Invitation for Bid, the awarding authority estimated that this particular project would cost $7,000,000. The project entailed both lump sum and unit price items.
Five contractors submitted bids. The bid price of the apparent low bidder was below the awarding authority’s estimate, but that bidder eventually withdrew its bid. The bid price of the next lowest bidder was $7,268,270, or $268,270 over the estimate. However, instead of awarding the contract to the next lowest bidder, the awarding authority decided to rebid the project.
The project architect advised the awarding authority that the next lowest bid price exceeded the “budgeted estimate” and added that “[G]iven the significant cost difference between the remaining bids and the engineer’s estimate, it is in the City’s best interest to reject all bids and readvertise the project to seek more competitive pricing.” After advertising the project for re-bid, the awarding authority updated the original bid tabulation sheet to read: “Over budget – No bids could be considered.”
Bid protests ensued. The awarding authority argued that the “Project’s $7,000,000 estimate is the Project’s ‘budget,’” and that, as a result, it was entitled to rebid the project due to “insufficient funds.” The Bid Unit disagreed.
The Bid Unit reaffirmed several important principles when it comes to rebidding:
- Rebidding is “decidedly disfavored because the initial bidders’ secret prices are exposed . . . .”
- Therefore, “rebidding can disrupt equal footing by opening the door to an awarding authority favoring a certain bidder who may not have been able to obtain the award on the first round.”
- To “avoid these pitfalls” and to further the purposes of the competitive bidding laws, an awarding authority “may voluntarily rebid a project in narrow circumstances: ambiguous specifications, materially new specifications on rebid, or insufficient funds appropriated for the work.”
Given these principles, the Bid Unit stated that the “law is clear” that an awarding authority “may not reject bids simply to obtain a lower price.” According to the Bid Unit, “this is precisely what the [awarding authority] did” here by rejecting all bids to “seek more competitive pricing.” The Bid Unit stated definitively that “[o]btaining better pricing is not a lawful basis to rebid a project.”
The Bid Unit went on to conclude that the awarding authority failed to establish “insufficient funds.” Asserting that the awarding authority “recast[ed] the Project’s cost estimate into a budget, then recast[ed] the budget into a hard funding cap,” the Bid Unit stated that these “leaps fail.” The Bid Unit was clear: “an estimate is not a cap” but a “good faith projection of what a project will cost.” The Bid Unit added that an estimate “denotes neither a budget nor ultimate funding” and confirmed that “awarding authorities, including the City [in this case], routinely award contracts to bidders whose bids exceed the estimate.” According to the Bid Unit, if the Massachusetts Appeals Court “wished for ‘over-the-estimate’ to be a viable rationale for rebidding a public construction project, it certainly could have done so” but “did not.” In short: “[b]eing over an estimate is not the same thing as having insufficient appropriated funds.”
Ultimately, the awarding authority failed to demonstrate that there was “truly insufficient funding” for the project. Not only was the project part of a larger, $40,000,000 appropriation, the Bid Unit noted that the awarding authority did not reduce the scope of work or its cost estimate on rebid. Regardless, the fact that the project included “many unit price elements” “defeat[ed]” the awarding authority’s insufficient funds argument. This is because the awarding authority retained “ample means” to control construction costs through its use of many unit price items.
In these circumstances, the Bid Unit concluded that the awarding authority’s attempt to rebid the project “lack[ed] legal justification.” The Bid Unit allowed the protest, and instructed the awarding authority to: (1) “disregard” the results on rebid; (2) “review the next lowest bid from the first round of bidding . . . in the usual and compliant course”; and (3) “award the contract to the lowest responsible and eligible bidder.”
Key Takeaways
Although the decision is not binding legal precedent of an appellate level Massachusetts court, it presents several key takeaways for contractors to keep in mind, including the following:
- Awarding authorities cannot rebid a project simply to obtain a lower price; otherwise, public awarding authorities could undermine the purposes of the competitive bidding laws by engaging in multiple rounds of bidding until they arrive at a favored contractor or price.
- “Insufficient funds” remains a valid basis for rebidding. However, an awarding authority must demonstrate that it “truly” lacks sufficient appropriated funds for the project. An estimate does not necessarily equate to a “funding cap” and the fact that bid prices may exceed the awarding authority’s estimate – without more – does not automatically mean the awarding authority can rebid on the basis of insufficient funds.
- The “insufficient funds” basis for rebidding may not be available where – as here – the contract entails several unit price items which enable the awarding authority to control construction costs.
When contractors encounter situations in which an awarding authority seeks to reject all bids and re-procure a project, contractors should examine whether there is a valid basis for the awarding authority to do so. It is often advisable to submit a public records request to obtain public records that may shed light on the awarding authority’s decision. The contractor did so here, and the resulting records revealed that the awarding authority’s decision-making “lack[ed] legal justification.” Contractors resisting a rebid may employ several other arguments depending on the facts. However, just because an awarding authority rejects all bids and advises that it will rebid a job does not automatically mean that it has lawful authority to do so.
