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Non-Binding Estimate


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Hi,

I have a question for the forum. Hypothetical situation (aren't they all?!): somewhere from the DoD, an informal, email or verbal request is made to a company to provide a budgetary estimate for services and goods. The company provides a "Price Estimation" and includes the statement "This is a a non-binding estimate of software, hardware and associated services." Could the company end being bound to the price estimate anyways?

In other words, does "non-binding estimate" hold water with the government?

(Be gentle...I'm a first-timer here on this forum!).

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Hi,

I have a question for the forum. Hypothetical situation (aren't they all?!): somewhere from the DoD, an informal, email or verbal request is made to a company to provide a budgetary estimate for services and goods. The company provides a "Price Estimation" and includes the statement "This is a a non-binding estimate of software, hardware and associated services." Could the company end being bound to the price estimate anyways?

In other words, does "non-binding estimate" hold water with the government?

(Be gentle...I'm a first-timer here on this forum!).

A binding contract requires an offer and an acceptance. There has been no offer from the company, which made it clear that it was only a non-binding estimate, based upon the Government's specific instructions. This looks similar to situations where the government develops "rough orders of magtinude" or "ROM" estimates to help support follow-on contracting actions.

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A binding contract requires an offer and an acceptance. There has been no offer from the company, which made it clear that it was only a non-binding estimate, based upon the Government's specific instructions. This looks similar to situations where the government develops "rough orders of magtinude" or "ROM" estimates to help support follow-on contracting actions.

This is correct. The only time you could run into problems is through the legal theory of estoppel, and only then under certain circumstances. Estoppel is a doctrine grounded in "good faith" and "fair dealing," which may find a party liable for intentionally misrepresenting information with the intent that the information be used or relied upon by another party to its detriment.

Though you may feel confident your estimates are prepared entirely in good faith and based on reasonable judgment, the possibility that you could have overlooked a cost or misstated something accidentally could be perceived by someone else as an intentional misrepresentation with a fraudulent purpose. The "non-binding estimate" language may protect you even if there was such a misrepresentation, as it indicates to the government that this is not an actual bid. But if it were me, out of an abundance of caution, I would want to further qualify the estimate with additional disclaimers like "This estimate is not final, and should not be used or relied upon by the recipient in conducting its affairs."

And I just want to be clear, Joel is correct -- your estimation is almost certainly not the basis for any contract. As I said, the only potential liability I foresee is some kind of strange circumstnace where, you estimate, say $500,000, and the government somehow uses that information in a reasonable price analysis or relies on the information in some other way, and then rejects bids or acts in some way that they pass on offers to do the job for, say $600,000. Then the government asks you to submit your final bid, and you are now at some significantly higher amount, like $1,500,000. If the government can still get someone to do it for $600,000, you're probably fine, you just lose the contract. But if they can no longer get that $600,000 contract, and it's because they relied on your estimate to their detriment, and they discover you intentionally lowballed your estimate by omitting costs, AND that you intentionally did that to defraud them or give yourself some advantage, AND now they have to pay someone else $800,000, then -- if all those things are true -- you could potentially be liable under the theory of estoppel for the $200,000 difference they are now having to pay, when, in the absence of your estimate, they would have selected the cheaper $600k offer.

Like I said, a really unusual circumstance. And even then, you could point to your "non-binding" language to demonstrate you did not intend for the government to rely on your estimate for any reason. But I would just add the disclaimer to my estimate to help ensure the government wouldn't rely on the information in some detrimental way, and further insulate me from a potential lawsuit.

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