What can be done about “bid shopping”?

When a general contractor divulges the bid price for one subcontractor to its competitors to try to get a lower offer than the one it submitted to the owner. Bid shopping is when a general contractor uses the lowest accepted bid to force other subcontractors into submitting lower bids.

The Associated General Contractors of America considers bid shopping “abhorrent” as well as declaring that they are “resolutely opposed to it.” These practices are not only abhorrent, but also unethical and anticompetitive Coach Loafers according to the American Subcontractors Association. Others contractor trade associations also oppose the practice (the AGC and ASA have issued Joint Guidelines), and courts who have weighed in on bid shopping tend agree with this sentiment.

Bid shopping is perhaps the most widely depreciated practice in the construction industry. Despite the fact that is not a common practice, it continues to be widespread.

Incentives make it tough Bid Shopping

Subcontractors are almost always forced to participate in post-award negotiations because of the pressures of bidding shopping. If a general contractor approaches a subcontractor with a lower price, it assumes it will not be awarded the job unless it lowers its price. Now that the subcontractor knows it will lose the subcontract as well as the recovery of its initial costs it has, there is strong incentive to lower its bid and cut corners to keep the contract.

In Sheet Metal Employers’ Assn. v. Giordano the Court of Common Pleas of Ohio noted that “[m]any hours were invested…in craigslist salem preparing a bid for the… contractor. This may lead to the latter playing one bidder against the other, each trying to reduce its bid as much or as little as possible. Financial loss is possible and estimated profit is greatly reduced.

This contract is not a good deal. It is easy for the [ultimate] subcontractor to cheat and do inferior work.

Prices Bid Shopping are Affected

Bid shopping can also have negative consequences. It interferes with the fair setting of prices by the free market. In order to compensate for anticipated , a subcontractor may artificially raise its bid. The owner will be hurt again as artificially inflated costs have resulted in a decrease in its cost. Any subcontractor price deflation is only for the benefit of the bid-shopping general contractors, and not the taxpayer.

can also hinder the setting 

Bid shopping can also hinder the setting of fair prices by disincentivizing subcontractors who are not interested in spending the time and effort to prepare and submit competitive bidding when it is possible. This can lead to lower overall competition and possibly higher construction costs. This is good for the general contractor but not for the subcontractor or the owner.