Bid shopping or not? 7

[maskalawia]

Hi all,

I am a recent grad, been working for a general contractor for less than a year. I was currently soliciting subcontractor bids for a job, and one hour before job closing one of the subs (whom I have a good relationship with) called and asked me how their bid is looking. He was a close second. Usually I'd say that he's within 20% and that's it. But because of our relationship, I said that his bid is very competitive with Company X (I named the company without disclosing its price - here is where my dilemma comes from). We ended our conversation there. Shortly after, he calls and lowers his price.

Chris Plue, VP of Webcore Concrete, defines bid shopping as “letting one bidder know where their price stands in relation to the competition and letting
that bidder adjust their pricing accordingly". Others say "you're only bid shopping if you disclose one subcontractor price to another"

Was I guilty of bid shopping or not?

 

[thaidavid40]

I guess the precise meaning of "bid shopping" is in the eye of the definer. However, providing any feedback on relative pricing level, even if couched in vague terms, seems to invite the allegation. Why would a company provide such feedback BEFORE the bids are due anyway? In our work, the contractors, and their pricing, stand on their own. Generalized feedback comes only AFTER the bids are opened.
Dave

Thaidavid

 

[allgoodnamestaken]

Definitely avoid situations like this.

If someone asks about bids I tell them "Sorry, but its our policy not to talk about bids prior to the tender closing and my boss is a real stickler for that." and leave it at that. Blame it on your boss to preserve the relationship. If they continue to ask about bids prior to close then they are fishing for feedback on their price, which is definitely a problem if you don't shut it down right away.

I don't know what your policy is, but everyone's bids are publicly available afterwards and they can see how well they did and adjust their bids on the next project accordingly. Not before.

 

[SlideRuleEra]

As a former contractor, I can absolutely assure you that contractors (and subcontractors and material suppliers) discuss this type behavior among themselves. Your company in general, and you in particular, will get a "bad reputation". Over time, the prices your company receives will not be as competitive as they once were - no collusion, just a general awareness of who you are dealing with. In the past, I participated in and contributed to these "behind the scenes" discussions. As the other say... don't do it.

Edit: These discussions also covered Owners and Engineers, as appropriate.

http://www.SlideRuleEra.net

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[maskalawia]

Thank you all, point taken.

Question for all, what do you consider to be appropriate post-bid feedback for unsuccessful bidders?

Question for SlideRuleEra, does it take many instances of this behavior for the negative consequences you talked about to start taking place? This is the first time I was put in this position.

 

[SlideRuleEra]

maskalawia - Don't worry about a one time occurrence, but I suggest taking some simple steps to help set things right. You have a big advantage, you are a recent grad. In a couple of weeks, or so but not too soon, find an unrelated reason to chat (one at a time) to each subcontractor who bid. In general terms, casually work into each conversation how much you are learning about contracting, especially the importance of the bid cycle. I would leave it at that.

Concerning post-bid feedback. We would get very competitive pricing on major bridge components, such as rebar, structural steel, concrete piling & girders, etc. The most I would tell a supplier (successful or unsuccessful) was a truthful " you were completive" or "your bid was not competitive". At the time (1970's) this was accepted as an ethical response by these bidders. They never asked for additional info, yet continued to provide cutthroat pricing on future jobs.

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[zelgar]

I think SlideRuleEra touches on an important thing about if asking for the information (or providing a response) is ethical. Unless the bidding situation is unusual, all of the companies had the same information for submitting bids. Unless they requested additional information about the requirements before their bid submittal, they had the same opportunity as the other companies that offered a bid. Their calling you to get an idea on their offer compared to their competition is questionable ethics. Their offering a new bid based upon knowledge that other companies submitting a lower bid is not ethical.

 

[IRstuff]

From a practical perspective, the revised bid should be looked at askance. They presumably bid a price that was within reason, and within some probability of being on target. When they cut their bid, they ought to have put themselves into cost-overrun territory.

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[bimr]

My understanding is that the practice known as bid shopping is something that occurs after the award of contract not before.

By this definition, you have not been bid shopping.

This is something that is less likely to occur once you have developed a relationship with the suppliers that you are using.

http://constructionadvisortoday.com/2012/05/can-anything-be-done-about-bid-shopping.html

 

[beej67]

Meh.

I'da just told him his bid was "very competitive," and then I'd select among the suppliers based on the one I trusted the most, him included, based on factors other than price.

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[allgoodnamestaken]

Too much risk involved in declaring there are "other factors" even though we all know non monetary factors are taken into consideration. If a company has a low bid, no bad history, and the expertise to carry out a job, and their bid loses to another company with all the same qualifications and a higher price, you may eventually find yourself fielding questions from a lawyer as to why.

All you should say is "We are not required to pick the lowest bid - other factors may apply". But never suggest to someone that they had the lowest bid (or even use "competitive") and that they lost to someone else for other reasons UNLESS you're prepared to explain those reasons in detail and be quizzed on them by their lawyer.

 

[BUGGAR]

Just wait until a contractor gets the idea that the bidding process is askew and, rightfully so, challenges the process; and legally you have to start all over again. SlideRuleEra knows.

 

[IRstuff]

One thing that can be done is to weed out the duds, and ask for a best and final offer (BAFO) from all the remaining bidders. This let's EVERYONE know that they're "competitive," but since everyone knows that fact, there is no advantage given to anyone. Each bidder could raise or lower their bid, or stand pat, depending on how strong they feel their proposal is.

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[IRstuff]

One other thing that can be done on your part is determining cost realism, i.e., you know that some people are underbidding, while others may be overbidding. The Air Force was big on determining what they thought the project might realistically cost, and decrement or increment the bidder's proposals and then do the evaluation.

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[77JQX]

This is why you don't open bids until after the bid closing.

 

[Panars]

77JQX, The general contractor has to look at his subcontractor's bid before the bid closing so that he can prepare his bid.

 

[coloeng]

I think many on this post are getting confused. Masklawia is working for a General Contractor and receiving bids from Subcontractors. As the General, you are under no obligation to accept the lowest responsive bid. You can take the highest bid for a certain trade if you have great confidence in that sub and none in the other subs in that same trade. Of course this will increase your total bid for the project.

I agree with Bimr, price shopping is when the General has been awarded the bid and then begins pitting subs against each other to lower his costs, but maintain the same price for the bid. That is why many owners require a list of subcontractors as part of the bidding process.

 

[allgoodnamestaken]

As the General, you are under no obligation to accept the lowest responsive bid. You can take the highest bid for a certain trade if you have great confidence in that sub and none in the other subs in that same trade. Of course this will increase your total bid for the project.

Certainly true, but that doesn't matter based on the situation at hand. The fact is that bids were in and someone asked for feedback on their bid amount prior to closing and then sent in a lower bid. This is bad news any way you look at it, whether you call it bid shopping or not.

As a general contractor it is 100% within your right to pick one company over another based on non-monetary reasons. But, if you give people feedback on their bid prior to closing, in the long run you will get a reputation for not dealing fairly with others and be worse off for it.

 

[77JQX]

Oh. My mistake.

 

[darthsoilsguy2]

there is another side of this coin. when you get a bid from one company and then.... almost immediately you get the competing bid from the other company and it is just barely under.... do you let the 1st know that you think they got shopped by another GC spilling the beans?

this kind of stuff is what makes bid day crazy.