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House Bill Takes Aim at ‘Bid Shopping’

Monday, May 16, 2011

More items for Program/Project Management

Contractors bidding on public construction projects would be required to name—and use—subcontractor listed in their bids, to prevent the practice of bid shopping, under a bill now under consideration by the House.

The Construction Quality Assurance Act of 2011 (H.R. 1778), introduced May 5 by Rep. Carolyn Maloney (D-NY), would require construction companies that bid on federal agency solicitations over $1 million to list each subcontractor they plan to use for $100,000 or more of the work.

After the contract award, if a prime contractor replaced a listed subcontractor without the permission of the contracting officer, the prime contractor would be subject to penalties.

The penalty would be the greater amount of:

• 10 percent of the amount of the subcontractor’s bid;

• The difference between the listed subcontractor’s bid and the replacement subcontractor’s bid; or

• The difference between the substitute subcontractor’s bid and the dollar value specified by the contractor to perform the work himself or herself.

Bid Shopping

“The bid-listing requirement would eliminate post-award price negotiations between contractors and subcontractors that can lead to corruption, wasteful spending, cutting corners, and can drive quality contractors and subcontractors out of federal construction markets,” says the American Subcontractors Association, which is vigorously supporting the bill.

“Bid shopping” occurs when a prime contractor divulges one subcontractor’s bid to obtain a lower bid from another sub.

“Bid shopping results in a windfall of profit to the ‘bid shopper,’ while depriving taxpayers and the federal government of the full value of their construction dollars,” said ASA president Timmy McLaughlin.

ASA president Timmy McLaughlin called mandatory bid listing “the responsible solution” to bid shopping.

The measure would also promote quality workmanship and security on federal projects, by publicly identifying major subcontractors and the types of work they would perform, ASA contends.

“Right now, federal agencies are forced to accept bids without any assurance of which subcontractors will actually perform the work on their projects,” McLaughlin said.

“This lack of oversight diminishes the quality and security of federal construction. Taxpayers deserve better, and mandatory bid listing is the responsible solution.”

Comment from brian ofarrell, (5/17/2011, 7:43 AM)

Bid shopping is not just a problem in the USA. In Canada some GC's shop the bid even if they have a named sub. The architects in a lot of these cases let them get away with it and even authorize it. Most subs are unaware of their rights when it comes to bid shopping. The named policy is a great idea but it needs to go further to ensure that compliance is enforced. If a sub knows that they will have a chance to negotiate after the tender closes why would they put forth their best price. Bid shopping is a white collar crime and it is expensive for a sub to pursue. CCDC 23 is a document that explains best practices for tendering and awarding contracts. It spells out clearly what practices are acceptable. There is one thing to take note of if you wish to pursue someone for bid shopping in the courts. A judge would be setting a precident that would undermine the entire bidding system if they ruled in favour of bid shopping.

Comment from marc chavez, (5/17/2011, 11:04 AM)

I can't wait! It has always happened but now is becoming a huge issue. I have jobs that bid various “packages” one month and 3 months later I hear the selected sub “is getting a new number” to the general and a sub that apparently did not get the job “has a change” or is “looking at it”… and this is months after the bid. These generals should be held accountable! In addition, not just at the federal level - it’s just not fair to the sub – AND the job. Many times the shopped product is not of equivalent quality. The general shows the owner a savings of 50 cents on the dollar and the owner jumps at it. Thinking what a great deal they are getting! Great deal for the GC! They get that 50 cents for a few telephone calls and a meeting or two - you, the public get stuck. As an architect and usually just the specifier, I can only push so hard to make them hold the spec (for quality, not brand name.) Money talks and owners can be led astray by the lure of cash now – maintenance or replacement later. Subs out there - I try to keep it open and fair – but there is only so much I can do.