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Congress Weighs Curbs on ‘Bid Shopping’

Friday, May 31, 2013

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Subcontractors are hailing a new federal bill that would tie primary contractors firmly to their subcontractor commitments in order to end the practice of bid shopping.

The Construction Quality Assurance Act of 2013 (H.R. 1942) "would promote open competition among subcontractors and ethical bidding practices and ensure that the highest quality subcontractors bid and work on projects paid for with federal taxpayer dollars," according to the American Subcontractors Association, an enthusiastic supporter of the bill.

Rep. Carolyn Maloney

Bill sponsor Carolyn B. Maloney (D-NY) says bid shopping "remains a pervasive practice in federal contracts."

The measure was introduced May 9 by Rep. Carolyn B. Maloney (D-NY) and is now before the Committee on Oversight and Government Reform.

"Post-award bid shopping is widely criticized in the industry, yet it remains a pervasive practice in federal contracts," Maloney said in a statement.

"That is why I am introducing the Construction Quality Assurance Act to create selection procedures for the low-bid system that ensure that legitimate, competing small businesses do not face unfair practices. My bill will improve agency projects and protect taxpayers at the same time."

'Quality and Best Value'

The bill's stated goal is "to assure quality and best value with respect to federal construction projects by prohibiting the practice known as bid shopping."

Bid shopping occurs when a prime contractor seeks to lower his or her costs by soliciting lower subcontractor bids after being awarded a contract by federal sources.

The measure would require prime contractors that bid on federal construction projects valued at more than $1 million to list each subcontractor they plan to use for $100,000 or more work.

Road construction

Prime contractors on federal projects worth more than $1 million would have to keep designated subcontractors after the contract or face stiff fines.

After the contract is awarded, the prime contractor would need the permission of the contracting officer to replace a listed subcontractor. Noncompliance would trigger the costliest of these monetary penalty options:

  • 10 percent of the amount of the subcontractor’s bid;
  • The difference between the amount of the list subcontractor’s bid and the replacement subcontractor’s bid; or
  • The difference between the amount of the bid by the substituted subcontractor and the dollar value specified by the contractor to perform the work himself or herself.

Subcontractors who cooperate in an unlawful post-contract switch would also be subject to penalties.

Subs Cheer

ASA strongly endorses the bill.

“The bid-listing requirement would eliminate post-award price negotiations between contractors and subcontractors that can lead to corner cutting and wasteful spending, and can drive quality contractors and subcontractors out of federal construction markets,” said ASA Chief Advocacy Officer E. Colette Nelson.

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NARI Omaha

Subcontractors say the Construction Quality Assurance Act of 2013 (H.R. 1942) will help head off "corner cutting and wasteful spending."

“As the federal government continues to tighten its belt, taxpayers deserve to get absolutely the best construction projects for their tax dollars.”

The Sheet Metal and Air Conditioning Contractors' National Association added its support.

"Since bid shopping occurs after the contract has been awarded, these savings are not passed along to the federal government and the taxpayer, but instead are pocketed as profit by the prime contractor," said the group, which has 4,500 contractor-firm members.

"Under this legislation, the federal government would recover the contract savings accrued through subcontractor replacement or related contract changes. H.R. 1942 will greatly improve the federal construction procurement system for federal agencies, subcontractors, and taxpayers."


Tagged categories: American Subcontractors Association (ASA); Bidding; General contractors; Government contracts; Laws and litigation; Subcontractors

Comment from Scott Kuperman, (5/31/2013, 8:23 AM)

They want best value for taxpayers? Subcontractors cheer? This is just more poppy-cock. If they cared about taxpayers they would overturn Davis-Bacon. More regulations, more documents to sign, more bureaucracy and red tape. Meanwhile, Davis-Bacon will insure that the taxpayers pay the MOST for a project, not the least. Just add another rule to the 14,878 pages of other rules already imposed on small businesses. Clerks and lawyers are the only ones who will get job security out of this.

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