Bid Shopping

Definition

Bid shopping is a practice where a general contractor contacts subcontractors in an attempt to receive a lower subcontractor price after having been awarded the contract for the project.

Purpose

Bid shopping is often viewed as an unethical practice that can undermine the integrity of the bidding process. The primary purpose for the general contractor is to reduce costs and increase profit margins by securing lower prices from subcontractors after the main contract has been awarded. This can lead to unfair competition among subcontractors, potentially resulting in lower quality work or financial instability for the subcontractors involved.

Examples of Use

1. Post-Award Negotiations: After winning a contract, a general contractor contacts various subcontractors to negotiate lower prices than those originally bid.
2. Competitive Pressure: Subcontractors are pressured to lower their prices to match or beat competitors, often leading to a race to the bottom.
3. Cost Cutting: The general contractor uses bid shopping to cut project costs and increase their profit margins.

Related Terms

1. Bid Peddling: Similar to bid shopping, but initiated by subcontractors offering to lower their prices unsolicited after the general contractor has received initial bids.
2. Ethical Bidding: A practice where bids are submitted and accepted based on fair competition without renegotiation or undercutting.
3. General Contractor: The primary contractor responsible for the overall management of a construction project.
4. Subcontractor: A contractor hired by the general contractor to perform specific tasks or services as part of a larger project.
5. Contract Negotiation: The process of agreeing on the terms and conditions of a contract before it is signed.

Notes

• Bid shopping can damage relationships between general contractors and subcontractors, leading to mistrust and reduced cooperation.
• Many professional associations and industry standards discourage or prohibit bid shopping to maintain fair competition and project quality.
• Transparent and ethical bidding practices are essential for maintaining integrity and trust in the construction industry.