In my January column, I mentioned the Associated General Contractors’ (AGC) written message against bid shopping. The organization went on to oppose a then-current proposed federal legislation meant to rein in bid shopping. The following are each of its arguments against the legislation, and my responses.

“No Evidence to Support Assertions that the Practice is Widespread. Legislation designed to constrain bid shopping on the federal level is unnecessary. The need for such legislation is not supported by any federal government study, nor has the legislation been requested by any federal entity. The construction industry does not consider bid shopping a common practice in federal government contracting.”

You could have fooled me. Many of the unlisted projects I bid show signs of shopping. Most of my customers complain about being shopped. A few of my customers will not bid anything but prime electrical projects because they don’t trust general contractors.

“Mandatory Bid Listing is Not the Solution. Mandatory bid listing would require a general contractor to list all subcontractors when a bid is submitted and would only allow substitution with permission of the government’s contracting officer. Mandatory bid listing undermines the government’s attempts to streamline procurement, removes the flexibility of the prime contractor to manage projects, and does not improve the quality or decrease the cost of construction projects. Not only would this be a huge administrative and paperwork burden on contractors, but even more so on the part of our chronically understaffed and overworked federal agency partners.”

For the type of work I have bid for most of my career, this has not been true. Most of the public projects I work on—city, county, state and federal—require bid listing. The process is simple. The GC writes down a number and a name for each listed subcontract. The low qualified GC gets the job. The listed subs get the job. This is not rocket science.

“The Solution Proposed Has Empirically Failed Before. The legislation proposes the practice of bid listing as the solution, yet that practice has already been found to be net worse. Previous attempts to require bid listing created a morass in the administration of federal construction contracts, including delays in awards of contracts, rejected low bids, project delays, and higher procurement costs. The General Services Administration (GSA) previously required bid listing, but eliminated this requirement in 1983 on the belief that ‘bidding problems and protests related to the “listing of subcontractors” requirement adversely affected the GSA construction program.’ By eliminating the bid listing requirement, the GSA stated the change would ‘simplify procurement procedures, reduce paperwork burdens associated with procurement … and eliminate potential delays and financial losses experienced as a result of the listing requirement.’”

This paragraph does not ring true. I have never had a problem with a listed project in my career. My hit rate is higher on listed projects compared to projects that do not require listing. No “negotiations” are allowed after a bid, and the process protects the subcontractors from unethical GCs. One example from my career happened when we were listed on a school project. The GC said that a 5% buyback was required (read as, “Give the GC 5% of our money for their profit”). We brought a member of the state contractor’s license board with us to the start-up meeting. After the board member handed the GC’s representative his card, we never heard another word about buybacks.

I also noticed in this argument that there was no follow-up on the claim by the GSA that the procurement would improve after listing requirements were removed.

“Existing Framework of Federal Rules and Regulations Solves Better. The contracting community believes that the solution is a strong commitment to ethical conduct by the professionals who work within the construction industry. Federal construction contractors hold themselves, and are held, to the highest ethical standards. There are also several mechanisms already in place to ensure contractors do not engage in such practices such as the False Claims Act and the Federal Contractor Ethics and Compliance Rules. Grafting a new mechanism onto the system (which has failed in the past) to prevent this practice, is not only unnecessary, but is also net worse for the system than the practice which the mechanism is designed to solve.”

This paragraph sounds good, but experience tells me that a voluntary commitment to an ethical standard does not work. 

Finally, I am a bit taken aback by the AGC’s claim that it speaks for the entire contracting community. It does not seem to be speaking in the subcontractor’s interest, as my entire estimating career has benefited from projects that require bid listing. When general contractors can’t shop numbers, subs benefit.

shutterstock / kemot7

 

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