According to James Gill Jr., a lawyer and professor of construction law and ethics at Louisiana State University in Baton Rouge, the ethics of bid shopping ultimately lie in the eyes of the beholder—what subcontractors consider unethical might not be questionable to an owner. I agree with that. However, who is defining what ethical means in this case? 

As with most issues, the ethics of bid shopping are driven by money. General contractors tend to be in favor of bid shopping, while subcontractors are mostly against it. General contractors profit from bid shopping, while subs lose profits. Is it ethical for one entity to harm another to obtain more money?

Ethical and monetary questions

Gill also says, “If you are an owner and you want to get the best price for your (new) house, for example, what do you do? You call four or five different contractors while you are shopping. The subcontractor’s suppliers expect you to shop around, but subcontractors don’t want you to take their price and tell it to somebody else.”

I think I can speak for most electrical estimators when I say, of course we don’t. These estimates can cost thousands of dollars to prepare. Do I want to spend money on an estimate that is just going to be handed to my competitor?

I have some thoughts about Gill’s statement. 

First, “You call four or five different contractors while you are shopping.” Yes, but that doesn’t mean I’m going to shop their numbers to each other. However, I can understand the assumption. It seems that the practice of shopping numbers is everywhere. While purchasing some furniture several years ago, I received quotes from furniture stores. The high bidder accused me of shopping his number, read me the riot act and barred me from his store.

Second, “Suppliers expect you to shop around.” True, but only because they know that it happens. That does not mean they want their numbers shopped around. Because of the shopping, they do the same thing to us that we do to GCs and owners: holding quotes until the last minute. Lighting fixtures are the worst. Most often I do not get my lighting quotes until 15 minutes before bid time, and often there are conflicting scopes that cannot be worked out before turning in the bid.

When I started a relationship with a new vendor, they often assumed they were going to be shopped and did not quote me their best price up front. They did this even though I told them that I do not shop numbers. They were quite upset when I actually wrote purchase orders to the low bidders. I would get calls asking me why I didn’t give them a chance to beat the number. 

The upside here was that my antishopping ethic soon reaped rewards. Vendors began to trust me, giving me better numbers sooner in the day. The relationships I fostered with my vendors resulted in winning more bids. I received better numbers than my competition because my vendors knew they would not be shopped.

Another benefit of good relationships created by not shopping vendors was revealed to me for the first time by a manufacturer. Sometimes, manufacturers are in a very strong position to influence the subcontractor selections. They can do this with preferential pricing for the people they trust or be in a position to make recommendations to owners. Since I treated them fairly, they pushed work my way. This is a great way to get work, as your markups can be higher, and your hit rate near 100%.

The AGC’s position

Several years ago, I ran across an article stating the Associated General Contractors of America’s position on then-current legislation pending in the U.S. House of Representatives regarding bid shopping. The first paragraph is copied below. This text is still on their website today.

“The Associated General Contractors of America is resolutely opposed to the practice of bid shopping. In 1995 AGC, the American Subcontractors Association, and the Associated Specialty Contractors issued this joint statement on the issue of bid shopping and bid peddling: ‘Bid shopping or bid peddling are abhorrent business practices that threaten the integrity of the competitive bidding system that serves the construction industry and the economy so well.’ AGC strongly believes that bid shopping and bid peddling cannot sustain long-term working relationships between prime and subcontractors. However, AGC has serious reservations about this particular legislative solution to the practice.”

While I do not know the content of the legislation in question, I have often benefited from bid listing requirements in California, where my estimating career started. I will get into the AGC’s arguments against this legislation next month.

Header image: Shutterstock / Yellow_Man

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