There is a lot of discussion about bid shopping in several of the forums I participate in, so I thought this would be good time to revisit the subject and bring things up to date. I learned very early in my career that having the low number at bid time did not guarantee you a contract. 


If you gave your best number to every general contractor (GC) who was bidding the project, one or more of them would give (or shop) your number to another electrical contractor and ask him to beat it. This was extremely irritating. My employer had paid me to prepare that estimate, only to have a GC hand the product I developed to another company. Then, even if you had the best number at bid time, the successful GC would often put the job out to bid again. This second round of post-award bidding is where bid listing laws come in.


How it works


For those of you in states where bid listing is not legislated, here is how it works in California, where bid listing on publicly funded projects has been the law approximately for 50 years. My estimating career started in California; bid listing was the only method I knew for public projects, and as far as I was concerned, it was a great system. The bid-listing law in California—which is similar to those in about a dozen other states—requires the GCs and other prime bidders to list on a bid form the subcontractors they intend to use. The subcontractor’s bid amount is also required to be recorded on the bid form. The bid form and all of the other required documents are then sealed in an envelope, which must be delivered to the designated location before the 
bid-closing time. Shortly after the bid closes, the envelopes are opened and read aloud to anyone who chooses to be there. The low-bid GC and listed subcontractors are noted as being the successful bidders, pending a review of the other bid documents. If the documents are in order, the low-bid GC is awarded the project and is then required to award the project to the subcontractors he or she listed, at the prices listed. This process very effectively stops post-award bid shopping.


Risky business


Unfortunately, bid listing does not stop preaward bid shopping. I had to learn a number of strategies to protect our best number. One effective strategy was to call in a higher number an hour or so before the bid. We then had to get our low number to the GC at just the right moment, so he or she did not have enough time to shop the number. If a GC was known to shop our numbers, he or she would never get our best number. Bid day in our office was like a suspense thriller or a game of Russian roulette. Several of us would wait by the phone, ready to dial. We did not want to shoot ourselves in the foot by calling too early. When the boss gave the word, we would start dialing furiously in an effort to get our best number to the GCs in time. There would often be another round of panicked dialing when the fixture vendor called in a better number he had been holding back because he feared bid shopping, too.


Why I like it


My primary reason for supporting bid listing has to do with the cost of preparing an estimate. Even a midsize project can take several weeks of effort and cost thousands of dollars in wages. For GCs to simply give our product to another bidder feels like they reached into our pockets and stole 
our money. 


The secondary reason has to do with the risk the state is exposed to when bid shopping is practiced. One risk is that the state will not get the most competitive bids available, as the subcontractors are padding their prices in anticipation of getting shopped. It is possible that, in spite of the bid shopping, the state may end up paying too much for the project. Another risk comes from subcontractors being pushed to lower their numbers too much. While the GC benefits by pocketing the extra money he or she has extracted from the subcontractor, the risk of the use of substandard materials and installation practices is passed on to the state. The state also risks the 
subcontractor going out of business, which is extremely disruptive to a project.


Next month’s column will provide advice on how to get a bid-listing law passed in your state.