Bid shopping Unethical effects

Over time, the construction industry has seen an uptick in dubious activities among its practitioners. Any of these challenges have adverse consequences for building companies, culture and the credibility of other practitioners. The article analyzed in this essay examines bid shopping, which is one of the immoral practices found in the building industry.

The authors describe bid shopping as an act of exposing the quotation obtained by the contractor or subcontractor to its rival as a means of letting them quote lower than the others (Gregory & Travers, 2010). Of close relation is bid peddling where a sub-contractor who was unsuccessful during the shopping process, offers to lower their quote and influence its use after the contract award. Both bid shopping and peddling are viewed as unethical by the Associated General Contractors of America (AGCA) and American Subcontractors Association (ASA), and have, as a result, issued joint guidelines discouraging the acts.

As standard practice, most companies with construction procurement needs go through the bidding process as a way of sourcing for a contractor who promises the completion of the quality work and operate within the budget of the owner. Further, the general contractor’s source for subcontractors and pay them for the main work in the projects (Gregory & Travers, 2010). Ideally, the two unethical practices threaten the integrity of competitive bidding systems and at times lead to the unfair award of tenders to those under qualified.

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Bid shopping has great disadvantages and often than not, owners end up with substandard works that take longer periods that anticipated. An example illustrated in the article of the negative impact that bid shopping has in the construction industry is as seen in the case of Conduit & Foundation Corp. versus Philadelphia. Contractors were asked to place bids for and show suppliers they would use for the supply of pumps and motors for the works at the storm water station. During the bid opening process, one of the contractors listed two options of which one was low. Though the procurement body almost awarded the lowest bidder the tender, the second least stopped the process through the court citing unfairness, and the court ruled in its favor and was consequently awarded the contract since as per the procurement rules, each bidder needed a listing for one supplier.

Habitually, most subcontractors have fewer hopes of working with the general contractors after the contract award, leaving them with options of renegotiating their initial offers least the contractors substitute them with cheaper options. Consequently, contractors increase their profit margins while the subcontractors go into losses and contrary to the original agreement. Bid shopping also affects market prices and discourage sub-contractors from bidding as a result of an unfair bidding process.

Some of the practicing currently in place for inhibiting bid shopping includes bid listing statutes that compel contractors into listing all intended suppliers thus preventing post-award negotiations. Additionally, having bid depositories where the collection of subcontractors bids from all subcontractors stops canvassing as no one knows the least bidder until the allocation of the contract to the contractor. Other suggestions include the importances of understanding the effects of bid shopping and peddling by subcontractors as a way of understanding their adverse consequences. Lastly, giving bidders the freedom of setting their operation terms gives them an advantage of having some bargaining power if need be. For instance, most quotations have a validity period of thirty days and allow revisions after the expiry.

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Reference

Gregory, D. & Travers, E. (2010). Ethical challenges of bid shopping. Retrieved April 23, 2017, from
http://www.keglerbrown.com/content/uploads/2013/08/TheConstructionLawyer-Summer2010.pdf