Ethics Of Bid Shopping

Electric_Light

Something I've been told somewhere is that bid shopping is a faux pas. That is going to multiple vendors/suppliers/contractors.

That is going to contractor B, saying A quoted this much, go back to A and say B quoted this and so forth.

Do you find this unethical?

Do you ask your customers what other contractors quoted/bid? What do you answer when they decline to give you the answer and asks you "what is the best price you can give me for (given specifications) project" ?

CScalf

I say yes, but am guilty of "shopping" I always try to "jew" everyone on everything, guess it is just my nature, no I am not jewish but my wallet is...

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silvertree

I don't like it, I don't do it, but I don't think its unethical.

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PA woodbutcher

Have only done it once, but that was on $12,000 worth of decking. I get 99% of my materials through the same supplier. I don't have the time to do price shopping and they E-mail all pricing updates. If I do find it cheaper someplace else, up to and including blowes they will match the price. I do squeal sometimes when I get a price on something though

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Patrick

We only shop when we are buying BULK inventory pallet loads of stuff we use everyday we send out our lists too all our vendors and they usually get pretty aggressive with it knowing that we send it to everyone and sometimes we do go back and say X can do it for this much do you want a chance to do better? And many times they will, and I'm talking hundreds of dollars difference

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Originally Posted by Celtic
Like I said...I'm sure you are very good at what you do ~ whatever that is and where ever it happens.

Electric_Light

Being on the purchasing end, I think that you risk getting the short end of the stick by answering the question. Here you have two contractors bidding for your business and second contractor not having any idea on what to bid, but let's say he has 15,000 in mind.

He asks what you've been quoted before (as in the case of auto insurance companies trying to win new customers ALWAYS asking you what you pay now for your premium) and you tell the truth, which let's say is 20,000, you might end up getting a bid for $18K instead of $15K...

From my non experience based studying, I've been taught to always insist on asking what the best deal they can give and be as specific as possible in writing the specifications to close down as many loop holes as possible for corner cutting and avoid unnecessary specification of brand names to keep the cost low. (i.e. specifying "door hardware used shall be class 1" as opposed to "door hardware shall be of class 1 grade made by Schlage Lock Co" )

From what I've been taught, savings increase substantially up to about 3 bids and somewhat up to about five bids, but negligible savings beyond obtaining five bids, although this is talking about multi-million dollar contracts or big commercial or government projects.

thom

Bid shopping the way you describe it is abusive and unethical. Your subs and suppliers will quickly learn of your tactics and will consider them in the future.

Before a sub bids a job, I make sure he is qualified. When I solicit multiple bids, to low bidder gets the job. That's only fair. No, I will not play them against each other.

When bidding lumber packages, I do the takeoff, by package (first floor walls, first floor sheathing, second floor decking, second floor walls, second floor sheathing, roof framing, roof decking, and stairs), then fax it to the suppliers who will bid it. Generally I use one supplier but on occasion I will request another bid to keep him honest.

Electric_Light

At least for government projects here, the winning general contractor must submit a list of subcontractors within I believe 4 hours of being awarded the contract.

I believe that regulation is there to prevent funny business from going on.

And when I say be VERY specific, I mean VERY specific like this, so you don't end up with a low bidder, who is a low bidder, but ends up using garbage material.

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Aggie67

I think bid shopping is dirty pool. I never do it. I've had cheeseball clients and GCs tell me "I've got a bid for $64,000 or whatever, if you can beat that by 5% the job is yours." Nope. Good luck with that.

I had one GC we did work for 3-4 years ago on a couple jobs. Clean, on the up and up. We did well, he did well. Then we start getting phone calls like "this is yours if you can do it for $X." Have to pass, sorry.

Well for the next year we didn't win a thing. It got to the point where we stopped bidding. When we did, I got a call from their estimator saying "I need your number." No, man, we never get work, it's a pointless exercise. "But I always go in with your number." So why don't I ever get work? "I don't handle the subs or the projects." Click.

Couple months later I get a call from the owner. "We really want to start a relationship back up with you." Ok, so we start bidding again, but this time I make it a point to be late enough so to not have my number count in their number. Get a call. "We got the job, but we went in with a guy who had a lower number." Good for you. Stick with them, I think they'll work out for you better than we will.

Almost a year later we get a call again from the owner. "Come on, my friend, bid some work, let's see if we can do something together." I'm bored and feeling a little punchy, so I set up a meeting. I say we've been bidding off and on for 3 years, and we haven't seen an ounce of work. "But your prices are higher than the guy we use." So, use him for crying out loud, he's been beating me for almost 3 years. "He just went bankrupt, and we need to find someone else."

But here is an example of bid shopping at its worst:

There is a large fortune 500 chemical company (sponsors a NASCAR Sprint Cup team) that has elevated bid shopping into an art form. They get 4 or 5 contractors qualified at their sites, and for each project, they set up a reverse auction for the work. You get set up with an on-line account, and on the day of the auction, you go on line for an hour to work the process. You enter your first bid, and if it's higher than the opening price that they set - THEY set - you get a message that "your initial bid is too high, please try again." The crafty part is that you don't see anyone else's number or identity, just the messages "you are not the low bidder" or "your initial bid is too high, please try again."

I did work for them a few years ago this way, but I just got sick of it. The last time I did it, I logged in and went to enter my initial number, and got the "your initial bid is too high" crap. I immediately logged off and went for an early lunch. I'm driving down the road and I got a call from the auction administrator who said "we see you logged in and entered your first number, but then you logged out, we were looking forward to a bid from you." I told them you got my bid, but your computer program told me I was too high, so, I wish you the best, keep us in mind.

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Winchester

I don't think it is unethical to let other bidders know what someone else bid and give them a second chance.

I don't do it myself, because I don't want to do business that way, I think it is unwise and works against building trust with others.

If someone bid higher than I am willing to pay I'll go with the lower guy and they can try again next time. As long as I trust the quality of all the "bidders".

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Electric_Light

I think the bid is something to be kept between the bidder(s) and the solicitor and not to be disclosed until the end (disclosure usually required for government work).

Writing VERY VERY detailed thorough specifications is what keeps too good to be true bidders that comes in and try to do a hack job though. Here, we have prevailing wage, pre-qualification, etc etc.

slowforthecones

the customer is just trying to get the best bang for his/her buck. nothing unethical about it unless you call the same contractor out multiple times to bid on different things and never have the good faith intentions on using that same contractor.

DBBII

With the crazy way the GC bid market is going today, some of this is almost unavoidable. If you are bidding a job, and say 30 minutes before bid time, you get a low number from someone you never heard of before. Gee, it was sent in via fax, and the only phone number is a cell phone, that no one answers, so I can't even verify the scope of work. Also, I have seen on the bid where it was sent to all the GCs bidding the job. Now what do I do? If I don't use the price, I probabily won't be low, and won't get the job. If I use it, and let's say the sub refuses to honor it, I'm also stuck. Therefore, do I call a sub I know and tell him I got a low price and is there anything he can do?

lawndart

Just recently, I had a customer call me to tell me to pick up a deposit. When I arrive at their house, they informed me they had a price cheaper than mine by $300, and said "we wanted to give you the chance before hiring the other guy" I walked out without saying a word. The look on their face was priceless.

silvertree

I'm on your side for that one. What an insult

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DavidC

I'm thinking that this conversation centers more on B to B and/or commercial work than on the contractor and HO level. If so, than it most likely is the standard fare that nobody claims to like while everyone seems to do it. When we subbed most of our work the GC's were always eager to tell us when they had a better price from someone else.

My dealings now are more on the contractor/HO relations. Whenever it comes up from a HO I'll make sure that they understand that we don't compete on price, it is what it is and this is how much it costs to hire us. I would have quite a struggle to turn that around and put the pressure on my suppliers to beat each other up.

On my level any savings would be negligible and I would worry that some resentment would develop for my efforts. I'd rather choose suppliers based on the service they provide. Our main supplier is 30 miles from our city but provides better service than any of the ones in town. Actually it's the salesman that handles our account we are loyal to. He knows what we like and makes sure we get it most of the time. I expect that if I'm paying a little more it's fair trade for what I get.

Good Luck
Dave

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Aggie67

If you haven't figured out that that's a torpedo being sent into you broadside, I wish you luck. That's an old trick. I actually caught someone doing that to us about 8 years ago. Same deal, mystery proposal arrived, it was lower than anybody else. I had the number they faxed it from, plus a number that no body answered. With a little research I was able to determine that the fax number came from a company across the parking lot from the offices of one of the other bidders. When I confronted them, they hung up on me. The rest of the bidders received the same fax. Nearest we could tell, the guy was too busy to take the job, so he was punting (he turned in a high bid). He sent the torpedoes out to mess with everyone else on the bidders list.

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Aggie67

I respectfully disagree. I hold the position that the practice is unethical, and almost every trade group out there agrees. The customer trying to get the best bang for his buck doesn't clear the ethical dilemma. It just makes him untrustworthy. If I submit the low bid fair and square, I should win it without fear of him taking my low bid and shopping it for an even lower number, or to a guy he wants to do the work but can't estimate properly to save his life. I'm going through that gem right now, today, as we speak. I submitted a number last month to a client, and scuttlebutt from our guys in the field is that another freshly minted newbie contractor with connections and no estimating skill was told they could have the project if they did it for my price.

I might be howling against the winds of a hurricane on this, but I'll stick to my guns. It's dirty pool.

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ARI001

I don't do it. I look at this way; when I price a job I do so at a rate that covers my cost to do it, my company overhead, and a percentage for profit. If I am going to cut any fat off it can only affect my profit as the rest are fixed costs. I can only assume the subs I use are doing the same thing. Trying to force them into a position to accept less than they would normally charge (because somebody else either intentionally low balled or didn't know how to bid it or just to fatten my bottom line) most likely will result in them cutting corners to make up the difference. We all know roughly what the costs are for various trade work in our areas. So you know if you are forcing the bid below cost or someone is trying to take you for a ride. If someone you have used before is high balling you it probably is because they've identified as a bid-shopper.

When I pick subs I tend to go with the ones who quote in the mid-range. I do price shop both labor and materials, but I figure they all know that anyway. If a HO tries to show me another contractors bid I decline. If they push the issue I walk away. If I I'm bidding against someone I know I let them know what the HO is up to. In my opinion it is unethical but I also realize it isn't illegal and is somewhat commonplace.

outlaw

I ask my suppliers for their best up front. They know this.

I will ask a H.O. to show me their other bids just to point out that it is not apples to apples.

I don't do public bid work because it is a wast of my time.

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