[Guest]

Consider the following situation:
Two different general contractors are about to be contracted to
perform work in the same locale for an owner (two separate but similar
projects). The owner identifies that he can achieve cost savings by
asking the two general contractors to communicate together and
identify opportunities to use sub-contractors from one general
contractor's bid on the other's project as well. Both general
contractors will still be contracted to perform the same projects with
the same scope, but now the overall contracts are lower because the
sub contract costs have been optimized.

What are the ethical considerations of this scenario? Are there any
relevant case studies or examples that aid in the development of a
point of view? Ethically, if the owner is a public company, doesn't
it have the obligation to find the lowest cost for its shareholders?

In the example scenario, assume that General Contractor 'A' (GC-A) has
secured top quality (yet lowest cost) electrical and tile subs while
General Contractor 'B' (GC-B) has used different electrical and tile
subs, but found a carpentry sub who is great quality/low cost. The
owner discovers that GC-A never bid to the carpentry sub that GC-B
used and likewise GC-B never bid to the electrical and tile subs used
by GC-A. The owner believes that the costs of the two projects will
be lowered by asking the GCs to "communicate" between each other and
see if the electrical and tile can come down on GC-B's project by
potentially bidding to the elec and tile subs used on GC-A's project.
(and vice versa for the carpentry on GC-A's project).

Additionally, the owner believes that the costs could further be
lowered through the increased volume for the subs that would be shared
across projects (assuming the sub-contractors have enough staff or
that the schedule allows for the subs to finish project A before
starting project B)

For this example, assume that all of the sub-contractors have been
fully qualified and are all above average players. Lets' simply
assume that the reason the GCs did not bid their work to the lower
cost subs was that they simply did not know of them.

This is where some of the ethical questions may arise. Is the GC's
success (in general) due to the the subs that they find and "keep
secret" from their competitors? Or, just the opposite, does the GC
have the obligation to try and find new competitive subs (even if it
means sharing their list with their competitors)? From the owner's
perspective, the sub-list is not secret and the owner himself could
simply disqualify the higher cost subs of GC-A and ask GC-A to bid to
GC-B's subs. I know this is not a black and white ethical dilemma,
but it poses an interesting set of concerns (from the owners'
perspective) and being in the owner's shoes, I am trying to make the
best decsion for all parties involved: shareholders of the owner's
company, the GCs, and the sub contractors.

 

[hatchet]

The flaws I see in the system before we even get to the ethics of it... typically if the bidding has already been completed and the bids opened the owner has lost the ability to bid a second time. That is unless all bids are thrown out for some stipulation not followed with the bid documents.
Getting into the ethics of it - if it were me I wouldn't release my subcontractors to another GC (but that has nothing to do with ethics).

 

[Guest]

RE: Etics of asking GCs to share sub lists

Let's assume for the sake of discussion that the contracts are being negotiated and that the owner has long standing relationships with both GCs.

As an aside - why wouldn't you share the sub list with another GC? It is not secret. Everyone can see who is working on the job.

 

[Grumpy]

I wouldn't share proprietary information with my competitor, the other GC. Not unless it was in the contract and agreed upon before hand... which I wouldn't agree to. My relationships with my subs have been built upon for years. They work for me. I wouldn't sign them into a contract that forces them to work for someone else. How do I know how they would treat them? They may do something to tarnish my reputation with the sub.

Lowest cost doesnt always win... IMO lowest cost usually loses. Something must suffer to acheive lowest cost. Usually quality but sometimes the timliness of the project.

 

[Glasshousebltr]

Grump your right on the money again.

Unregestered guest, ya need to register, we all kinda like to know who we are talking to.

Also I think your making things way more complicated than they need to be. Have the customer pick, then close the deal. If you can't close on your terms, go on to the next. You might be asking for big problems sharing subs.

Bob

 

[Grumpy]

I was actually thinking at this post at work and thought to myself why hire two GC's?!

LOL let the GC hire two subs!

 

[Teetorbilt]

I'm with Glass. This is really making a mountain from a molehill.

 

[Crankshaft]

My company works as a sub on some jobs and the GC on others. When I bid as a sub my relationship is with the GC, not the property owner. I have developed these relationships over several years and have a great working relationship. There are several GC's I refuse to work with, therefor if I gave them a bid it would be substantialy higher than the bid to my primary GC. This kills your cost savings idea.
I'm with Grumpy, why not take a bid on the whole project from one GC?

 

[Guest]

Thank you all for weighing in. Let me simplify the focus by stating the following assumptions:
1. The owner has long standing relationships with both GCs.
2. The work of of both projects cannot be bid to one GC only because the two projects are different enough that each GC has become expert in the project type assigned to him.
3. Assume that the two GCs don't have to worry about competing with one another for jobs from this owner because the owner is able to give them work that meets or exceeds their annual capacity of jobs.
4. Assume that GC-1 is regionally strong and has a sub base that is much more competitive because of it. GC-2 is not as strong in this locale and his sub base is not as strong (and less competitive).

Questions:
The owner sees the sub lists - and has every right to share the lists with the GCs. Why shouldn't he?

What's the big deal about asking the two GCs to collaborate here and identify wins for the owner (without it having to be losses for the GCs). Everyone wins from my perspective - The owner with lower costs, the GCs with with better subs, a happy owner, and signed contracts.

 

[Grumpy]

Like Crank said, sometimes we are subs and sometimes we are GC's. It depends on the job. From a GC point of view I wouldn't get involved unless the PAY was great... because your asking for ALOT of headaches. From a sub point of view, you already read my sanswer. My relationship is with the person who hires me.

Hmm your assumptions contradict each other. Assuming the two areas are so specialized, why would subs need to be shared since subs specialize much more than GC's.

I also believe there is no annual capacity. I am a firm believer in growth! My annual capacity is as much work as I can find. I can always find installers or subs to do the work and if it gets to be too much work for me I hire an assistant to bear some burden.

The owner has the RIGHT, however many rights are not ethically correct. I have the right to stand in a theater and yell fire, but is it morally correct?

I leave you with this...

In order for someone to win, someone else must lose.

 

[Guest]

Grumpy is an idiot

[Edit] Sorry, but we try and limit name calling on this board.[/Edit] - Nathan
"In order for someone to win, someone else must lose."

Yes, I suppose that in dodge ball there are clear losers and winners. At the negotiation table and in most profitable businesses, both sides walk away winners.

The notion of uncontrolled growth is also laughable. These Contractors clearly have business plans and goals and are building their businesses in a healthy manner.

I support the idea that getting both of the General Contractors together with the owner to identify opportunities to share subs or identify economies of scale that benefit the owner.

 

[Grumpy]

LOL Awww nate. I am curious what he called me.

 

[Crankshaft]

LMAO. Grumpy he forgot opinionated and a few other things, but an idiot you are not.
T-Const your last two paragraphs are totally contridictory. I don't think you will ever have a GC's Goals & Objectives be the same as an owner/property manager. The bidding process will level the field for the owner. As a GC I will not share my subs because of other projects that we are/will be working on. Why would I tie up my good subs and then try to hire crews that may not be to my advantage. Good subs allow us to submit competitive bids. As a sub you better believe I give GC's different bids on the same project. If the owner is wanting the cheapest price, he should consider buying all materials and ask for a pure labor bid. But don't be supprised if this is higher than the bids he has now. As for growth, I'm with Grumpy. Get the sales I'll get the production.

 

[Grumpy]

Well I take no offense really, but honest T-Const. You just did what is known as a research study. AKA a marketing idea panel. You ran your idea past GC's and subs ranging from billion dollar builders to the one man handy man shop. It doesnt seem like any of us are open to the idea.

I ran legitimate objections past you encouraging you to think different avenues. Was my post insulting in any way? Perhaps I forced you to realize your post was flawed?

 

[Glasshousebltr]

FIESTA! grump, on the money again.

I'd be curious to know a little more about Homie (T-Const). He doesn't seem to grasp the basics in our field. He smart, grant you, but I don't think he makes his money here in the trenches.

Also: it would be cool to know what he called grump. :Thumbs:

Bob

 

[Painter.Josh]

I would like to weigh in on this, spending sometime each the year doing sub contracted painting for a licensed builder in Michigan.
For the original poster asking the question. You really are asking alot, not only of the GC but the sub contractor as well.
I work for 1 builder. Why? Because he and his brother told me themselves. They dont want to share me with their competition. Now seeing how, 30% of my income last year came from this single builder, I am more than happy to oblige.
Now what I gander from what your saying is, asking a GC to talk to another GC about sharing their Subs if the price is cheaper. And if the 1st GC refuses to share their subs, I get the feeling that you would ask the 2nd GC to talk to the subs behind the 1st GC's back.
Why would I as a sub, invite something like that? That could very likely cost me 30% of my annual income, so you could save a possible 800.00 on the paint job. I am in no way the cheapest painter in my area. But the builder uses me because he is satisfied with my work.
After 1st reading this post, I talked to the builder I do sub painting for. He has a set list of subs for painting, plumbing, electric, and lanscape. And he did tell me that customers in the past have questioned he or his brother about using cheaper subs. He told me what he told the customer. "There are cheaper subs out there. But the ones we use are the ones we use for specific reasons. Your more than welcome to find cheaper sub work than what we quoted you, but if you do that, you can find someone esle to build your house."

 

[Glasshousebltr]

Look even Painter Josh had to put 2 cents in.

This topic is hot baby.

T-Const, come on back, everybody TANGO!

Bob

 

[ProWallGuy]

I'm just another little fish in this pond, but if T-dogg wants my opinion, I reckon he should register to be taken as legit. Until then, hahaha.

 

[hatchet]

Some very good points, of which a few were geared towards subcontractors giving one bid to GC-1 and another bid to GC-2. I see this all the time in the $100million + projects. We have subs that won't even give a bid to other GC's in the area. Many others will give a much inflated bid. On one project the owner attempted to go out and get bids from some of our subcontractors. They gave him inflated bids because they would rather work for us (then they called us and told us after the bid) .