Have you ever come across a practice so manipulative that it feels like it should be illegal? For many subcontractors, that frustration can often come up when they encounter bid shopping.
While it's not a fully widespread practice, bid shopping is common enough to become a significant concern for specialty contractors. This controversial tactic can strain relationships and undermine trust across the industry.
In this article, we dive into the ins and outs of bid shopping and the consequences of the practice for construction owners, general contractors, and subcontractors.
Table of contents:
Bid shopping in construction is a controversial practice where a general contractor solicits lower bids from subcontractors, often using the lower bid as leverage.
Unlike a legitimate construction bidding process, which is transparent and focused on fairness, bid shopping prioritizes cost-cutting at the expense of trust and collaboration.
It can occur before the contract is awarded, and the GC shops for lower bids so they can submit lower numbers to the owner. Bid shopping can also happen after the GC is awarded the contract. In this instance, they would conduct bid shopping to lower their costs and widen their profit margins.
While bid shopping involves general contractors seeking lower bids, bid peddling is the reverse—where subcontractors actively approach general contractors to undercut their competition after bids are submitted. Both practices disrupt fair competition, but bid shopping is contractor-driven, whereas bid peddling is subcontractor-initiated.
Construction bid shopping may seem like a cost-saving strategy, but it can seriously harm relationships and open up issues over the long term.
Bid shopping is widely regarded as unethical because it undermines trust and fair competition. Subcontractors across all trades invest significant time and resources in preparing bids, and when those bids are used as leverage for lower prices, it devalues their efforts.
For obvious reasons, this practice creates distrust, not to mention that it fosters a race-to-the-bottom mentality that can compromise quality.
While bid shopping in construction is technically legal, it's generally condemned by industry professionals. There have been efforts to outlaw it through legislation, but no widespread legal bans have been enacted.
Organizations like the American Subcontractors Association continue to advocate against bid shopping, but the lack of enforceable laws can leave the practice unchecked and perpetuate its controversial status.
While construction bid shopping is technically "done to" subcontractors, subs aren't the only ones negatively impacted by the practice. Consider the following.
Project owners often bear hidden consequences of bid shopping. Subcontractors who feel pressured to accept lower bids won't feel valued, which may reflect in their work. Subs might be forced to cut corners to protect their margins, leading to potential rework.
Also, disputes between contractors can cause project delays, while unforeseen issues stemming from rushed or underfunded work can drive up costs.
Ultimately, owners may find themselves paying more in the long run for what was supposed to be a cost-saving measure.
Bid shopping might provide GCs with (very) short-term cost savings, but the long-term impact can be damaging. Subcontractors are less likely to trust or partner with GCs who engage in the practice, making it harder to find reliable partners for future projects.
Additionally, bid shopping can tarnish a GC's reputation within the industry, which means they'll have fewer opportunities to win work in the future.
And again, while the practice is currently legal, there's still an increased risk of legal challenges and disputes, which can further erode profitability and credibility.
Bid shopping hits specialty contractors the hardest. It reduces their profitability, forcing many to operate at unsustainable margins. The practice devalues their expertise and competitive advantage, making it harder to stand out.
The uncertainty caused by unpredictable pricing pressures lowers morale and can even drive talented employees away.
Overall, these challenges can make it difficult for specialty contractors to grow or sustain their businesses.
Bid shopping is a challenge for sure, but there are steps industry professionals can take to combat the practice. Here are some ideas.
Trust between general contractors and subcontractors is key to reducing bid shopping. Prioritizing open communication and long-term partnerships over short-term gains help build a collaborative ecosystem.
When GCs focus on these things—along with values like fairness and respect—subcontractors are more likely to provide competitive bids and deliver high-quality work. Everyone wins in the long run.
Providing education on ethical bidding practices can transform industry culture. Training sessions, webinars, and workshops for GCs and subs alike help highlight the importance of transparency and shed light on the negative impact of bid shopping.
Industry associations can also play a role by promoting guidelines and standards that discourage unethical practices.
Another simple but effective way to deter bid shopping is to include specific bidding clauses in contracts. Make sure you use clear language that prohibits post-award bid renegotiations, protects subcontractors, and ensures fair dealings. Contracts should also outline dispute resolution processes to address any issues that arise. This level of detail creates accountability and reinforces the importance of ethical practices throughout the project lifecycle.
Modern technology offers robust tools to combat bid shopping and promote transparency. Take, for example, Autodesk Construction Cloud (ACC). The bidding software and collaboration tools within ACC make it easy to communicate and share information so all stakeholders stay aligned and informed throughout the bidding process.
In addition, Autodesk Build has robust contract management features for tracking and managing agreements. Create contracts, monitor terms, and ensure compliance with agreed-upon conditions so there's accountability at every stage of the project.
Bid shopping can negatively impact everyone working on a project, but the good news is there are steps and solutions to combat it.
Construction teams can drive ethical practices across projects by building strong partnerships, using clear contracts, and leveraging advanced tools like Autodesk Construction Cloud.
Ready to take control of your bidding process? Learn more about how Autodesk solutions can support your success today.
May we collect and use your data?
Learn more about the Third Party Services we use and our Privacy Statement.May we collect and use your data to tailor your experience?
Explore the benefits of a customized experience by managing your privacy settings for this site or visit our Privacy Statement to learn more about your options.