Bid shopping and construction marketing

Miller Grading Company, Inc. in Atlanta, has published some concise definitions of bid shopping and bid peddling, and explains why these are unethical.

If there is ever an issue that tears at the soul -- and challenges the fundamental practices -- of the construction industry, it is bid shopping. The practice of using confidential bid information to play one supplier against the other is deemed by industry lore -- and ethical standards -- to be wrong. But anyone who knows anything about this industry knows it happens, all of the time.

How much? And can/should anything be done about it? And what does bid shopping have to do with marketing, after all?

Well, if you think at it at the most elemental level, bid shopping's corollary -- bid peddling -- is all about marketing. You aren't the lowest bidder, but want the job, so you offer to come down and match the lowest bid, or (perhaps on a slightly higher ethical plane) suggest variations to the project/scope of work that allow you to be 'lower' than the others -- and still win the job (presumably by helping your GC come in lower, hopefully -- from the GC's perspective -- on a fixed bid contract where the owner doesn't engage in bid shopping or reverse auction practices.)

I'd love to catch first hand evidence of the bid shopping/peddling practices within this industry, but sense only a fool will let me anywhere near the action, especially if I am equipped with a digital tape recorder and camera. But occasionally, people let their guards down and (knowing I would never identify them publicly) give me a peek into the real world, at least real to the participants.

The mayhem (and bid shopping/peddling) I suspect is greatest around the fixed bid deadline as the general contractor is wrapping up the process of closing for the fixed bid deadline. Faxes, emails, phone calls, and other mechanisms bring in the sub-trade prices at the last possible moment. But maybe there is a little room for haggling, a little nudge, a little wink, and the invitation to just lower that bid a little (or a hint that if the original bid is too high, an adjustment can be made.) And so the deal is sealed, or is it, on close.

Bid depositories supposedly solved this problem, as (especially in the U.S.) procurement regulations requiring all sub trades to be named and prices quoted on completed projects. But of course these ideals have been lost in the era of Public Private Partnerships, construction management, and design-build contracts, where transparency is often lost in the name of efficiency and flexibility (and bid shopping).

So how do you win the war here? I would argue you want to get in a position where you can command a higher price -- and a higher ethical standard -- by achieving a brand reputation for integrity and fair value. If your business practices are above reproach (and your internal costs and efficiencies are strong enough), you should be able to win enough business without resorting to the bid-shopping/peddling game.

But maybe I'm dreaming in technicolor. Maybe there is no solution to this problem. I will seek out some insights and invite your response to an upcoming survey. You can also communicate with me by phone or email (and I promise not to disclose your identity to anyone, without your consent.)