Collusion and the law

[copper123]

col?lu?sion (kə-lū'zhən)
n.
A secret agreement between two or more parties for a fraudulent, illegal, or deceitful purpose

Hey guys, here is kind of a loaded question. Example first:

General Contractor puts out a scope of work for sub contractors to bid on. Bid deadline is over. Sub Contractor ?:A? is higher than sub ?B? on the job that they bid. Sub ?A? goes to general contractor and says, hey, I will beat that number. ?A? gets the job. Or, general contractor says to ?A? , well you know, the bids came in pretty high, got any fudge room?? I have just got into the business and I am seeing tons of this going on. When I first started, I thought I had a unique opportunity to start something that had a completely unblemished record. I wanted to be known for good work, and honesty. This I have completely 100% stuck to. Problem is, it would seem that it?s a good ole boy club out there, and this happens a bunch. Many contractors know me from the days when I used to work for my old boss. They know the work that I put out. It has been eluded in not so many words, if I would play ball a bit, I would be busy, busy. I am Tossing and turning at night thinking about it, and I just can?t do it. I think about how I feel when I get crapped on, and what would it make me if I did it to somebody else.?
Anyhow, how rampant is it in your folk?s neck of the woods?

 

[goldstar]

Re: Collusion and the law

Welcome to America !!! This happens all the time in private bidding where favored subs get a "last look" on bids. Public bids are a different story because they come under a more stringent scrutiny and in order for a higher priced contractor to be awarded a contract over another there has to be good reasoning (i.e capability, staff, job experience, capitalization, etc.)

 

[jim sutton]

Re: Collusion and the law

It happens a lot here too. Like Goldstar said, "favored" subs often get the opportunity. Often the GC took the job lower than he should have and is compelled to "bid shop", which is what this is commonly called, not collusion. Sometimes the low bidder may be a sub that the GC is not familiar with and/ or would rather work with someone else. It is not a good practice as it is what screws up our industry. The GC's should only take bids from subs that they are willing to work with in the first place. And the subs should be listed on the bid form so they can't bid shop. I was told by a construction attorney once that in Europe they had to list there subs on bid forms to prevent this. Collusion would be if you and the other EC's got together before bidding and "fixed" your bids to choose who would be low, this is illegal, bid shopping is not.

 

[chrsb]

Re: Collusion and the law

It happens all the time. Now a days with all the reporting services out there, it is easy for a EC to see who all the GC's are bidding the jobs. I have talked to my GC about this, they told me they get alot of "unsolicited bids" on bid day. If it is a private bid then they will refuse those bids, if it is a public job they really have no choice but to take the low bid if it is alot lower. If it is a small amount of diffrence then they would take my bid. I have been asked to re-bid a job before, meaning sharpen your pencil, but have not been given the other guys number.


What makes me very upset is the ammount of iresponsible bids that are getting turned in latley. I have called after the job was awarded to another contractor (I always call to get as much feed back as posible) and have found out that the low bid was below my cost. What really makes me mad is the GC will call them to see if they missed something and they always do miss something. It also makes me look bad when I turn in a bid and am 40% higher then the low bidder (who missed alot on his prints). These are not small jobs either, they are 250k+. Oh well.

[ April 28, 2005, 08:27 AM: Message edited by: chrsb ]

 

[petersonra]

Re: Collusion and the law

I don't have an issue with this. If a GC wants to give his favored sub a leg up because he prefers that guy, so what? If you are the sub trying to beat Mr. Favorite, it will frustrate you, but I see nothing illegal or even immoral in this practice UNLESS the bid states the low bidder will get the work, and this is just never stated.

As the non-favorite, your only real recourse is to talk with the GC about this situation and explain why you won't be bidding anymore on his projects.

What he may be doing is using you to keep his other sub "honest". And you are doing this work for free. This happens to us all the time where people have us bid on something just to have a second or third bid to make sure the bidder they already chose is not way out of line price wise.

On the other hand, he may be testing you out to see if your pricing is in line before actually awarding you a bid. Best thing is to talk to him about it and explain its not worth your effort to bid on something if there is little chance of getting an order from it.

 

[slotz]

Re: Collusion and the law

Hi, I'm new to the board. Here in the Dallas/Ft Worth area it's very competitive. The company I work for is small, but the owner and myself are very experienced estimators and designers, so GC's know that the numbers we put out are "good" numbers. In this market, GC's are forced to look at all numbers, even unsolicited and unknown contractors, because their competition is also looking at those numbers. But in reality, when the successful GC's estimator hands off the file to project management, it's whole new game. The low number used (which may be your number), is now the upper threshhold "buy-out" number. GC's go through all 16 divisions, find all the problems which allowed them to get the job in the first place, then they establish buy-out numbers for each division. By the time they get to div 16, the electrical number could be 5-20% lower than the real number. They will "interview" the low 2-3 bidders. The idiot who bites on such a number is the "winner". Your low bid on bid day may only guaranty you an interview to take a job for a price that doesn't exist.

[ April 28, 2005, 10:52 AM: Message edited by: slotz ]

 

[copper123]

Re: Collusion and the law

Wow, to be honest, I am kind of blown away by the response that I have gotten. I am still extremely green on the management side of these things. It would seem almost, from what I have heard, is that this is just another facet of the industry. In my mind, it was not legal, and certainly not ethical. If you look at some contractors bidding documents, they specifically say they have a no collusion policy. I took this as a legal statement and that this was a legal term that would apply to any contract that went out to bid. Guess not.
Petersonra, Thank you for your frankness with quote

"I don't have an issue with this. If a GC wants to give his favored sub a leg up because he prefers that guy, so what? If you are the sub trying to beat Mr. Favorite, it will frustrate you, but I see nothing illegal or even immoral in this practice UNLESS the bid states the low bidder will get the work, and this is just never stated"

It would seem that when you hand in your bid, its now just a starting point. Sounds like we are buying cars more than doing electrical work!

thanks for the responses.

 

[petersonra]

Re: Collusion and the law

I think the reference to an anti-collusion policy refers to the subs colluding amongst themselves. In most cases, a little negotiation between the GC and the sub he selects is probably best for both parties.

 

[copper123]

Re: Collusion and the law

I have been thinking about this topic all day. I just got back from a job walkthrough and was looking at other electrical contractors. Do you really think its healthy for this to happen? What happens if the contractor is just ping-pong balling the number back and forth. This forum is just full of guys talking about how the prices for electrical work are getting driven lower and lower. I have come up with the conclusion that its all about the company that is asking you to cut your number. Are they talking to another guy also? Are they going to appreciate the service you give them. I think its a case by case thing. If you have a good relationship with the general contractor maybe its ok. I guess nobody is holding you at gun point, you can always just say no. That is what I have done, and right now I am typing this, and not twisting a wire nut! Anyhow, just throwing it out there.

 

[petersonra]

Re: Collusion and the law

I see it as very healthy. What's wrong with either competition or negotiation? It's an important part of contracting that you just have to live with. In the long run it tends to benefit both sides.

 

[copper123]

Re: Collusion and the law

you know, i really can't see anything wrong with it, just as long as every body is playing off the same sheet of paper. What is still a sticking point IMO is the fact that the numbers are out, its all laid out there. Basically its just another round of bids. Just as the Slotz said.
For me I have was hoping for a more clinical, sterile process, but it just seems like that is not the case. Anyhow, it really does sounds pretty American. Capitalism at its best. I just hope that the little inner workings between the contractor and the sub or legit.
Anyhow, thanks for the replies guys. It has opened my eyes a bunch.

 

[petersonra]

Re: Collusion and the law

What is there that could be not "legit"? Unless there are other requriements (such as government bids) that are designed to require higher costs, what is wrong with doing what you can to reduce your costs?

 

[copper123]

Re: Collusion and the law

Ok, I will bite one more time Petersonra.

How about this scenero, this is really close to home for me. I in the last couple of days have entertained the thought of making this offer. But in my heart, it seems unethical.

You and I bid on a job. You come in under me. Knowbody knows what the numbers are at. I go to the general contractor and say, hey I know that Petersonra and I bid this job. What is his number? You see it and then say, well you know Mr. General Contractor, I bid in 5 extra widgits right here, and after looking at the scope of work, I should not have bid them in. So.. I can beat that bid. Why don't you give it to me and I will promise to take care of you.

After the bids are in, I think it should be a done deal. this is how Kickbacks, backscratching, ect happen. You claim its ok, and I am still up in the air, but, I am leaning your way a lot more.
Anyhow, how do you feel after you loose the job? You of course would say, well heck, I could offer you the same thing he did. You should have approuched me also. I can shave here and there also. So.... basically, you have a entire new bid process again!

 

[petersonra]

Re: Collusion and the law

I am not in favor of kickbacks, or anything else that "crosses the line", but a little negotiating and horse trading is not wrong and often allows a job to be done at a lower cost in a perfectly acceptable way.

 

[powerbillnky]

Re: Collusion and the law

No matter how you slice it, it is WRONG. All an EC has to do is let a good estimator turn in a bid(and do all the WORK), then talk to the GC and undercut the bid a little to get the job. If someone does not see that is deceitful and unethical, I wouldn't have much respect for them. The estimator doing the work has no chance to be "paid" for that work, and neither does his company. DO YOU LIKE TO WORK FOR FREE?

 

[petersonra]

Re: Collusion and the law

How do you figure it is wrong to get multiple bids, and then if you figure its still too high do some negotiating with one or more bidders to reduce the cost? That's not only ethical, it's good business sense.

This is very typical of the way things are done EXCEPT when bidding government jobs, where price is not so much of an issue.

 

[shelco]

Re: Collusion and the law

There is nothing illegal about this prctice it is done all of the time. There is however such a thing as ethics in the business world. Bid shopping is low class and unethical. If the bids all come in over budget then either rebid letting everyone know it is over budget or negotiate with the low bidder, he then has the option of pulling out and the next in line gets a shot. If you have a favorite and you have a budget the negotiate with that contractor.
Dave

 

[petersonra]

Re: Collusion and the law

Why do you consider bid shopping unethical? It's a long standing practice, and I don't see anything wrong with it. It tends to benefit both parties to the transaction. The GC gets the best price, and the bidder gets an order. Those are the two people who are party to the transaction. Any other bidder is not involved in the transaction.

The other bidders may not like not getting the project, or not like this way of awarding a contract, but dislike of a process does not make something unethical.

If you don't want this to happen to you, don't bid. Or, have a heart to heart with the GC and explain to him you can no longer spend the time and money involved in putting together a competitive bid if there is no chance of getting a project.

There is nothing unethical in refusing to bid either.

 

[rbalex]

Re: Collusion and the law

If a technically qualified bidder receives an invitation to bid, they have the reasonable expectation that they will receive the order if they submit the low bid that meets job requirements or if all bids are considered too high or job requirements are altered to reduce the cost they have the first right of refusal.

It is dishonest and unethical when a technically qualified low-bidder has no real chance of actually receiving an order and their bid is only used to keep a preferred bidder "honest."

 

[petersonra]

Re: Collusion and the law

The whole purpose of putting things out for bid is to "keep the bidders honest".

In the real world there are way too many intangible factors to consider beyond the simple price on a bid form.

One of the big intangibles for me is whether the bidder will try to make his profit from "nickel and diming" me to death. Any EC who does this to me will never again be considered for any of my projects, no matter how low his bid is. I know this is the main mechanism for low bidders to make money on projects, but I cannot take the time to screw around with this kind of nonsense.

I expect the bidders to actually realize that there may well be mistakes on a drawing and tell me about them when they come up, rather than deliberately doing it wrong so they can bill me for it later.

I also prefer to work with the same people. Over time you develop relationships that have value beyond the low bid on one project, because you learn how to work together. This is not something you can do if you just accept the low bid.

Now, if the GC states the low bidder will get the order, that is a different story. But virtually ever request to bid I have ever seen flat out states otherwise, and in no uncertain terms.

In fact it used to be a fairly common practice when buying certain types of equipment to throw out the high and low bidders and than negotiate with the remaining bidders. I think the theory was that the low bidder probably forgot something and might try to make it up somewhere along the way.