Collusion and the law

[shelco]

Re: Collusion and the law

everyone bids a job to get it. the bid they put on the table is what they feel is the best they can do and still make money, If the job is over budget then you can negotiate with that bidder by value engineering or reducing scope. Bid shopping after the fact no matter how you look at it is "UNETHICAL" the statement that if you don't want to be involved in that then don't bid is unreallistic. First off you rarely now that is going to take place. If a contactor has a reputation of doing this eventually every one will go in with raised prices. There is almost always a staement that they reserve the right to accept or reject any bid. This does not mean they will bid shop it means they can make a determination as to qualifications and best value and award it to someone other than the low bidder but at their bid price. That is why a lot of GC's and const mngrs have gotten such a bad rep. Most are ethical but a few spoil it for the rest. Sorry to rant ethics in business is first on my list any one that thinks bid shopping after the fact is ok needs to take a long look at their practices .

 

[petersonra]

Re: Collusion and the law

I am amazed at the opinions being expressed here. First off - if a GC makes no promise that the low bidder will get the job, and in fact states in the bid documents that he may well not give it to the low bidder, what possible reason could you have to object to this?

There is no reason why anyone outside the public sector has to accept any bid for any reason, no more than you are required to shop at Walmart or not.

I can understand why it might frustrate an EC who spent money preparing a bid and then does not get it, but thats part of the hazards of being in business.

It does seem unfair to materially change the bid specs and than negotiate a contract with a favored bidder, but there are often reasons outside the bid price why someone might favor a particular bidder. And it is often easier to negotiate with a single bidder rather than trying to do so with a whole herd of them.

 

[ed downey]

Re: Collusion and the law

Shelco is exactly correct. Working for a large GC I have had subs try to offer a mysterious deduct after the bid while I am shaking out the numbers and the scopes. I Flatly will not except this this is wrong and should never be accepted.

Now if it is over budget and we are value engineering a project we will generally ask the two low guys to come up with a list of V.E. ideas with associated deducts for each item. We will not share the V.E. ideas of one sub with another until after award of the work and at that time we may have the selected sub price up the V.E. ideas from the not selected sub.

But we will never give out bid numbers of other sub contractors during or after a bid. We are instructed to only give out percent ranges of where the questioning sub was after the shakeout process.

These are company policies and you will be fired for breaking these policies.

-Ed

 

[shelco]

Re: Collusion and the law

Petersonra
I read what you are saying and maybe we are not talking about the same thing.
When a request for bid goes out no matter who it is from it is expected that the low bidder will be given the job if all aspect were covered and there are no other reasons not to give it to the bidder other than discrepancies in bid vs. bid documents. That being said you are correct in stating that they do not have to give it to the low bidder. However, and here is where the ethics come in to play, It is expected that a reputable person, owner or contractor will discuss this with at least the two low bidders and go over scope of work and if they have any clarifications and or exclusions that could alter the award process. To arbitrarily give others the opportunity to beat the low bidders price after the bids are in is, while not necessarily illegal most assuredly unethical, you simply cannot get around that. Ethics is a morality not a law. What will invariably happen at some point is that the the??low bid will get shopped and no one will lower their price so the person awarding the bid will go back to the low bidder to award and he will say no thanks I with draw thus he has to take a higher price in the end. It will, does and has happened.

Ethics in business and life is paramount to being successful. You may argue this all day long and how you do business is up to you but if you really study ethics in the market place you cannot dispute this. Though many people have many different interpretations. The definition of ethics seems clear to me. I do not intend for this to be a personal attack and i hope that it is not taken that way. Some times business is done a certain way for so long that it becomes every day and accepted no matter how wrong it may be. Doing things the right way is best, as well as easier. You build business relationships on trust and integrity.
I have been in business for over 40 yrs and though it is tempting at times to waver, maintaining high standards has gotten me more work than resorting to gray practices.

 

[highkvoltage]

Re: Collusion and the law

petersonra. The only thing that bothers me is you stated that "you prefer to work with the same people." Are you saying that you won't entertain a bids from another contractors? The reason I ask is being a new EC I am finding this to be my biggest problem. I can preform the work but very few doors open because of this reasoning. It is very frustrating and really somewhat ignorant expecially if you are reviewing bids for your employeer. I just left a EC that preforms sub par work but for some reason his clients stay with him even though they know I can match their cost and give them a higher quality, appealing job.

 

[petersonra]

Re: Collusion and the law

I like working with the same people. Over time you develop relationships that are often worth more than a low bid. It is hard to put into words why this is, but at least in my line of work (mostly equipment) the low bidder is not always the best choice, regardless of his ability to do the work.

I can't tell you how many times a bidder has come up with an alternate solution to a problem that was more cost effective than what I had planned on, or even suggested design revisions that made the thing better. Forcing bidders into a rigid structure of "low price gets the work" causes both parties to ignore the intangible factors that often mean as much as the absolute price.

I encourage bidders to bid what they want to do. Often they can do things in a certain way that is more cost effective than the way I would do it, or the way another bidder would.

I also have to look at other factors. Often a plant has requirements that contractors take a safety/orientation class prior to being allowed to work there. That gives a huge advantage to a guy that is already there, because I don't have to worry about the guy being able to schedule enough people through the class. Even if the contractor is willing to eat the cost of the classes, I have to wonder how he is going to do that and still make a buck. The guy that is already there has stuff on site, including a trailer and maybe a small store of parts that I can tap into if needed. That's worth a lot during startup when you really cannot dilly-dally around waiting for the guy offsite to bring you a fuse.

I rarely put out formal bids anymore. Generally, I discuss with a few potential venders what I want and let them come up with a solution. I tend to take the same approach with contractors. If, after the bids come in, the price is out of line, I will almost certainly start talking with the bidder who I am most comfortable with and try to work things out to get the cost back in line. If that is unethical, so be it. My primary responsibility is to my company, my customer, and my end user, not to the low bidder.

That does not mean I will lie to the bidders and tell them the low bidder will get the project. I am upfront about where they stand, and in general, how decisions are made, and why. It's a bit arbitrary, but it's also effective. It does frustrate bidders who come in with a low price but don't get the bid for reasons other than price.

I generally will not discuss the exact bid prices of one bidder with another. I don't see that as a good practice (I'm not entirely sure why though). I will tell them in a more general way. Its helps them the next time to be more competitive.

In any case, generally I no longer contract directly with installation contractors. Usually the end user or OEM takes care of that these days.

 

[shelco]

Re: Collusion and the law

OK now you are talking about some thing different. "A bid" request is something different than you are talking about. A bid project is with detailed defined spec and scope of work and the bidder cannot alter. A request for quote that states value engineering is encouraged is something different the bidder has a chance to offer alternate methods of achieving the desired results. The bid requester then takes into consideration all of the offers and determines what is the best value and makes an award based on that. That is entirely different than bid shopping. What I just described is done quite often and no one has an issue with that because every one has the same oportunity. Bid shopping is where the bid based on a specific defined scope of work with no allowance for value engineering on change in design and the low bidders price is given to another bidder or if a high bidder is given the opportunity to meet or beat the low bidders price for no reason other than you want to do business with this one contractor, that is unethical as you have wasted time resources and money of the contractor that had the lowest legitamite price. He could have used that time and effort to bid a project he had a legit opportunity to get.

 

[jim sutton]

Re: Collusion and the law

So the truth comes out : petersona you are really a GC cruising the EC's website. I didn't think you could be an EC with your position. It is unethical for a GC to decieve qualified EC by soliciting his bid and then not giving him the job if he is low. period. If you later determine that he is unqualified, that is another matter, but don't keep asking him for bids.

 

[petersonra]

Re: Collusion and the law

I am not a GC. Sometimes I seem to act as one though. I realize it can be very frustrating to put a bid in, be low bidder, and have the business go elsewhere. But I am not convinced it is unethical. There are way too many things to consider in these decisions besides price.

It may be that in your little chunk of the world, price is the only thing that matters. I can't say that is the case for me. I think you are probably missing out on a lot of nifty projects if you focus on price. You are probably missing out on a lot of profit as well.

If you focus on giving the customer what he really wants and needs, rather than trying to get a project by being low bidder, you may well find out that you are better off financially. Or not. YMMV.

Certainly, I would not advocate doing something that is immoral or unethical. I just do not see a little horsetrading after bidding as unethical. Maybe I am wrong. But I would bet it's mostly subs who feel this way.

 

[shelco]

Re: Collusion and the law

well i thought we had it, but alas back to square one. Horse trading and negotiating after a competitve bid is and always will be unethical but it appears you have conviced your self that it is ok to steal time and services from another to justify you profit levels. Our little chunk of the world is trying to make aliving relying on people like you. You would be better off just hooking up with a couple of contractors that you work with and let them value engineer, come up with a price and be done with it. What justifies manipulating hard working honest contractors and taking money out of their pocket and putting it in yours. You would have a hard time convincing me that you pass the savings on to your customer Based on your dialog
Good luck I hope you have a stash of contractors because you will run out at some time

 

[jim sutton]

Re: Collusion and the law

Petersonra you are absolutely right about price not being the sole factor in winning jobs. But that is not what this thread is about. You have been repeating the whole thread about "horsetrading" to get the customer a better price. Bid Shopping is when you take 3 bids from EC's, get the job using one of the bids, and then call all 3 telling them the other bids in order to beat the subs down until 2 of them give up. No that is not ethical, but nice guys finish last, right.

 

[hbiss]

Re: Collusion and the law

In my experience if there is a request for bids that means that the job goes to the lowest priced qualified bidder.

If there aren't complete specs or they are looking for "value engineering" then they do a request for proposals. (RFP) Here they take the proposal they like the best.

Sounds like the latter is really what some of us are talking about here.

-Hal

 

[powerbillnky]

Re: Collusion and the law

Petersonra,
Here is something for you to think on. Let's say your boss asks you and 2 other engineers to work a day or two putting together a proposal on a new process line, but stipulates only the engineer with the best proposal will be paid. Now you work your butt off on creating, designing, and pricing the best process line ever created. Then you submit it and wait for the payoff. But instead of praising your work, he goes straight to one of the other engineers, shows him your design, and ask if he can do it cheaper. Of course he can! The reason is while you were hard at work, this guy was working on a different project. He has zero time in this project since he did not do any work designing or pricing. All he merely has to do is follow the design you submitted(your boss was just trying to save a dollar so he figured it was OK if he "shared" your ideas with him), deduct a few dollars, and presto, he's a valued asset to the company. NOW DO YOU SEE WHY EC's GET UPSET WHEN THEY ARE TREATED THIS WAY? Whether you agree or not, it is wrong and unethical. BTW, Martha Stewart seems to have the same idea of ethical as you.

[ May 05, 2005, 10:14 PM: Message edited by: powerbillnky ]

 

[bigjohn67]

Re: Collusion and the law

Simply enough.... We have a list of contractors to stay away from that have been known to "shop with your price"
We'd rather make $-0- than loose money.

 

[shelco]

Re: Collusion and the law

Touche'
It is rather apparent to most people what is good ethics and what is not, in my experience if you ask 1000 people about this senerio 99% would agree that this is unetical, those that don't will never be convinced or change their prctices.
but they will be on the " do not bid list" for most. An rfp as stated above is the best way to go for Petersrona that way at least every one knows where they stand. I probably won't change the out come however as he still will share your info. I hope that i am wrong but i doubt it.

 

[petersonra]

Re: Collusion and the law

We seem to be stuck on semantics here. I would not (and have not) suggested use of a bid submitted by someone who actually went to the trouble of bidding to give the bid to someone who did not bother to bid at all.

However, I am not above throwing out all the bidders and starting over again if I don't like what they came back with.

I still see no problem with picking a bidder based (at least in part) on concerns other than price. This seems to be a real bugaboo with some of you, and I don't want to offend anyone, but in the real world (at least my little piece of it), that's often the way things are done.

Maybe because I am from a different world - mostly equipment rather than contracting. In my world this is just the way things are done. and while it frustrates people who do not get a project that they may have the lowest price on, it's just the way it is.

I can give you an example of something that used to happen to a company I formerly worked for a couple of times a year. A large, well-known company would put out bids (or maybe you would call them RFP) and state that their engineering dept would evaluate the bids and recommend the lowest evaluated cost to be purchased. Time after time we would be the lowest evaluated cost, yet the PA would inevitably buy the system with the lowest upfront cost. Eventually we just stopped bidding on their projects as it was a waste of time bidding good equipment against cheap stuff.

 

[69boss302]

Re: Collusion and the law

petersonra, I have to jump onto your band wagon on this one. In the industrial end I have vendor's that I use and the company has approved that when I need something done I get a quote on. I do every so often get quotes from other vendors to check and see if their prices are getting out of line. Even the purchasing department will require three quotes some times.

I actually get sick and tired though of some contractors that will come in and say that they will beat anyone else's prices. I have actually had that happen. My little red flags get raised right away when a contractor says that. First of he is the one being unethical, I would have to share the price of my other vendor/contractor with him. The one that comes in like this doesn't even usually want to see the actual job, I have been approached with "Just tell me what they charged and we'll beat their price". The ethics should exist on both sides and they don't seem too. Everyone is complaining about the GC that takes advantage of an EC, but as any situation there are bad apples on both sides.

Bidding, Quoting or whichever term you chose is a cost of business, just like advertising, maintenance of equipment, and gas for your truck. I believe that it is just merely absorbed into the budgets some where. Companies employ outside salesmen to go practically door to door to sell them, they get a salary (some very small) plus commission usually. They are salesman, I realize small or one man shops don't have this luxury but you still have to drop off a card or call just to get your name in the hat.

Business does not work on lowest cost. Lowest cost all to often gets you lowest quality, somebody has to cut something to get the cost down. There is a lot to be said for a trust that is developed between a vendor/contractor that has proven his abilities and has not been unethical in his work.

 

[shelco]

Re: Collusion and the law

69boss302
You are absolutly correct there are as many unethical subs as GC's. They fall in to the same catagory. I would never accept that type of contractor in my fold. You would be asking for trouble and you would get it. These people should be disounted as a good contractor. If they would be willing to cut on that level what else would they be willing to cut. just as a GC playing the please cut your price game. Once you get the job what else is he going to ask for.

 

[steve66]

Re: Collusion and the law

I can't believe I've read 3 pages about weather bid shopping is ethical, and not a single word has been said about the owner - the person or company paying for the work. That is the reason why bid shopping is unethical. It has nothing to do with being fair to the EC's or GC's (thats just an additional benefit of fair bidding).

Let's be honest. If the GC gets the low bid, and he bid shops his subs - he keeps the extra profit. The owner doesn't get any of the savings. And as a result of the GC's bid shopping, all the subs are going to try to cut corners any way possible. That's not good for the owner.

Steve

 

[luke warmwater]

Re: Collusion and the law

Why is there such a bad business practice as to 'try' to be the low bid to get the job?

On one hand, it is nice to be asked by a GC if we can match or beat a lower bid, but my answer is always, 'no'.

There is alot of work in my area. If someone needs the work that badly to under-cut everyone, they can have the work. I'll be busy making money on the jobs that the low bidder doesn't have the time to do now, and the GC cant get a 'low baller'.