Bid shopping—using one subcontractor's price to negotiate lower prices from others after bid opening—is one of construction's most contentious practices. Understanding bid shopping helps subcontractors protect their interests and general contractors maintain ethical practices.
What Is Bid Shopping
Definition
Bid shopping occurs when a general contractor or higher-tier contractor:
- Receives subcontractor pricing before or at bid time
- After winning the project (or during bidding)
- Shares that pricing with other subcontractors
- Solicits lower quotes by revealing competitor prices
Related Practices
Bid Peddling Subcontractors approaching GCs after bid opening, offering to beat the price used in the winning bid.
Bid Chiseling Pressuring the subcontractor whose price was used to reduce their price after project award.
Scope Manipulation Reducing scope after award to justify lower subcontract price while expecting original scope delivery.
Why Bid Shopping Is Problematic
For Subcontractors
Direct Harm
- Pricing information becomes competitor intelligence
- Lowest price used without award guarantee
- Pressure to reduce already-thin margins
- Time invested with low conversion
Market Effects
- Race to the bottom on pricing
- Quality reduction to meet prices
- Relationship erosion
- Estimating resource waste
For the Industry
Quality Impact
- Lowest price rarely means best value
- Shortcuts to meet reduced prices
- Claims and disputes increase
- Project quality suffers
Trust Erosion
- Subcontractors become reluctant to price
- Less competition over time
- Relationship damage
- Industry reputation harm
For General Contractors
Short-Term Gain, Long-Term Cost
- Subcontractors add "shopping margin"
- Best subs avoid known shoppers
- Claim exposure increases
- Reputation damage
Legal Framework
Listing Laws (California Example)
California Subletting and Subcontracting Fair Practices Act
- Requires listing subcontractors performing >0.5% of bid
- Listed subs must be used (with exceptions)
- Substitution requires specific grounds
- Penalties for violations
Purpose
- Reduce bid shopping
- Protect subcontractor investment
- Ensure responsible bidding
- Maintain competitive integrity
Prompt Payment Laws
Federal and State Requirements
- Payment timing mandates
- Retainage limitations
- Interest on late payments
- Legal remedies available
Relevance to Bid Shopping
- Can't leverage payment to force price cuts
- Contractual terms must be honored
- Pressure tactics have limits
Contract Protections
Anti-Bid Shopping Clauses
- Some public contracts prohibit bid shopping
- May require certification
- Enforcement mechanisms vary
- Document violations
Signs of Bid Shopping
Red Flags for Subcontractors
Before Award
- GC shares your price with competitors
- Multiple late scope requests
- Unusual questions about pricing breakdown
- Requests to "sharpen your pencil"
After Award
- Pressure to reduce price "to get the job"
- Claims your price was "too high" but they used it
- Scope reduction discussions
- Extended negotiation despite clear terms
Patterns to Watch
GC Behaviors
- Always awards to lowest bidder regardless of relationship
- High turnover in subcontractor relationships
- Reputation in trade community
- Claims and disputes history
Protecting Your Business
Pre-Bid Strategies
Selective Bidding
- Research GC reputation
- Ask other subs about experiences
- Check award history
- Limit bids to trustworthy GCs
Bid Conditions
- Clear expiration dates
- Scope limitations explicit
- Pricing withdrawal rights
- Terms and conditions
Proposal Language Include protective language:
This proposal is submitted in confidence for
[GC Name]'s exclusive use in preparing their
bid for [Project Name]. Pricing is proprietary
and may not be shared with third parties.
This proposal expires [date] and may be
withdrawn prior to execution of a subcontract.
During Bid Process
Communication Discipline
- Written proposals only
- Documented scope clarifications
- Careful phone conversations
- Email confirmations of discussions
Timing Strategy
- Understand your leverage points
- Don't submit earlier than necessary
- Be available for legitimate questions
- Recognize pressure tactics
Post-Bid Protection
If Not Listed/Selected
- Don't bid peddle yourself
- Maintain professional relations
- Learn from the outcome
- Document for future decisions
If Selected and Pressured
- Reference original proposal terms
- Document pressure attempts
- Know your walk-away point
- Consider industry reporting
For General Contractors: Ethical Practices
Why Ethics Matter
Business Case
- Best subcontractors prefer ethical GCs
- Pricing becomes more competitive
- Fewer claims and disputes
- Reputation attracts talent
Project Outcomes
- Better subcontractor commitment
- Quality focus vs. margin protection
- Smoother execution
- Repeat relationships
Best Practices
Bid Process
- Clear scope documents
- Fair bid timing
- Consistent treatment
- Transparent evaluation criteria
Subcontractor Selection
- Consider factors beyond price
- Value relationship history
- Respect confidential pricing
- Award based on stated criteria
Post-Award
- Honor pricing commitments
- Fair contract terms
- Prompt payment practice
- Address issues professionally
Industry Initiatives
Listing Law Expansion
Trend
- More jurisdictions considering
- Lower thresholds discussed
- Enforcement enhancement
- Industry support growing
Trade Association Efforts
Subcontractor Organizations
- Bid shopping education
- Reporting mechanisms
- Member communication
- Legislative advocacy
Industry-Wide
- Ethics training programs
- Best practice guidelines
- Certification programs
- Reputation systems
When You're Bid Shopped
Immediate Response
Document Everything
- Save all communications
- Note dates and conversations
- Record specific statements
- Preserve evidence
Professional Response
- Remain professional
- State your position clearly
- Don't make threats
- Protect relationships where possible
Longer-Term Actions
Internal Review
- Evaluate GC for future bidding
- Update bid list accordingly
- Share experience appropriately
- Adjust strategies
Industry Communication
- Talk to peers (carefully)
- Trade association reporting
- Pattern identification
- Collective action where appropriate
Building Better Relationships
For Subcontractors
Become Valuable
- Deliver excellent work
- Reliable and professional
- Problem-solver reputation
- Technical expertise
Strategic Positioning
- Build direct owner relationships
- Develop specialties
- Create switching costs
- Demonstrate value beyond price
For General Contractors
Subcontractor Development
- Mentor emerging subs
- Provide growth opportunities
- Fair and consistent treatment
- Long-term perspective
Relationship Investment
- Repeat business with performers
- Reference sharing
- Collaborative problem-solving
- Industry reputation building
Conclusion
Bid shopping undermines the construction industry's integrity and ultimately harms all participants. While completely eliminating the practice may be impossible, understanding it helps subcontractors protect themselves and encourages general contractors toward ethical practices.
The best protection is building genuine value—expertise, reliability, and relationships that transcend pure price competition. And choosing carefully who you work with.
For subcontractors: be selective, protect your pricing, document everything, and walk away from exploitative relationships.
For general contractors: recognize that ethical practices attract the best subcontractors and produce better project outcomes. Short-term savings from bid shopping cost more in the long run.
ConstructionBids.ai helps subcontractors find direct public bidding opportunities where they can compete as prime contractors, avoiding bid shopping concerns entirely.
