Why bid shopping exists

Unethical behaviour
Main contractors generally bargain with subcontractors from a position of power,
which May et al. (2001) consider can lead to unethical behaviour and exploitation
of the subcontractor. Vee and Skitmore (2003), in their survey of professional
ethics in the construction industry, found that post-award bid shopping is viewed as
being unethical because the decision to bid shop deprives the subcontractor of
work fairly won in a competitive tender. Post-award bid shopping is considered
unfair and reveals commercially sensitive tendering information. Those that benefit
from the practice consider it acceptable while those that suffer from it consider it to
be wrong.
Bid shopping increases profit
Post-award bid shopping does not reduce the contract price; any reduction in costs
would be for the main contractors benefit and increases their profit (Shash 1998).
The prevailing opinion on why bid shopping occurs is that it appears to be
attributed to the main contractor's desire to increase profit
Bid shopping is considered an unethical practice used by contractors to gain
advantage over their clients in the bidding process. Bid shopping can be harmful to
the construction industry because it creates an unhealthy business environment,
eliminates the benefits of the bid system, promotes lower standards of quality
performance, delays project completion and reduces job site safety.
Just in time
To try and prevent contractors from shopping their bids, subcontractors submit
their bids to the contractor just prior to the time that the contractor is required to
submit their bid to the owner. The reasoning is that the contractor wont have time
to shop their bids to other subcontractors. This practice is often referred to as just
in time bid submittal.
While this practice, used by subcontractors as a defense against bid shopping, does
keep the contractor from bid shopping, it can also act as a double-edged sword.
The problem is, if the subcontractors turn in their bids just prior to the deadline of
the contractors bid turn, the contractor is unable to check for any discrepancies or
errors. These discrepancies and errors, of course, lead to increased costs, disputes
over the scope of work, and the general inefficient prosecution of work

Bid depository
To help prevent bid shopping and provide clear scopes to all the subcontractors, an
online bid depository may be available. Bid depositories assist the contractor to
manage the scopes of work prior to bid day. The bid depository reviews the
construction documents and creates bid forms that are customized to each project
allowing the bids to compare apples to apple for the various scopes of work.
While bid depositories may not cover all the scopes of work on a project, they
assist the general contractor in ensuring that the scopes of the various trades are
uniform. Bid depositories also reduce if not eliminate the opportunity for bid
shopping to occur.

project buyout
To compensate for insufficient time during the bidding process for a contractor to
analyze the bids, generally a period of time is allotted after the award of the bid to
the general contractor and prior to the award of subcontracts and purchase orders,
during which the general contractor completes the review of all bids. This period of
time is often referred to as project buyout. Project buyout is the process of
converting all subcontractor bids to subcontracts and all material quotes to
purchase orders (Johnston, 2004).
What happens
No contractor enjoys the prospect of making less profit than desired. Therefore, the
shopper has strong incentive to develop ways to recoup that lost profit. One of
these ways is to cheapen quality. The shopper may not use the specified material
and/or allows workmanship to suffer in order to gain back the profit lost.
Another way is to search for opportunities to increase the amount of one's contract
through extras. The bidder is constantly motivated to seek change orders, often
pricing them at substantial premiums above the actual cost of the work done. In
either of the two scenarios, conflict is sure to result, and legal issues arise. The
original fee is lost or reduced by discounting and the added burden of legal fees to
resolve the ensuing conflict is inevitable.