Bid shopping is when you pass on a project bid you receive, revealing a company’s pricing to its competitors. I am against bid shopping, and so is everyone I know. But if everyone is against bid shopping, why does it exist?

Several years ago, a “new” business procurement method popped up called a Reverse Auction. Fortune 500 companies and federal agencies embraced it. In a Reverse Auction, contractors submit their prices on a website open to all bidders. All bidders are given an opportunity review all estimates, and if they choose, resubmit a lower price. The Reverse Auction lasted 24 hours. If a revised bid was submitted in the final hour, the “open” period was extended for several more hours. Think about it: Reverse Auctions are systemized bid shopping.

Years ago, I met with a subcontractor who was not responding to our requests for project bids. I wanted to know why. He replied that because his competitor is my buddy, he assumed I would shop his bid to my buddy. I told him that I do not bid shop. He agreed to provide bids, and expressed his desire to work with us. Indeed, following our meeting, he did begin to provide project bids. But a few years later, I discovered this same subcontractor was involved in bid shopping. Another general contractor was providing him his competitor’s prices. I could not understand: here was a man who made it clear that he was against bid shopping, yet he participated in it. I thought back on our conversation and remembered his exact words: “I would like to work with you.” His definitions became clear: “bid shopping” is when someone reveals your pricing to your competitor, whereas “working together” is when an individual provides you with your competitor’s pricing.

Many years ago, one of our subcontractors located his office only two doors away from ours. The owner was great guy, and ethical. He would never bid shop. However, his estimator did not share his ethics. One day, his estimator walked into my office and asked questions on a bid I was preparing. His last question caught me by surprise – and next thing I knew, I’d told him the amount of the lowest bid I had received. After that, I never again let him in my office while I was preparing a bid. When I spoke with the owner about the incident, he said it was not intentional. But when I discussed it with another general contractor months later, he told me that this estimator made a practice of it, even though the owner did not believe it was occurring. That general contractor and several subcontractors “set up” the estimator by misinforming him on bid pricing, so his bids would be too low.

What were the outcomes of these two stories?

The first firm’s owner retired with enough money for two lifetimes. The second firm’s owner, following a string of unprofitable work and an industry slowdown, paid his bills and left town. Today in the Northern New Mexico construction community, it is no longer sexy to openly bid shop. Most companies have ceased the practice.

And I? I am not as starry eyed as I was 30 years ago when I worked on my first bid.