Government Contractors Speak Out on Bid Shopping

August 30, 2000
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No contractor likes losing money, but this is often the result when subcontractors are competing for federal contracts.

John J. Dunleavy, executive vice president of Pierce Associates, Inc., Alexandria, VA, in testimony before the House Government Reform Subcommittee on Government Management, Information, and Technology, described how the Construction Quality Assurance Act of 2000 (H.R. 4012) would protect subcontractors performing work in the federal construction market from things like “bid shopping.”

Bid shopping occurs when a prime contractor approaches its subcontractors after it has been awarded a construction contract, and tells the subcontractors to lower their prices or lose the subcontracts.

In his testimony, Dunleavy praised the proposed act for targeting improvement of “the quality of federal construction project delivery, and the competitiveness of federal construction markets by effectively stemming the parallel abusive business practices of bid shopping and bid peddling.”

The Quality Assurance Act, proposed in March, would present a solution that would address problems that have been ongoing in federal subcontracting, and base implementation of such solutions on the quality of work.

The bill has six co-sponsors, with support from members of both majority parties and an independent. Rep. Paul Kanjorski, D-PA., is the bill’s original sponsor.

The American Subcontractors Association (ASA) said, specifically, the bill calls for an amendment to the Federal Acquisition Regulation, requiring that each bid on federal construction projects in excess of $1 million, include the name, location of the place of business, and the nature of work for each subcontractor with whom the bidder, if awarded the contract, will subcontract work for amounts in excess of $100,000.



The language of the bill would protect the government’s and prime contractors’ interests by preserving the competitive bidding process through bid day, and by allowing substitution of the subcontractors listed in the original bid in limited circumstances, added ASA.

Testimony Tells the Story

Testifying before the committee on behalf of the Mechanical Contractors Association of Amer-ica (MCAA), Dunleavy said, “The Construction Quality Assurance Act of 2000 will bring many more quality construction firms back into competition in the federal market.

“It would also lead the way to project performance based on best-value performance contracting, rather that adversarial buying-the-job practices,” he said.

Dunleavy’s testimony was echoed by that of ASA member Chip Swab, president of Ennis Electric Company, Manassas, VA.

“Of the 19 federal contracts my company has performed work on and the many more that we have bid on during the past two years, every single one has featured some form of bid shopping,” said Swab. “Today, the federal government does not get the best possible value for construction…because in most cases the final decisions as to which subcontractors, suppliers, and manufacturers will be used on a project are not made until after the government accepts a bid or proposal from a prime contractor.”

In effect, the widespread practice described in testimony from Dunleavy, Swab, and others subjects subcontractors to a second, unofficial bidding process that solely benefits prime contractors, and can force the subcontractors to perform work with minimal resources and attention.

This sounds economical on the surface, right? After all, construction owners and users do not reap any benefit…right?

On the contrary, said Swab.

“The savings from that subcontract enrich the prime contractor to the detriment of the value delivered to the owner. As a responsible construction owner and custodian of public property, the federal government should not tolerate such waste any longer,” said Swab.



Improving Competition

MCAA, which has formed an alliance with the National Electrical Contractors Association (NECA) and the Sheet Metal and Air Conditioning Contractors’ National Association (SMACNA), said it “supports the passage of H.R. 4012 as a move that would continue the pattern of policy improvements established by the Competition in Contracting Act, the Prompt Payment Act, the Federal Acquisition Streamlining Act, and the recent Miller Act amendments.”

MCAA said that these laws encourage federal construction purchasing officials to evaluate and select highly skilled contractors in a market that increasingly uses competitive negotiation over low-bid procurement.

Dunleavy testified that H.R. 4012 would strengthen these reforms “by extending bid listing protections to major first-tier subcontractors.”

He also said this reform would ensure that performing contractors and subcontractors are all committed to successful project performance and would go a long way toward ending the deleterious effects bid shopping and bid peddling have on the federal construction procurement process.

A complete copy of Dunleavy’s testimony before the subcommittee can be found on the alliance’s website at www.construction alliance.org.

Subcontractors interested in learning about this act and other legislation supported by ASA may contact ASA director of government and industry relations, Matt Wald at 703-684-3450, ext. 333; mwald@asa-hq.com (e-mail).

Publication date: 09/04/2000

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