Bid Shopping
Political Action Committee Position Paper
The Basics
General contractors sometimes use a subcontractor’s quote to prepare a bid, receive the award and then increase profit by either substituting a lower cost sub-contractor or by manipulating the quote providing sub contractor with the threat of being replaced. That’s bid shopping.
That practice had already been recognized by the Courts as unethical and not in the best interest of the general public.
In the case of Savage vs. State, 1969 the court wrote that the primary purpose of the competitive bidding statutes is for the benefit of taxpayers and not the enrichment of bidders.
In 1971, in the case of A.A.B. Electric vs. Stevenson Public School District, the court wrote “it is recognized that another purpose is to provide bidders with a fair forum for the award of public contracts, and necessarily so. It is by protecting this secondary purpose that the primary benefits of the competitive biding system can be insured to the general public.”
Legislative History
In 1993, Senate House Bill 1370 introduced to the legislature a comprehensive abolishment of the practice of bid shopping.
The legislature enacted a compromise version of SHB 1370 that 53rd session. But this bill fell short of the goal.
It became section .060 of RCW (Revised Code of Washington) Chapter 39.30. Chapter 39.30 deals with contracts and competitive bidding violations. This new section required general contractors to list within 24 hours after the published bid submittal time, the names of subcontractors with whom the general would contract. It applied only to those Public Works with value greater than $100,000 and to those subcontractors whose part of the project was greater than 10% of the total bid.
Failure by the general contractor to list either a subcontractor or itself as the performer of all categories of work with their bid “shall render the bidder’s bid non-responsive and therefore void."
Bid shopping continued to be a major problem and in March of 1994 the legislature amended the statue to shorten the time for submittal of subcontractor names from 24 hours to 1 hour.
In September 1994 Rep. Hans Dunshee, wrote to the Attorney General’s Office asking if bidders are obligated to use those subs named in their list.
The Office of the Attorney General gave a “qualified affirmative” writing it “necessarily implies that bidders subcontract with subcontractors whose names they have submitted with the bid”; but “once a bid has been accepted, specific terms of the contract with regard to substitutions of subcontractors would apply.”
The Attorney General’s Office also wrote:
“RCW 39.30.060 does not appear to create a new cause of action against an awarding agency based on a general contractor’s failure to comply with the requirement” and “the statute imposes no duty on agencies to address this requirement in requests for proposals, contracts, or policies.”
In short the law as it stood then simply stated that generals list the subs they would use if awarded the job. It lacked statutory definition of terms for subcontractor substitution, imposed no specific duties on pubic agencies to implement its provisions and did not provide penalties for failure to comply. In other words loopholes allowed generals to continue the practice.
In 1999 Rep.’s Mark Miloscia and Tom Campbell sponsored House Bill 1438 to the 56th legislature. It moved to amend Section .060 to define terms for subcontractor substitution and hold generals in violation liable to named subs. The bill as enacted, SB1736, did not include the proposed amendments of HB 1438.
Instead the $100,000.00 exception to the listing requirement was raised to 1 million dollars. The 10% rule was dropped. Generals are limited to listing up to 2 subs when alternate bids are proposed and only those subs performing plumbing, heating air conditioning and electrical must to be listed when contracted directly by the primary contractor.
Where Local 32 Stands
Improvements to the law are still needed. RCW 39.30.060 still lacks sufficient statutory definition of terms for subcontractor substitution. It still has a loop-hole which allows general contractors to not list all mechanical subcontractors (sometimes there are many) who have participated in building the bid. It still lacks assignment of specific duties to affected agencies for implementation and provision’s for noncompliance penalties. The $1 million exception impairs the ability of our smaller mechanical contractors to avoid being bid shopped, particularly in the rural areas of our jurisdiction or when larger projects are divided into phases. Limiting the listing requirement to those subs who perform mechanical work only, once again creates a hardship on the other subs.
All contractors need a fair bidding forum. Union contractors are responsible bidders with proven track records of providing a safe and quality consumer product while paying family wages. The cost to comply with all the codes, rules and regulations is fixed by our RCW and WAC (Washington Administrative Code). It has to be added in to their bids. Manipulating subs to lower their best offers in order to increase profit only encourages cheating working families of the benefits they deserve and the taxpayers of product’s which comply to code.
What’s needed:
- Define all the terms which a public agency may use to approve subcontractor substitution;
- Specify that each public agency is to address the requirements of this section in all of its solicitations for proposals / contracts;
- Specify that each agency is responsible for enforcement of contractor compliance with all of the statue’s provisions;
- Decrease the exemption limit to $100,000.00;
- Include all subcontractors;
- Give the subs or other interested parties the right to sue (cause of action for breach of statutory duty).
