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.”
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.
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:
1.)
Define
all the terms which a public agency may use to approve subcontractor
substitution;
2.)
Specify
that each public agency is to address the requirements of this section in all
of its solicitations for proposals / contracts;
3.)
Specify
that each agency is responsible for enforcement of contractor compliance with
all of the statue’s provisions;
4.)
Decrease
the exemption limit to $100,000.00;
5.)
Include
all subcontractors;
6.)
Give
the subs or other interested parties the right to sue (cause of action for
breach of statutory duty).
This Position Paper was produced by the Political Action Committee
of UA Local 32.
Send all Questions and/or Comments to Wayne Stedman,
UA32PAC Chair by clicking on this link.