Contractor Who “Bid Shops” Lets Sub’s Low Price “Off The Hook.”

Kegler Brown Construction Alert

While “bid shopping” has become an unfortunate but frequently encountered practice in the construction industry, it is still rare to see cases dealing with the “bid shopping” issue. Ohio now has such a case which was decided on April 21, 2009 by the Tenth District Court of Appeals. Complete General Construction Co. v. Kard Welding, Inc., 2009 WL 1067508 (Ohio App.10 Dist.). In this case the subcontractor submitted a written structural steel quote to the contractor on an ODOT project.

Disagreements subsequently arose concerning the wording of the subcontract and the subcontractor revised its quote upwards based upon a mistake in its original bid. The contractor attempted to enforce the original bid price and seek to recover the excess costs associated with subcontracting the work to a higher bidder.

Evidence showed that the contractor had continued to negotiate bids submitted by other structural steel subcontractors in the hope that those subcontractors would reduce their bids, and in fact there was evidence that this was the contractor’s “customary practice.” A court found that this practice was the tactic commonly referred to as “bid shopping,” and defined “bid shopping” as “a general contractor’s effort - after being awarded a contract – to reduce its own costs by finding a subcontractor that will submit a lower bid than the one used in calculating the total contract price.”

The court found that any time a contractor engages in “bid shopping” he can no longer continue to rely on the quote submitted by the low bid subcontractor. The court went on to rule that a general contractor is not free to delay acceptance of a low bid after he has been awarded the general contract in the hope of getting a better price. When the general contractor does that, he lets the low bid subcontractor “off the hook.”

This case may cause contractors to rethink whether they want to engage in “bid shopping,” particularly if they have a low bid from a subcontractor that they want to rely upon.