Bid Shopping and How Your Contracting Business Can Avoid It

When property owners look for a contractor for a project, they are often searching for the lowest price. So it’s not entirely surprising that, on occasion, you might interact with a property owner or a contractor who reveals another contractor’s bid in an effort to get you to lower yours. This concept is known as “bid shopping,” and it is illegal in certain contexts. By understanding it, you can have a better chance of avoiding it.

What Is Bid Shopping?
It’s common for property owners to ask for lots of companies to bid on a project, so that they have various options. This is not the same as bid shopping. When a general contractor is looking for subcontractors for their own bids on a project, they might publicize the bids that they are receiving in the hopes that subcontractors will offer to do the work for a lower price. Bid shopping essentially encourages other contractors to lower their prices in an attempt to secure work.

What’s Wrong With Bid Shopping?
If you have ever done comparison shopping or asked a company to match the price that a competitor is offering, you might wonder what is wrong with bid shopping. As a contracting business owner, you may quickly understand how bid shopping can create significant problems within the industry. There’s already a lot of pressure for small businesses to compete with larger ones by lowering their prices and cutting into their profit margins. Bid shopping can create a “race to the bottom” mentality where the lowest price becomes the biggest factor for general contractors or property owners to determine who gets the bid. If you’re constantly having to cut your bid to meet the lowest price, you may eventually end up losing money on projects.

What’s the Difference Between Bid Shopping and Bid Peddling?
The difference between bid shopping and bid peddling is the person who is doing it. Bid shopping usually involves a general contractor or property owner looking for lower bids from subcontractors. Bid peddling comes from a subcontractor offering lower prices than another subcontractor in the hopes that they can supplant that subcontractor for the same job. Both actions can be sneaky and unethical, they just come from different directions.

Is Bid Shopping Illegal?
In many cases, bid shopping is illegal. In fact, California state law requires that for public projects, contractors have to publish a list of the subcontractors whom they would hire to complete the work for the project. With a few exceptions, this law makes it much harder for contractors to substitute a lower-bidding subcontractor on a whim. Outside of this context, however, it may not be illegal. It’s worth keeping in mind that most professional organizations in construction dislike the practice, mostly because it kills profit margins and makes it more difficult for businesses to thrive in a competitive environment.

What Should I Do If I Encounter Bid Shopping?
Although bid shopping is often illegal and generally looked down upon, you may still encounter it on occasion. The best thing you can do is to understand the laws for submitting bids to a contractor. If there’s a contractor in your area who you find is trying to push the envelope to see what they can get, try to avoid doing business with them in the future. Ask your lawyer about adding clauses in your contracts to protect the confidentiality of your bid. You won’t be able to get rid of bid shopping entirely, but you can establish yourself as an above-board contractor who prizes a healthy industry. You’ll be able to build more credibility with that view anyway.

Bid shopping is a problem in construction, but if you know what to look for, you can generally avoid it. For more advice about getting started in construction, visit CSLS today!

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About CSLS

Contractors State License Service (CSLS) is the largest school in California devoted to the Construction professional. For over 23 years, CSLS has helped its students pass the exam to become licensed contractors in the State of California, licensing more students than any other school. From our main offices in Southern California, CSLS operates over 25 locations with full-service support and classrooms. We have grown to this extent by providing quality, professional services. In comparison, this provides 7 times the number of convenient locations than the second largest contractor school. Contractors State License Services is one of the only contractor schools in the state that is run by educators, not lawyers or people mostly interested in the bonding and insurance business. Contractors State License Services formerly operated under the oversight of the State of California's Bureau for Private Post Secondary and Vocational Education. As of January 1 2010, the new Bureau for Private Postsecondary Education (BPPE) came into existence replacing the BPPVE. CSLS now operates under the provisions of the California Private Postsecondary Education Act of 2009 (CPPEA), Article 4 Section 94874(f). Our Mission is simple; We can help you pass your California Contractors License Exam. Celebrating our 25th year, CSLS has helped over 120,000 students pass the California contractor licensing exam to become licensed contractors in the State of California. Additionally, we offer complete home study and online contractor’s license programs to help you pass your California contractors license exam. CSLS offers licensing classes for all types of contractor licenses, including General Engineering Contractor, General Building Contractor, Specialty Contractor, Insulation and Acoustical Contractor, Framing and Rough Carpentry Contractor, Cabinet, Millwork and Finish Carpentry Contractor, Concrete Contractor, Drywall Contractor, Electrical Contractor, Elevator Contractor, Landscaping Contractor, Warm-Air Heating, Ventilating and Air-Conditioning Contractor, and many others. For a complete list of contractor licenses, visit and tuned for more informative posts.