Subcontractors’ perceptions regarding bid shopping in Auckland, New Zealand

Abstract

Main contractors use bid shopping to reduce a subcontractor's quoted price. The literature suggests that this is a practice disliked by many subcontractors and that the subcontractor's loss of revenue and margin is an important consequence. The vast majority of subcontractors in New Zealand are small in size, thus bid shopping can lead to subcontractors having greater exposure to additional financial risk, arising from the reduced margins they must accept. Whilst bid shopping has been mentioned as part of research on issues such as ethics and tendering practice, few empirical studies have directly focussed on bid shopping, and specifically, sought the perceptions of subcontractors themselves on the effects of bid shopping on their business. A questionnaire-based semi-structured interview survey of subcontractors was conducted, seeking their opinions on the prevalence, and seriousness of, bid shopping, what the effects of it are, and what measures they took to prevent their quotes from being bid shopped. The results established that bid shopping takes place regularly and is a matter of much concern to subcontractors, having a negative influence on their pricing decisions and the quality of the work they do. It also places more stress on the subcontractor‟s staff and limits the growth of their business. Significant implications for the construction industry are associated with safety on site, the quality of the subcontracted work, and the image of the main contractor in the market place. A link was suggested between the incidence of bid shopping and the state of the construction market.