Sharing bid amounts, is it bad business?

Question

Just need to know if it’s bad business when getting multiple quotes? Example of my situation. Second HVAC guy came back with bid amount which was higher. He’s knows the first contractor that bid the property. How he knew I don’t know. He asked me what the first guy bid (which was lower by 1,500) and I told him without thinking if it was bad business to share this information. I may just be over thinking it.

Cassi Justiz · Answer

I wouldn't make it a habit of telling contractors the other quotes while they are bidding the job. If you want to use it to negotiate, I would wait until after the bids come in. If some desperate contractor without enough work comes in they may undercut everyone just to get the job. Once the job is secured, then those kinds of contractor may end up cutting corners or taking on multiple jobs at the same time to make it work. If possible, I would act like everyone is the first contractor to bid the job and then follow up with the ones you like.

But remember that price isn't everything. Sometimes it's worth paying a little more to get the job done quickly and correctly.

But remember that price isn't everything. Sometimes it's worth paying a little more to get the job done quickly and correctly.

Jack Shepherd · Answer

When I don't know how much a job is worth and I can find 3 otherwise equivalent subs to give me call backs, I always like the notion of getting 3 bids and picking the middle.  It usually helps me understand the market rather than guessing if one of two amounts is way off base due to one guy being pricier generally, or one guy missing something in his estimation, or different levels of quality, or sometimes what seems like random chance.  Of course, there are often other factors about a company's reputation or how their estimator bid the job that causes me to break that guideline.

I know with a lot of my subs, after I've given them the job, are often quite curious as to how the other bids came in.  It's a delicate conversation sometimes, but my subs are always appreciative when I can tell them, "all my bids were within 5%" versus "One bid was twice and much, and one was half as much."  An electrician rarely hires another electrician for example. With houses being different, even if all the supplies are the same, a larger bid can be a bit of guess work on everyone's part sometimes leading to vastly different amounts that place Contractor A much higher than Contractor B where the next job may have them flipping the other way.

Lynsey Dreis · Answer

Account Closed I agree with everyone's points on this thread.  I would also mention that it is always good to have the rule of "2 is 1 & 1 is none" If you plan to keep repeating the process of flipping/rehabbing, it is always nice to have at least 2 contractors for each field of work that you are on good terms with.  If one guy drops off the face of the earth you want to be able to have a good rep with another sub in the industry.

David Robertson · Answer

The process of sharing other contractor's bids in order to negotiate a lower number is called 'bid shopping', which is generally frowned upon and considered unethical in the Construction industry.

I understand you want to get the best deal and make the most money on your projects, but Contractors are the lifeblood of a rehabbing business and your Contractors need to make money too!

Contractors spend hours putting together Bid Proposals and it's not fair to them if you waste their time by 'shopping' and price matching with other Contractors.

If you 'bid shop' Contractor's numbers you are going to get a bad reputation, and you will have a hard time finding Contractors to bid your projects.

Sure, you may save a few dollars upfront, but ultimately you are going to p*ss off a lot of contractors and potentially hurt your business long-term.

Mike Reynolds · Answer

Believe it or not there are a lot that do this. Some keep doing it for decades. I got asked to bid a job for a guy and someone came in and half the price. They called me and asked if I could match it. I just laughed and said no ma'am. Two weeks later they asked me to come fix it. I said no ma'am. It is so common for (dare I say) slum lords it gets old. The kind that when HUD wants some siding replaced they want you to putty the siding to make it "look like" it was replaced.

What I like about you is that at least you realize there may be something wrong this scenario and you ask about it here. Many people think this is standard practice and just go on ahead. You are headed in the right direction.

Eric M. · Answer

The problem with this "rule of thumb" is that it implies more expensive is better. That can be true but just as easily, it isn't true, and you don't always know in advance which it will be.

I am sure we have all come across those contractors who bid crazy high for their shoddy work, just hoping the homeowner is dumb and doesn't pay attention. And it works. I myself have at times fallen into this trap and realized after the fact that I overpaid when there was no need to and I didn't get better (or even good) work.

So I don't think the adage that you get what you pay for is necessarily true at all.

Michael Noto · Answer

Account Closed It makes complete sense that the guy with less overhead and presumably less employees would be able to charge less for a similar job as compared to the 2nd guy who has a big company, more employees, more overhead.

If their quality of work is similar go with the 1st bid bid and don't look back, $1500 is a big difference.

Account Closed · Answer

@David Robertson

I didn’t mean to do it intentionally, thanks for the advice I won’t make a habit of it!

Derek Guivehchi · Answer

@Jared Mann Don’t share bids with competing contractors.  You don’t want to be “that guy” you’ll get the reputation of pitting one against another even if that’s not your intent.  If you keep doing that contractors will get to where they don’t want to bid your jobs.

Mike Reynolds · Answer

I don't think you are over thinking anything. I have had customers come to me and say

"Hey, ole so and so says he can do it for this much."  And I say

"That's great. Let me know if you need me to look at something else in the future."

In reality my mind is saying

RUN, RUN RUN.........

Its true that you can get the same quality job from a low bidder that has less overhead. But you cant get consistent quality from low bidders because somewhere down the road he is going to realize he isn't really making money. It's like when you plug in a property on BP calc and you forget the lawn care. Yes you can still make money but it wasn't what you thought. Then the next one you add it in and it takes a different property to break even.

Problem is you have those guys that go buy a hammer and go into the business.  It's hard to find these guys before it's too late.

Sharing bid amounts, is it bad business?

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