Allegations of Unethical Bidding Practices on Federal Construction Contracts

PLRD-81-64: Published: Sep 9, 1981. Publicly Released: Sep 9, 1981.

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GAO was asked to investigate a complaint concerning the alleged unethical bidding practices used by construction contractors when bidding on Federal projects.

The bidding practices referred to are commonly known as bid shopping and have been a longstanding, recurrent complaint by subcontractors. The practice entails the solicitation of proposals by the prime contractor from prospective subcontractors as a basis for its bid on a construction project; however, once the prime contractor has won the award, proposals are again solicited from subcontractors in an attempt to obtain lower prices than initially obtained. The difference in prices between the first subcontractor solicitation and the second is then retained by the prime contractor as profit. GAO stated that the difference between the subcontract prices obtained on the first subcontractor solicitation and the second could occur if a noncompetitive prime contract were being awarded. However, GAO could not determine what really happens when formally advertised prime contracts are involved, since it does not have access to the contractors' records that are awarded noncompetitively. Additionally, although the General Services Administration requires that a subcontractor listing be included in bids by prime contractors, the Government does not have a general policy against bid shopping, and other agencies generally do not prohibit the practice. GAO, however, would refer the matter to the attention of the Office of Federal Procurement Policy for its consideration in developing a Federal procurement system applicable to all Federal agencies.

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