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PLRD-81-64 1 (1981-09-09)

handle is hein.gao/gaobabcju0001 and id is 1 raw text is: UNIrED STATES GENERAL ACCOUNTING OFFICE \. k. - WASHINGTON, D.C. 20548 PROCUPEMENT, LOGISTICS, AND PEADINESS DIVISION B-204451 SEPTEMBER 9,1981 The Honorable Leon E. Panetta House of Representatives 1I16339 116339 Dear Mr. Panetta: Subject: Allegations of Unethical Bidding Practices on Federal Construction Contracts (PLRD-81-64) In your May 21, 1981, letter, you asked us to investigate a constituent's complaint concerning unethical bidding practices by construction contractors bidding on Federal projects. This report provides some background on the bidding controversy and our views on the solutions proposed by your constituent. The unethical bidding practices referred to are commonly known as bid shopping and have been a longstanding, recurrent complaint by subcontractors. As described by your constituent, the potential prime contractor solicits proposals from prospec- tive subcontractors as a basis for its bid on a construction project. Once the prime contractor has won the award, it again solicits subcontractors seeking lower prices than initially obtained. Your constituent's assumption that the prime contractor retains, as profit, the difference between the subcontract prices obtained on the first subcontractor solicitation and the second would likely be correct if a noncompetitive prime contract were being awarded. However, the situation described by the constit- uent appears to be competitive. Opponents of a ban on bid shop- ping state that the prime contractor applies a reduction factor to its first round subcontractor offers and this reduction is reflected in the price to the Government, thereby allowing the prime contractor to offer a lower price and win an award. We cannot determine what really happens when formally advertised prime contracts are involved, since we do not have access to contractor's records for contracts awarded in this manner. (942073)

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