Alabama Contractors License Practice Exam

What is the consequence of bid shopping?

1. Increased competition

2. Simplified bid process

3. Reduced project costs

4. Unfair bidding practices

The correct answer is: Unfair bidding practices

Bid shopping refers to the practice where a contractor, after receiving bids from subcontractors, discloses the specific bid amounts to other subcontractors to solicit lower prices. This practice can create an environment of distrust and can undermine the integrity of the competitive bidding process. As a result, it is considered an unfair bidding practice because it may pressure subcontractors into lowering their prices unreasonably, often to the detriment of the quality of work or fairness in compensation. Moreover, bid shopping can lead to a cycle of retaliation among subcontractors, which may discourage them from participating in future bids, ultimately affecting both the contractor's reputation and the overall market conditions. It disrupts the essential fairness that competitive bidding is intended to encourage, where all bidders operate on equal footing without undue influence from other competitors’ prices. Thus, the consequence of bid shopping is primarily recognized as fostering unfair bidding practices.