I hired a firm to to work with me on a startup idea. I have wireframes and their proposal to build. Is it ethical to bid out the work they produced?


Do you have a contract with them that expressly states 1) who the ideas belong to, 2) establish the timeline or expectations of the project, 3) when the working relationship is concluded?

It is not unethical to work with one firm to produce one part of a project, and another to implement or take action on the plan.

It *is* unethical to go behind the back of the first firm if the intention or contract states that you will continue working with them.

Consider their position. If you were them, how would you interpret the actions you're proposing?

Happy to help more if I know more details.

Answered 9 years ago

It all depends on the scope of service that both parties agreed to.

For example, when we are hired to produce an IT evaluation or process improvement, etc... we will get the report done in an unbiased way.

At the end of the engagement, if there is a second phase or implementation, we will automatically produce a proposal. The assumption is the client will likely ask for other proposals and we can be in the mix.

So depending on the scope of the work, I would assume that the contracted firm expects they would need to earn future work.

But you want to be open and fair with them. If they have not done it, you may want to suggest they provide a proposal as well.

Answered 9 years ago

Well, it may not be the nicest thing but I believe it's far from unethical. I own an application development agency,, and I understand it's the nature of the business. If we one day decided we didn't want to do 'free' work anymore we could charge for the type of service. In short, we agree to do free work so we as the agency have to understand this could happen.

Answered 9 years ago

All depends on the understanding with which they provided their proposal and what level of 'work' they delivered to you.

If the work is just what they would consider to be part of their sales process then you should be okay but if they went above and beyond with the expectation of winning the final project then there are ethical questions for you to consider.

Having said that, this is how many larger firms operate. They send out RFIs and then based on the information they get back they refine and re-issue a more detailed specification in their RFP.

If you know what you're doing and are clear at the start then there shouldn't be a problem

Answered 9 years ago

“Bid shopping” occurs when a general contractor discloses the bid price of one subcontractor to its competitors in an attempt to obtain a lower bid than the one on which the general contractor based its bid to the owner. Put another way, bid shopping occurs when a “general contractor uses the lowest bid received to pressure other subcontractors to submit even lower bids.” A close relative of bid shopping is “bid peddling.” Bid peddling occurs «when a subcontractor, whose sub-bid was not selected for the contractor's bid, offers to reduce its price to induce the contractor to substitute it after award of the contract. The only real difference between bid shopping and bid peddling is the party that initiates the disclosure of the original low bid price. A general contractor will “shop” a low bid whereas a subcontractor will “peddle” its bid.
That law is premised on principles of “promissory estoppel” and “detrimental reliance.” Promissory estoppel allows a party to legally enforce another is promise if the promisee reasonably relied on the promise to the promissee's detriment. In construction bidding, with some narrow exceptions, a subcontractor or supplier must honour its bid price offer once the general contractor has “reasonably relied” on that sub-bid to develop and submit its own winning bid.
In practice, the construction bid process generally works as follows. Owners publish construction plans and solicit bids from general contractors. General contractors, in turn, solicit or receive bids from subcontractors for subcontract work. The general contractor then reviews the subcontract bids and may use those bids to compute its total bid to the owner. Owners typically receive and review bids from competing general contractors and award the contract to the general contractor with the lowest responsive bid from a qualified bidder., the “lowest” bid. Because the general contractor submits a prime bid to the owner for all the project construction work, it necessarily must subcontract for work that it does not self-perform. As a result, when preparing and submitting a project bid, a general contractor may typically solicit, from several different subcontractors, sub-bids for such work.
Thus, the general contractor relies on the subcontractor's bid when preparing its own bid by relying on the lowest responsive sub-bid it receives. Indeed, many contractors perform extraordinarily little of the actual construction work themselves, and their bids are predominantly based on bids from subcontractors. If the owner awards the project to the general contractor, and a subcontractor on whom the general contractor relied backs out of its bid, the general contractor is forced to retain a replacement subcontractor, that likely is more expensive than the original subcontractor. Hence, if the general contractor's reliance on the subcontractor's original bid was reasonable , and the general is compelled to obtain a more expensive replacement subcontractor, the general contractor has suffered a «detriment» sufficient to invoke promissory estoppel and can enforce the subcontractor's bid. The rationale for applying promissory estoppel or detrimental reliance in such bidding situations is that it would be unjust for a party that reasonably relies on another to be financially damaged if it could not then «hold» the bidding party 's bid after the general contract has been awarded to him. But the principles of promissory estoppel do not generally run “upstream.” In other words, under promissory estoppel, although a general contractor may compel a subcontractor to honour its sub-bid, a subcontractor that promises the lowest bid may not typically compel the general contractor to accept it.
The incentive exists because the owner has accepted the general contractor's price, which was based on a series of prices, including those provided to the general contractor by the low-bid subcontractors. After award, if a general contractor can obtain a lower bid for such subcontract work, the difference in the cost is pure profit that need not be shared with the owner. The time to shop for or peddle lower bids is the reasonable time after the award from the owner that the law grants the general contractor to accept subcontractor bids. As a result, less than honourable general contractors and subcontractors have a “reasonable” amount of time after the award of the general contract to shop or peddle a bid before the original low sub-bid can be said to expire. Second, the winning general contractor has no corresponding legal obligation to “accept” that offer and retain the original low bidder. And third, now that the general contractor has the award, it can pressure subcontractors to trim their bids, so the general contractor can pocket the discount as a windfall.
Philadelphia provides a good judicial analysis of why the integrity of the bid process is undermined by bid shopping. Except for one bidder, all the bidders for the work listed only one supplier. One bidder, however, listed two alternative suppliers for required pumps and motors. That bidder was the low bidder.
When bids were opened, the city requested the low bidder to designate the supplier that it intended to use. Though the low bidder complied relatively quickly, the second low bidder sought to enjoin the city from awarding the contract to the low bidder. The city and the low bidder objected, arguing that the multiple listings did not violate applicable bidding requirements or, if they did, that they were a «mere informality» that the city could waive. In response, the second low bidder argued that the multiple listing violated the integrity and competitiveness of the bid process.

The second low bidder further urged the court to prohibit the city from awarding the contract to the low bidder because it unfairly allowed it to pit its two listed suppliers against each other and thus bid shop after award. The trial court agreed, and permanently enjoined the city from awarding to anyone except the second low bidder. The city and the low bidder appealed to the Commonwealth Court of Pennsylvania. Though that court stated that there was «no evidence» that the low bidder had engaged in bid shopping, it upheld the injunction, explaining that allowing a bidder to list multiple suppliers would create a lasting problem contrary to the intent and purpose of the applicable procurement regulations .

These observations of the Commonwealth Court of Pennsylvania on the evils of bid shopping and peddling are shared by other courts. Only the successful low bidder will recover these costs, and even then, under most contracts, it is only once the visible on-site work commences that any of these up-front costs will finally be recovered through the first pay application. “Bid shopping almost necessarily forces subcontractors into post award negotiations.” A subcontractor that is approached by a general contractor with a competitor's lower bid naturally assumes that it will not get the job unless it reduces its price.
Particularly in times when business is slow, many subcontractors are willing to do work for less or even no profit, if it means they can keep crews busy and cover their overhead costs. Subcontractors that initially “sharpened the pencil” on their original bid, and are asked to trim even more, are thus forced to look for other ways to reduce their costs. The net result is that a subcontractor may rely on poor-quality methods and materials, or less skilled labour, to save money. Kept in the dark, the unwitting owner may end up paying for poor- or lower-quality workmanship without any corresponding cost savings.
Few persons are likely to go on record openly supporting bid shopping. Offsetting that benefit to the general contractor alone are all of widely recognized detriments of bid shopping and peddling, including distortions of the open market, reductions in construction quality, and harmful effects on subcontractors that lose work or are put on a path to financial distress, even bankruptcy. Some owners have turned to “reverse-auctions” so that they, too, stand to benefit from lower prices that general contractors may obtain when they bid shop. In a reverse auction the owner invites multiple contractors or vendors to bid on work.
Even trade groups that traditionally align with owner's interests, like the Construction Management Association of America, have issued statements opposing reverse auctions for the procurement of construction services.
Besides if you do have any questions give me a call:

Answered 4 years ago

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