In construction, a contractor walks a fine line in the bidding and billing process in attempting to increase profits. Whether the work is competitively bid or cost-reimbursement, some contractors view this practice as a matter of economic survival.

Contractors often rely on the fact that they know a lot more about what a proposed project will cost than the owner (which they often do). And since “everybody does it,” contractors assume that it must be okay to take risks on bidding actual quantities or try to recoup costs as quickly as possible. But, where public money is involved, there are always rules that restrict a contractor’s right to do what it might otherwise want to do.

The purpose of this article is to provide helpful guidance to contractors regarding two risky bidding and billing techniques, commonly referred to as “unbalanced bidding” and “front-end loading.” While common in the field, such tactics may result in real harm to a contractor’s bottom line.

Unbalanced Bidding
When an owner intends to award one contract with multiple unit prices, it can be hard to determine the low bidder. To arrive at a means of evaluating bids, most owners tell the bidders to assume that there will be certain quantities of each item – one cubic yard of X, 100 lineal feet of Y, and a lump sum of Z. The calculations are made by multiplying the number of units by unit prices, and then all of the extended numbers are added to get a total bid. While these hypothetical bid units are used to determine the low bidder, the eventual contractor is paid based on the actual quantities installed or furnished – which are frequently different that the bid quantities.

Unbalanced bidding refers to the practice of pricing individual line items on a bid sheet at more (or less) than what the bidder would normally offer. The bidder believes that the owner will actually use more or less of the item than is provided in the bidding documents. In doing so, the bidder attempts to take advantage of an owner’s over or under-estimation.