A bid is an offer to perform a contract for work, labor, or supplying materials at a specified price. A bid does not create rights in either the offeror or the offeree until the offeree voluntarily accepts the bid.
Some common uses of the term “bid” regarding contracts include:
- “Bid peddling” happens when subcontractor A purposely chooses not to enter a bid, wait for subcontractor B to pay for the estimate and make an offer, and then offer to perform the work at a lower price. This also allows the subcontractor A to avoid the estimating costs already paid by subcontractor B.
- “Bid shopping” happens when the general contractor, after receiving a bid from a subcontractor, pressures other subcontractors to submit lower bids
- “Bid rigging” happens when competitors conspire to raise prices of their goods or services to gain more profit. Bid rigging is a violation of the Sherman Antitrust Act.
[Last updated in June of 2021 by the Wex Definitions Team]