Customer shares contract with competing firms 1

[Electic]

I am the proprietor of a small engineering company doing specialty work for a large corporation. My work dovetails into projects completed by larger engineering firms, that at one level also are competitors. Due to the project nesting, the customer sent our project proposal, including terms and conditions, competitive rates etc, through two other firms that would like to have this work, to get back to myself.

This information would seem to make an easy target for anyone and everyone that would pretend to have a competitive advantage: slightly lower rate (and absorb more hours), slightly different work scope wording, etc.

Is this ethical? Both the other firms are pretty secretive about their rates, to the point that employees working there have no idea what they are billed out as (I worked for 18 months at one of the firms, we were aware only of 'billable hours' with no sense of the dollar associated). Any suggestions on a polite way to state this should not have been done and should not happen again in the future?

 

[msquared48]

The only reason for your client to do this would be to get a lower price from the other firms, solely for his benefit.

I would tell the "client" that this is very disrespectful to you as a consultant, recant your proposal/contract, and do not deal with him again.

Mike McCann, PE, SE (WA)

 

[KENAT]

Do you have terms in your quote about it being confidential etc?

Posting guidelines faq731-376

http://eng-tips.com/market.cfm?

(probably not aimed specifically at you)
What is Engineering anyway: faq1088-1484​

 

[Electic]

I will add another paragraph now. Thank you.

 

[IRstuff]

At the very minimum, you should have had a non-disclosure agreement with ANY client, potential or otherwise.

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert!

https://www.youtube.com/watch?v=BKorP55Aqvg

faq731-376 forum1529

 

[Electic]

thanks for the suggestions fellows.

a few more observations:

This is a good customer that has been pretty consistent in using us for the past 10 years. Good work and fair pay. I won't be firing this customer. Nor will our work at this customer be jeopardized by this slip.

I suspect the "guilty parties" were not aware of what they were exposing of mine. They are employees in staff positions and not feeling the burn of self employment. But they also are aware of the ethics violation in sharing material and construction quotes among bidders, for those services.

We have massive Non Disclosure Agreement that unfortunately does not extend to contract content. That might not be enforceable for contract content, because of the way this is structured. But I would like to make a statement on the next proposal that this information is for them only.

As stated, there will not be a problem with competitive bidding at this customer; however, there will be an unfair advantage now at other locations where the same companies compete for work.

 

[JedClampett]

Not to be trite, but clients who negotiate just to get the lowest price, just get the lowest price.

 

[IRstuff]

The fact that your NDA does not cover the contract specifically is a mere detail. The fact that you have an NDA means that you and the client both understand that there are competitive and proprietary information to be protected. Given that the client understands that they've committed a serious ethical breach, you ought to negotiate a contract value credit to be agreed upon by you and your client, i.e., treat the bids of those that got the information as if they were, say, 5% higher, and use that as the selection criteria. I think that you can come to some value above which it's unlikely to be due solely to trying to undercut your known bid, i.e., if their bids are, say, 7.5% lower, then we assume that their bid rate was lower to begin with and was not necessarily trying to solely undercut your bid

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert!

https://www.youtube.com/watch?v=BKorP55Aqvg

faq731-376 forum1529

 

[GregLocock]

Firstly, if you want me to sign an NDA that means that I cannot sign it without going to ask the big boys with shiny trousers. In practice that means if you ask me to sign an NDA for a normal commercial transaction, I won't bother.

Secondly "Not to be trite, but clients who negotiate just to get the lowest price, just get the lowest price.". Oddly enough that is exactly how many bids work in the real world. If I write a spec and a contract, then if I don't take the lowest price then either the spec or the contract was wrong.





Cheers

Greg Locock


New here? Try reading these, they might help FAQ731-376

http://eng-tips.com/market.cfm?

 

[JedClampett]

Greg, most states forbid price shopping for engineering services, at least for government work. You pick the provider based on qualifications, then negotiate a price. It's not a bid situation.
I'm not saying price never enters into it, but it is not intended to be the primary input.

 

[Electic]

Thank you for the replies. This discussion is certainly circling the issues if not solving them.

A few more observations:

I do not feel the customer was price shopping in this case. It was simply careless communication and the price effect will be more acute at other sites where we meet the same competitors.

I have over 30 years operations and maintenance experience in this work and when employed for one aspect, the customer will often benefit from some unspoken previous experience. That has been very valuable for operations when we can diagnose what caused a problem, that may not be apparent to the novice. But now the fellows we are working for tend to be novices themselves and to write this into an engineering specification is almost impossible. So when they compare services they are overlooking the system of organization that our firm provides, and the consistency given by a proprietor compared to rotating staff.

I may be that no clear cut solution exists. I could perhaps seek opportunity to sit down and chat with higher level managers that would appreciate the large cost savings of avoiding shutdowns, but of course they hear that from everyone; and the technical folks this is delegated to are not paying attention.

 

[SandCounter]

I suggest contacting the staff individuals' personally and telling them that you do not normally share proprietary economic data with your competitors and would appreciate their help in keeping it confidential. It sounds like an honest mistake, as harmful as it is.

The quality of your response will reflect some of the intangible benefits of selecting your firm beyond mere cost.

I used to count sand. Now I don't count at all.

 

[IRstuff]

Two things that defense contracting has grappled with are cost realism and life-cycle cost. These are both what experienced and established companies ostensibly bring to the table.

TTFN (ta ta for now)
I can do absolutely anything. I'm an expert!

https://www.youtube.com/watch?v=BKorP55Aqvg

faq731-376 forum1529

 

[BUGGAR]

"I could perhaps seek opportunity to sit down and chat with higher level managers that would appreciate the large cost savings of avoiding shutdowns, but of course they hear that from everyone; and the technical folks this is delegated to are not paying attention."

I think that is your answer also. And also the problem if they are not paying attention.
Why do people pay attention to their doctor but not their engineer?