Subcontractor buyout without bid shopping

Start from the bid-day leveling sheet

On bid day, the estimator compares each trade's quotes on one sheet. Each quote is adjusted for what it includes and excludes, so the comparison is like for like. A drywall quote that excludes metal studs is not cheaper than one that includes them; it is incomplete. The leveled number carried in the bid becomes that trade's buyout budget.

Step 1: confirm scope, line by line

Before signing, sit with the sub carried and walk its scope against the drawings, specs and addenda:

• what is included, and what is excluded
• who does the work at the edges, such as blocking, firestopping, cutting and patching, and cleanup
• schedule, crew size and lead times
• submittals, and who prepares shop drawings

Scope gaps found now are cheap. Found in the field, they are change orders you cannot pass to the owner.

Step 2: paper the deal

• A subcontract that flows down the prime contract's terms: schedule, changes, payment, retainage, warranty and insurance.
• Bonds, if the sub's size or the risk calls for them. Sub bonds count against the sub's own surety limits, not yours.
• Certificates of insurance with the endorsements the subcontract requires, checked before mobilization. A certificate is evidence, not coverage; see certificate of insurance and additional insured.

Step 3: keep a buyout log

The log compares each trade's buyout budget with the amount actually signed. A worked example with invented numbers:

Check: 2,500 - 3,200 + 0 = -700, and 625,700 - 625,000 = 700 over budget.

Where did the variances come from? The drywall sub found a duplicate line in its own takeoff during scope review and lowered its price. The roofing sub's bid excluded a required walkway pad that the leveling sheet missed, and adding it cost $3,200. Neither change involved showing one sub another's price. That is the difference between buyout and shopping.

The log feeds the job cost budget. A net $700 overrun comes straight out of the fee, so on a job with a $90,000 fee the expected profit drops to 90,000 - 700 = $89,300. See contractor job costing and overhead for how the budget is tracked from there.

Where buyout becomes shopping

Bid shopping is using one sub's price to push another sub lower for the same scope, usually after award. It is widely seen as unethical, and on some public work it is limited by subcontractor listing rules where a state or owner has them. The full picture, including bid peddling by subs, is in bid shopping and bid peddling.

Fair moves during buyout:

• correcting a real mistake in a sub's price, or letting the sub withdraw it
• negotiating a real change in scope, such as an alternate the owner accepted
• asking every bidder to price the same clarified scope, if the scope truly changed after bids
• choosing a different sub for a reason you can name: qualifications, bonding, safety record, a missing license

Moves that cross the line:

• telling a competitor the low number, or hinting at it
• holding the low sub to its price while inviting others to beat it
• awarding to the sub you did not carry for the same scope at a lower price that came only from shopping

Why it pays to stay clean

Subs talk. A general contractor known for shopping gets padded prices on bid day, fewer bidders and less help when the job needs it. The bid shopping guide works an example where a 3% cushion across $1,100,000 of sub pricing adds $33,000 to a bid, more than the shopping saved.

Where this sits for the exam

The bulletin lists subject areas only. Our reading puts bidding, subcontracting and ethics under Procurement and Contracting Requirements, 31 of 115 questions. Our pairing from the titles, not NASCLA's: Construction Project Management and the NASCLA Contractors Guide to Business, Law and Project Management.

Check your procurement knowledge

Take the free 10-question check. It needs no signup and explains every answer. For a full Procurement and Contracting lesson and practice questions with every answer worked, see the plans.

Sources

• PSI Candidate Information Bulletin 1458, content outline, updated 7 Jul 2026. Retrieved 5 Nov 2026.
• All examples use invented numbers. Listing rules are described in general; each state and owner sets its own.

FAQ

What is buyout in construction?

The process after award of signing subcontracts and purchase orders for every part of the work, confirming scope and price for each.

Is negotiating with a sub after award always bid shopping?

No. Fixing scope gaps or real mistakes and pricing real changes is buyout. Using one sub's price to push another lower is shopping.

What is a buyout log?

A list of each trade's budget from the bid against the amount actually signed, showing the gain or loss on each.