Here’s why it’s problematic:
1. It Undermines the Integrity of Sealed Competitive Bidding
In a true competitive bid process (especially HOAs), bids are supposed to be:
Submitted independently
Final at the time of opening
Based on the bidder’s best price
If a company says after the fact that it will “be 20% lower than the lowest bid,” that suggests:
They did not submit their true best price initially, or
They are attempting to undercut competitors after seeing their pricing.
That defeats the purpose of sealed bidding.
Here's an example of an unethical company
2. It Suggests Price Shopping or Bid Manipulation
If a bidder can revise downward after seeing competitors’ numbers, that creates:
An uneven playing field,
Incentive to intentionally submit a safe/high bid first
Post-opening negotiations disguised as competition,
This can amount to:
Bid shopping
Bid peddling
Or even collusive practices
On HOA projects, that can violate not only procurement rules but potentially antitrust principles enforced by state authorities.
3. It Violates the “Lowest Responsible Bidder” Principle
HOAs typically award contracts to the lowest responsible bidder — not to whoever negotiates lowest after bids are opened.
Allowing a bidder to say “we’ll be 20% lower than whoever wins”:
Turns a sealed bid into a negotiation
Potentially invalidates the entire bidding process
Opens the HOA to protest or legal challenge
Courts have repeatedly held that material post-bid modifications are improper in public procurement law, HOAs may be similar.
4. It Suggests the Initial Bid from the Company Was Not Genuine
If a company can instantly drop 20%, that raises questions:
Was the first number inflated?
Are they desperate for backlog?
Are they planning change orders later to recover margin or overcharge for engineering work?
This damages trust.
5. It Encourages a Race to the Bottom
Ethically, competitive markets are supposed to reward:
Efficient operations
Accurate cost estimating
Honest pricing
Not:
Tactical undercutting after seeing competitors’ numbers
A bidder who holds back their real price until they know the benchmark is gaming the system — not competing fairly.
6. It Can Harm the Owner
If a contractor drops 20% after bids open, the owner should ask:
Where is that 20% coming from?
Quality cuts?
Scope reductions?
Future change orders?
A dramatically lowered price can signal:
Underbidding to win
Intent to recover profit later
That creates project risk.
In HOA/condominium settings, boards typically operate under fiduciary duties imposed by state nonprofit and common interest development laws (for example, in California under the Davis‑Stirling Common Interest Development Act).
Here’s why a “we’ll beat the lowest bid by 20%” statement is ethically problematic in that context:
1. It Undermines Fair Competition
If proposals were requested as competitive submissions, each vendor is expected to submit:
Their best pricing
Their honest scope
Their real cost structure
If a company later says, “We’ll be 20% below whoever is lowest,” it suggests:
Their initial proposal was not their true market price
They were waiting to see competitors’ pricing
They are now negotiating based on inside knowledge
That distorts the competitive process.
2. It Puts the Board at Risk of Breaching Its Fiduciary Duty
HOA boards have fiduciary duties of:
Good faith
Fair dealing
Acting in the association’s best interest
If a board allows post-proposal price manipulation after reviewing other bids, it may expose itself to claims that it:
Did not run a fair process
Favored a bidder
Allowed improper negotiation
Owners could argue the board failed to exercise business judgment properly.
3. It Suggests Strategic Underbidding
A sudden 20% reduction raises serious questions:
Was the first price inflated?
Is the vendor desperate for backlog?
Will they attempt to recover margin via change orders?
Will service quality suffer?
In professional services (roof inspections, engineering, reserve studies, etc.), quality degradation is a real risk when pricing drops sharply.
4. It Creates Appearance of Impropriety
Even if technically allowed in a private setting, it creates:
Appearance of back-channel communication
Perception that one bidder had access to competitor pricing
Distrust among owners
Perception matters in HOA governance.
5. It Encourages a “Race to the Bottom” Culture
Professional services rely on:
Competence
Insurance coverage
Licensing
Time allocation
If firms compete by slashing margins after bids are opened, the market shifts toward:
Underpricing
Corner-cutting
Higher long-term risk
That ultimately harms associations.
6. It Signals That the Initial Proposal Was Not Submitted in Good Faith
Ethically, competitive proposals are supposed to represent:
“This is our best offer under the stated scope.”
If a company can instantly go 20% lower, that suggests:
The first proposal was strategic padding
Or they never intended it to be final
That weakens trust.
Important Distinction
Because this is not a public entity, it may not violate procurement law unless:
The RFP prohibited post-submission negotiation
The governing documents require sealed bidding
Or there was misrepresentation
But ethically, it still undermines transparency.
A Smarter Ethical Approach (If Negotiation Is Allowed)
If the association wants to negotiate, the ethical way is:
Notify all bidders that negotiation is occurring
Allow all bidders equal opportunity to submit revised proposals
Avoid disclosing competitor pricing
That preserves fairness.
