By TIFFANY COUCH
BridgeTower Media Newswires
PORTLAND, OR — Bid rigging is a fraudulent scheme in which competing parties collude to corrupt procurement procedures.
The practice perverts a system designed to award contracts to the best and most qualified subcontractors, and disrupts free-market competition because rigged prices are often higher than what they would have been had bidding been done in a transparent and fair way. Plus, the resulting product is often substandard.
The construction industry is especially susceptible to bid-rigging scams. Why? For the simple reason that it’s common practice for public and even some private owners of construction project to issue open bids to solicit qualified proposals. Bid rigging is a form of collusion, and it’s illegal. Vendors who corrupt the bidding process can be criminally prosecuted and receive fines and jail time.
Bid rigging can take many forms, but one of the most common is known as bid rotation. In this scheme, competitors conspire to take turns submitting low bids, allowing a predetermined bidder to win the contract while the “losers” serve as subcontractors.
Another common bid-rigging scheme is bid suppression. In this, a group of subcontractors will agree that one or more companies should “sit out” the bid process, thereby narrowing the pool of proposals and forcing a general contractor or procurement team to award a project to a bidder with prices that are usually higher than they would have been had competition been given free rein.
There are several tell-tale signs of bid rigging. They include:
Subcontractor collusion is not only illegal, but also harmful to the economy and the industry. Bid rigging and other forms of corruption, such as bribery, kickbacks and payoffs, typically lead to higher prices, inferior construction, poor job performance and a setting in which “playing by the rules” equates to losing money and jobs.
The only way to deter bid rigging and other forms of antitrust violations is to establish strict procurement procedures that establish less-than-favorable conditions for anticompetitive behavior. Consider the following 10 preventative steps:
It’s also important to note that noncompetitive forms of cooperation necessarily constitute bid rigging. It’s perfectly legal, for instance, for two or more bidders to pool their resources to submit a joint proposal.
By knowing how to recognize the tell-tale of subcontractor collusion and establishing strict safegards, procurement officials can help detect and deter bid-rigging schemes.
Tiffany Couch is chief executive and founder of Acuity Forensics – a forensic accounting firm in Vancouver, Washington. She is also the author of “The Thief in Your Company” – a book that explores how fraud harms organizations. Call her at 360-573-5158 or write to her at [email protected].