Bid-rigging is a form of Government Contract Fraud when a contract is promised to someone even though other vendors presented different bids. This is illegal in most countries since it is a form of price fixing. This harms the Government agency seeking the bids, and normal citizens who end up paying more in taxes.
Bribery and bid-rigging by government contractors are illegal. Whistleblowers can use these claims for lawsuits under the False Claims Act (FCA). Contractors commonly use both of these fraudulent practices to obtain government contracts. This harms the government since they are denied receiving the best products or services for the fairest prices.
Vendors could use gifts or money to entice government officials to gain a contract, or they could collude with others to sway who will get a contract. Vendors may intentionally bid too high, or to not bid at all, so that the government contract will be awarded at an inflated price.
Common Bid-rigging Practices
- Bid suppression is when a bid is not submitted so another vendor can win the contract.
- Complementary bidding (e.g. cover bidding, courtesy bidding) occurs when vendors agree to submit purposely unsuccessful bids, so another will win the contract. A complementary bid may have intentionally high numbers to make the competitor bid more attractive.
- Bid rotation is when a group of vendors take turns presenting the more attractive contract. They do this to corner the market, so only their group will be able to have the business revenue.
- Phantom Bids occur to purposely make legitimate businesses place a higher big than usual. It is highly manipulative and is just to drive a real vendor away.
- Buy-Back is the strategy where a bid is only presented with the purpose of it being bought back.
All these forms of bid-rigging can be occurring simultaneously. When multiple forms occur at once, this makes it harder for the government to catch the fraud.
Previous Cases of Bid-Rigging
In 2012, to settle a False Claims Act violation, Harbert Corporation paid $47 million. Harbet engaged in bid-rigging to win a USAID-funded contract in Egypt in the 1980s and 1990s by paying potential bidders not to bid at all or bid too high.
Plus, in 2011, Accenture LLP paid $63.675 million their own whistleblower. Accenture rigged bids for federal information technology contracts, received kickbacks, and inflated prices. The whistleblower received an award of $14 million from the settlement.
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