Bid rigging

Bid rigging, also referred to as collusive tendering, occurs when two or more competitors agree they will not compete genuinely with each other for tenders, allowing one of the cartel members to ‘win’ the tender.

Participants in a bid rigging cartel may take turns to be the ‘winner’ by agreeing about the way they submit tenders, including some competitors agreeing not to tender.

Types of bid rigging

Cover bidding

Competing businesses choose a winner while the others deliberately bid above an agreed amount. This ensures the selected bidder has the lowest tender and also helps to establish the illusion that the lowest bid is indeed competitive.

Bid suppression

A business agrees not to tender, thus ensuring that the pre-agreed participant will win the contract.

Bid withdrawal

A business withdraws its winning bid so that a competitor will be successful instead.

Bid rotation

Competitors agree to take turns at winning business, while monitoring their market shares to ensure they all have a predetermined slice of the pie.

Non-conforming bids

Businesses deliberately include terms and conditions that they know will not be acceptable to the client.

Signs of possible bid rigging in tenders to government agencies

• Suppliers appear to be taking turns at winning tenders or sharing the contracts by value.
• Regular suppliers decline to tender for no obvious reason.
• Bidders appear to deliberately include unacceptable terms in their tenders.
• Bidders sometimes bid low and sometimes high on what appears to be the same type of supply.
• You become aware that bidders meet before the close of tender, without you being present.
• The winning firm regularly subcontracts to competitors that submitted higher tenders.
• One firm of professional advisers represents several tenderers.

Impacts

If government agencies and businesses aren’t able to hold a competitive tender process, this can result in the organisation paying higher prices or receiving lower quality goods or services. If a government agency, for example, pays an inflated price for services provided by tender, these additional costs are eventually passed on to taxpayers.