Are you guilty of bid rigging?

It may seem like an innocent enough technique: you coordinate with one or several other bidders for a government job to raise the price of the goods or services and/or to ensure that a chosen company or contractor wins the job. Though the collaboration between you and other bidders means that no one loses or gets hurt, your actions may constitute bid-rigging, which is a form of collusion.

According to Justice.gov, bid-rigging occurs when conspiring competitors work together to raise the prices at which purchasers — typically government entities — pay for goods or services. Bid rigging can take many forms, but conspiracies typically fall into one of four categories.

Complementary bidding

Complementary bidding occurs when one or more competitors submit bids that they know the purchaser will not accept. The bids often contain outrageous terms or estimated totals that far exceed the project’s true value. The purpose of complementary bidding is to give the appearance of competitive bidding while secretly inflating the prices.

Bid suppression

In a bid suppression scheme, a typical competitor may either refuse to submit a bid or withdraw a previously submitted proposal. The goal is to ensure that the designated three competitors win the bid.

Bid rotation

In bid rotation schemes, all competitors submit bids. However, each takes a turn being the lowest bidder so that every competitor has the opportunity to win contracts.

Subcontracting

Finally, though subcontracting is perfectly legal, it can become fraudulent if a subcontracting arrangement arises out of a bid-rigging scheme. For instance, a competitor may agree to withdraw its bid in exchange for lucrative subcontract work through you. In other subcontracting schemes, a contract may agree to continually submit losing bids in exchange for ongoing subcontracting work through the winner.

Regardless of what a bidding scheme looks like, each has one thing in common: an agreement between competitors that limits the competition and predetermines the winning bidder. Bid rigging of any form is illegal. If the government suspects you of engaging in it, you could face fraud charges, in which case it may be in your best interests to hire a lawyer.