Bid Rigging

Topics: Sherman Antitrust Act, Price fixing, Procurement Pages: 4 (1420 words) Published: April 14, 2013
Bid Rigging
Bid rigging is a major source of corruption in procurement organizations today. According to the Organization for Economic Co-operation and Development (OECD), “bid rigging (pr collusive tendering) occurs when businesses, that would otherwise be expected to compete, secretly conspire to raise prices or lower the quality of the goods or services for purchasers who wish to acquire products or services through a bidding process” (Danger, 2009). Bid rigging can occur is both public and private companies. There are five standard types of bid rigging schemes: bid suppression, complementary bidding, bid rotation, subcontracting, and market allocation. Bid suppression schemes occurs when one or more bidders refrain from bidding so that the agreed upon bidder will be selected. Complementary bidding schemes occur when selected bidders will purposely bid too high, too low, or will require special terms they know will be rejected. These are the most common and are “designed to give the appearance of genuine competition” (Danger, 2009). Bid rotation schemes are comprised of a group of bidders who take turns on who will get the bid. Subcontracting schemes are a group of bidders deciding who will put out the winning bid and then the work will get subcontracted out to the other suppliers. The final type of scheme is market allocation. In this scheme, suppliers make agreements on which suppliers, markets, and regions each supplier is able to bid. This will ensure each supplier is awarded certain types of work. Bid rigging is considered corruption and is illegal in procurement. In 1890, the Sherman Act was put in place to prohibit price fixing, bid rigging and other anticompetitive activity. The Department of Justice states, “Violation of the Sherman Act is a felony punishable by a fine of up to $10 million for corporations, and a fine of up to $350,000 or 3 years imprisonment(or both) for individuals, if the offence was committed before June 22, 2004....
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