Potential Scheme: Unbalanced Bidding

“Unbalanced bidding” includes a number of schemes in which bidders manipulate line item bid prices in order to gain an advantage in the bidding process.  The schemes include:

  • “Front loading:” deliberately submitting artificially high item bids for the early stages of a construction project, offset by artificially low line item bids for later stages of the project, in order to improve the contractor’s cash flow;
  • Quoting high prices on line items that the contractor knows or anticipates will be the subject of change orders that increase the quantity of goods or works required.  For example, in a road project a bidder might quote a very high price for each cubit meter of earthworks to be moved, knowing that the number of cubic meters that need to be moved will be drastically increased later, after the contract award.  The bidder might reduce the price of other line items in order to offset the price increase for the selected line item.  The bidder might be informed of the proposed change as the result of a corrupt relationship with project officials;
  • Quoting dramatically lower prices on line items that the bidder knows – perhaps by being tipped off as the result of bribes to project officials – will not be called for after contract award. This information allows the favored bidder to drastically lower its price on the unneeded items to defeat its uninformed competitors. Project officials can facilitate the scheme by drafting vague or incomplete specifications to further disadvantage competitors. In a variation of the above, project officials can allow certain line items to remain in recurring contracts that have never been called for in the past, and which will not be called for in the future, to allow the current, informed contractors to lower their prices and defeat uninformed newcomers.

Unbalanced bidding is one of the more effective bid rigging schemes because the manipulation is not as obvious as other bid rigging methods, such as rigged specifications or unjustified sole source awards.

RED FLAGS OF UNBALANCED BIDDING

  • Particular line item bid prices appear to be unreasonably high or low
  • Change orders issued after contract award extending the line item requirements (in case of high line item bids) or reducing or deleting them (in case of low line item bids)
  • Inclusion of line items that have not previously been called for
  • Wide disparity in bid prices (because bidders are uncertain of the actual requirements)
  • Indications that the favored bidder met or communicated with project officials during the bidding process

CASE EXAMPLES OF UNBALANCED BIDDING

See actual case examples of unbalanced bidding from investigated cases.

BASIC STEPS TO DETECT AND PROVE UNBALANCED BIDDING

  1. Identify and interview all complainants and confidential sources to obtain further detail.
  2. Obtain the  following documents and examine them for the red flags listed above:
    • Requests for bids and line item specifications
    • Winning and losing bids
    • Bid evaluation reports
    • Contract
    • Change order requests and approvals
  3. Determine if there were complaints from losing bidders regarding vague or inadequate specifications. Contact the losing bidders to obtain further details.  Consult industry sources for assistance in technical contracts.
  4. Interview witnesses and examine telephone, email records and visitors logs to determine if there were communications or meetings between a bidder and project officials during the bidding period.
  5. Examine the winning and losing bidder’s line item bids and note unreasonably low line item bids.
  6. Examine change orders affecting the relevant line items and review for reasonableness.