Case Example of Collusive Bidding by Contractors

South East Asia, Road Projects

From 2000 to 2003 small groups of local construction companies rigged contract awards in road rehabilitation projects in collusion with government and project officials.  To execute the schemes, the project officials would, among other things, deliberately fail to announce or publicize requests for bids in a timely manner, refuse to sell bid documents to outside companies or find trivial or invented reasons to disqualify those companies that were able to bid.  Senior government officials would then choose the winning bidder, or “champion,” from among those allowed to compete after private negotiations with all of the companies.  The designated losing bidders would submit deliberately higher priced or non-responsive bids to allow the winner to inflate its prices sufficiently to fund the necessary bribes and enjoy handsome profits.

The designated winner often was a shell company set up solely to bid on the project in which project or government officials held undisclosed interests.  Such firms would subcontract all of work to smaller firms, often “losing bidders,” at far lower prices.

The scheme was detected when investigators noted that all of the bid securities – commitments by the bidders that they would perform the contract if selected – submitted by the different bidders were purchased at the same bank on the same day, indicating they were all purchased by the same person.  Other indicators included losing bids that were an exact percentage apart (because they were all generated by the winning bidder by multiplying its winning bid), and a pattern of the winning bids falling just under the threshold of acceptable bids, with the losers being over the thresholds.