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Bid Rigging…A Primer…

March 5, 2013   ·   2 Comments

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EDGAR CO. (ECWd) –

This article is a primer on a couple articles we are currently in the process of writing. These are coming this week, and are quite revealing, if not shocking.

Bid Rigging (Collusion)

Bid Rigging is a form of fraud in which a commercial contract is awarded to a party, even though for the sake of appearances, other parties also presented bids (wikipedia). It is also a form of collusion. This collusion can occure between two contractors or between public officials and contractors.

Bid Rigging results in economic harm to the public, the public body, and to the unsuccessful bidders.

Bid Rigging is a felony criminal offense under Section 1 of the Sherman Act, that carries with it a fine not to exceed $100,000,000 (one hundred million dollars) for a corporation, and imprisonment not to exceed 10 years, or both.

The US Department of Justice has several articles on preventing and detecting bidding fraud (here, here).

Under the Federal Sherman Act, price fixing, bid rigging, etc,  are per se violations of the Sherman Act. Meaning once a scheme has been established it cannot be justified under the law – for any reason.

Suspicious Indicators

Some of the suspicious indicators, which may apply to recent contracts within certain levels of our local governments are:

“Prices mysteriously drop when a new bidder appears on the scene”

Bid prices drop whenever a new or infrequent bidder submits a bid”

Prices previously were different”

What an indicator these are! 🙂

 The Scam

Some may justify bid-rigging by saying they are “keeping the business local” as was eluded to by Mike Heltsley at a recent County Board Study Session – his train of thought was quickly shot down by Ben Jenness and Jeff Voigt as they both immediately informed him it was an illegal practice.

Whatever justification is used, it is unjustifiable – period.

The Duty of a Public Servant

A public servant in any capacity has the DUTY to stop and report any attempts at bid-rigging, or “keeping it local”, though unethical bidding/quoting processes. To think otherwise could undermine every level of government – don’t think those directly involved will not remind you that you knew and did nothing, in order to further facilitate future transactions. 

While the Sherman Act deal mainly with one or more contractors acting together to rig, swap, or otherwise exert influence on the bidding process, it could be used with contractors and members of a public body. A different Federal Law, Racketeer Influenced and Corrupt Organizations Act (RICO), deals with patterns of illegal activity involving more than one person.

BidRigging

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Readers Comments (2)

  1. Sandy Gray says:

    Thank you Ben and Jeff for pointing outto Mike that what he is proposing is illegal. Keeping services local is fine but when the business wants to charge $200 for a product but you can buy same thing in say Terre Haute, Mattoon, or another location for $150 then
    would you consider going out of town. In regards to buying concrete $50 or more savings can really add up.

     Reply
    • jmkraft says:

      You are correct, but the bid-rigging that we will talk about does not involve concrete. The discussion where Heltsley said that, was about insurance bids for next year.

       Reply




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