Bid Rigging

Bid rigging is a common practice in almost every industry. It hampers the buyers’ efforts to get goods and services at a competitive price. The participants negotiate on the winning bid and its price ahead of time. Also, they divide the additional profit earned by winning a high value bid among the consortium members. The losing participants engaged in collusion submit a low-value bid or bid with unacceptable criteria for deliberately losing the bid. They may also be able to obtain subcontracts from the winning bidder. It takes many different forms, out of which the most common and well-known are listed below:

1. Cover Bidding: In cover bidding, bidders planning to lose prepare bid containing unappealing terms or unacceptable bid amounts. As a result, all the competitors’ bids are above an agreed price but less than the winning bid. This makes the bid of a predetermined winner looks enticing. Moreover, it creates an illusion that the bidding process is fair and competitive. This is also called as complementary bidding.
2. Bid Rotation: In bid rotation, the team of bidders conspiring will continue to participate in the future tenders; however, the intended bid winner will change each time.
3. Bid Suppression: In bid suppression, competitors of the collusion team decide to completely abstain from the bidding process so that the agreed entity could win the bidding process.
4. Non-Conforming Bid: In the non-conforming bid, bidders furnish bid submission?that does not meet the qualifying criteria.
5. Phantom Bidding: Phantom bidding takes place with the help of accomplices to trigger qualified bidders to quote a high value. The bid price is artificially raised due to this plan.How to Prevent Bid Rigging?There are various signs which we can look to determine if there was any effort to influence the bidding process or not. For instance, some terms and conditions in a contract appear unnecessary and intentional to make it ineligible for the bidding process. In addition, some bids have quoted a price much higher than the market price without a proper justification.Buyer and participating bidders can create a prolific and open competition, preventing collusion opportunities and benefitting the buyer to obtain a reasonable price.

1. Increase the number of bidders: The design of the tender process must accommodate a maximum number of bidders to decrease the chance of collusion. As the number of participants increases, the complexity of forming a consortium of bidder’s decreases.
2. Encourage maximum participation by simplifying the procedures: Rigid and stringent entrant criteria discourage potential qualified bidders from participating. Therefore, the organizers should maintain a fair cost of operation by simplifying the participation procedures, such as curbing unnecessary changes in bid forms and stop demanding irrelevant information.
3. Confidentiality and equality: Confidentiality is the key here. The bid price of a bidder should not be disclosed to anyone under any circumstances. Also, no supplier or bidder should be given any preferential treatment.
4. Restrict communication: Restricting the communication between bidders reduces the chance of collusion. They will have limited opportunity to meet if the bid takes place through electronic means or post.
5. Train the team: Adequate training of the procurement team results in a tender process less vulnerable to bid rigging. The operations team should have access to historical data of bid conduct to analyze and detect bid-rigging patterns.
6. Raise questions: If any bid or a clause in the bid does not make sense, appropriate questions should be raised to get the necessary clarifications.
7. Grievance redressal:? Officials can encourage complaints and whistleblowing that would help to detect collusion. Also, they can collect non-collusion affidavits from participants.
8. Awareness of market prices: It is crucial to keep an eye on the market price and conditions to assess a bid price and detect collusion effectively.