When Competitors Collaborate and Costs Rise: Government Contract Fraud Attorney on Bid Rigging

In many ways, government procurement contracts are similar to procurement agreements in the private sphere.  The basic elements of all contracts are the same, an offer and acceptance made between two or more competent parties for a legal purpose that creates obligations for both parties (e.g. payment for and the provision of goods/services).  However, the government contract system is much more controlled than the private contracting sphere.  The government contract bidding process is complex, highly-regulated process that relies upon companies filing honest, competitive offers to fill a given need.  Bid rigging is a violation of government trust and a form of government contract fraud.  As a bid rigging whistleblowers’ law firm, the Brod Law Firm partners with individuals who see this fraud happen and step forward to report it.  When fraud occurs in the private sphere, the companies involved can suffer.  When fraud occurs in the government contracting arena, the trust of every American is violated and every taxpayer suffers.

Bid Rigging: Overview and Forms

A useful explanation of bid rigging can be found in a Department of Justice contract2(“DOJ”) primer written to help people identify various forms of collusion among prospective government contractors.  As the primer explains, at a broad level, bid rigging involves competitors conspiring to raise the price of goods/services being purchased by the government.  Bid rigging occurs when competitors agree who will submit the best offer during the bidding process, agreements that eliminate/limit true competition.  In some cases, the collusion involves some, not all, of the bidders for a given project.  Although the primer focuses on antitrust matters, bid rigging can also be a violation of the False Claims Act.

There are several common types of bid rigging schemes.  According to the DOJ, the most common form is Complementary Bidding, a scheme in which some competitors agree to file bids that are essentially flawed, such as a bid containing a term the bidder knows is unacceptable or a price they know is too high.  These bids are not genuine attempts to win the contract, but rather attempts to make it look like companies are competitively bidding when they are actually concealing an inflated price agreement.  Other forms of bid rigging include Bid Suppression (a competitor agrees not to bid so the agreed-upon company wins), Bid Rotation (conspiring companies take turns being the lowest bidder), and Subcontracting Agreements (a competitor submits a losing bid or doesn’t bid at all in exchange for getting a share of the work via a subcontracting agreement with the winning bidder).

Bid Rigging: An Example

Bid rigging claims were part of a whistleblower suit that led to Accenture, a technology services company, agreeing to pay $63.67 million per a settlement agreement announced by the DOJ in September 2011.   As the Washington Post detailed, the suit accused Accenture, along with Hewlett-Packard and Sun Microsystems, of collecting payments from other vendors in exchange for granting the companies preferential status as subcontractors on existing government contracts or providing a strong recommendation to Accenture’s government contacts.  Whistleblowers Normal Rilke, a former senior manager with Accenture, and Neal Roberts, a partner at Pricewaterhouse Coopers who investigated the company’s “alliance partnership” system, filed suit in September 2004.  The government intervened in 2007, stating that the defendants “exploited the trust the government has reposed in them to act with honesty and candor… to act without conflicts of interest; and to serve as independent third party objective advisors.”

America’s Right to Honesty and the Power of a Whistleblower

In the above-referenced primer, the DOJ explains: “American consumers have the right to expect the benefits of free and open competition — the best goods and services at the lowest prices….The competitive process only works, however, when competitors set prices honestly and independently. When competitors collude, prices are inflated and the customer is cheated.”  The DOJ elaborates in the Accenture settlement announcement: “Kickbacks and bid rigging undermine the integrity of the federal procurement process….At a time when we’re looking for ways to reduce our public spending, it is especially important to ensure that government contractors play by the rules and don’t waste precious taxpayer dollars.”

Bid rigging is one form of collusion in which companies purportedly competing for government contracts actually work together to overcharge the government and defraud every taxpayer.  If you have information regarding or knowledge of collusion in the government contracting arena, call our California-based government contracting fraud law firm.  We work on government fraud cases across the country, protecting not only the government but also the whistleblowers who come forward in the interests of justice.

See Related Blog Posts:

Spotlight on Government Contracting Fraud: Violation of Price Reduction Clause in GSA Contracts

Fighting Fraud: Government Contract Fraud Attorney Examines Procurement Fraud

(Image by Dan Moyle)