This case involves a company that was a wholly owned subsidiary of a transportation construction, chemical, and petroleum company headquartered in the South. The company submitted a $7.1 million bid for a state highway design and construction project. The company agreed with a competitor not to compete by designating that it would submit the low bid and the competitor would submit a higher complementary bid, with the company subcontracting a portion of the project to the competitor after the company won the contract. The CEO of the company made the agreement the night before bids on highway projects were to be opened by the state transportation department. A cocktail party was held at a local hotel and attended by in-state contractors to discuss privately who would submit a low bid on the project the next day and who else would overbid. The CEO and his company were charged with antitrust violations and construction bid rigging.
Question(s) For Expert Witness
- Can a contractor make a private agreement with another contractor about who will win the bid on a highway construction project?
Expert Witness Response
Bid rigging occurs when a contractor conspires with several other contractors to determine, before bidding on a public contract, which contractor will receive the contract. Bid rigging has been going on in the construction industry for decades and the process is usually an informal one conducted discreetly, where one contractor simply inquires of another whether they are interested in a particular project. Then, the contractors enter into a “gentleman’s agreement” not to submit competitive bids on the project. Instead, the contractors predetermine who will win the bid. When the government is faced with a possible case involving bid rigging, they usually look for signs of anti-competitive behavior. The most common signs that bid rigging is going on are (1) where the same company always wins a certain procurement; (2) where companies bid higher on some bids than others with no apparent reasons; (3) where a successful bidder subcontracts work to the unsuccessful bidders; and (4) where a company withdraws its successful bid and later is subcontracted work by the new winning bidder. This particular case constitutes bid-rigging and would be considered fraud as it is a form of price fixing and market allocation with regards to a commercial contract.