Preventing bid-rigging: Tips for tendering authorities

Collusion risk assessment tool for procurement agents: Planning a call for bids? Use the Collusion Risk Assessment Tool to gain an early warning about potential risks of bid-rigging, as well as mitigation strategies you can take to minimize those risks.

Training for procurement professionals: The Competition Bureau offers free information sessions to public-service procurement officers at all levels of government to help them recognize and prevent bid-rigging. Use our online form to request a session for you or your team.

Recognizing bidrigging

Bidrigging schemes are limited only by the imagination of those involved. However, there are four common types of agreements designed to ensure a preselected supplier wins the contract:

  • Cover bidding is when competitors agree up front who will win. The “losing” bidders then tweak their submissions to ensure they are less attractive than the winner’s bid
  • Bid suppression is when a competitor agrees not to bid or to withdraw a bid to make it easier for a specific bidder to win
  • Bid rotation is when competitors agree to take turns submitting bids
  • Market division is when competitors agree to divide up territory, customers, or product markets among themselves instead of competing

Some arrangements are not illegal if the tendering authority is informed of the arrangement when the bids are submitted (or before). For example, two companies may decide to submit a joint bid on a specific project.

The following circumstances can make bid-rigging more likely:

  • a product cannot be distinguished easily from competing products from different suppliers
  • the goods or services being purchased have not undergone any significant technological changes or advances
  • a product has few or no close substitutes
  • few suppliers offer the good or service
  • the pool of suppliers has had few new entrants
  • meetings among bidders are likely (for example, site visits, association meetings)

Warning signs of possible bid-rigging

During the call for bids

  • Bids from competing suppliers are received together
  • Suppliers meet before they submit their tenders and procurement officials are not present
  • Suppliers who normally tender fail to do so
  • Only one bidder contacts wholesalers for necessary pricing information

On the bids themselves

Some common signs of bid-rigging are when two or more proposals

  • have similar handwriting or irregularities, such as identical typographic or mathematical errors
  • show identical bid amounts
  • come from the same place (for example, from the same email address)
  • use the same terminology when explaining price increases

Other common signs:

  • There are references to "industry-suggested prices" or "industry price schedules"
  • Bids from local companies quote transportation costs that are similar to the prices quoted by distant or remote bidders
  • When a new or infrequent supplier responds to the call for proposals and there is a sudden and significant change in price levels compared with past submissions (suggests possible bid-rigging during earlier tender processes)
  • The range of quoted prices among the bidders has changed suddenly (either up or down)

After the call for bids

  • The same supplier is often the successful bidder (that is, over a series of awards, one bidder always wins, regardless of competition)
  • The winning bidder does not accept the contract
  • The winning bidder subcontracts the work to unsuccessful bidders
  • There is a significant difference between the price of the winning bid compared with the other bids
  • A bidder seems to have knowledge of its competitor's confidential bid
  • There is a pattern suggesting successful bids are being rotated among several suppliers

Steps for preventing bid-rigging

Tendering authorities can take steps to reduce the likelihood of bid-rigging.

Maximize the size of the bidding pool and increase your knowledge of suppliers

  • Attract more potential bidders by making the bidding requirements more inclusive
  • Get to know suppliers and their prices in various markets or jurisdictions
  • Be aware of price changes in suppliers' inputs
  • Avoid blocking bidders because they did not qualify for a previous bid
  • Keep bids confidential; don't disclose who or why suppliers have been invited to bid

Draft appropriate tender specifications

  • Require bidders to disclose their potential subcontractors and their pricing
  • Require suppliers to sign a statement confirming they have not communicated with or made arrangements with other bidders regarding their bid submission
  • Whenever possible, allow for substitute products (focus on the end use)
  • Avoid preferential treatment for a certain class of suppliers, such as local companies
  • Avoid predictability; consider combining or separating contracts

Ensure contracts are awarded fairly and audit the process

  • Ask questions if prices or bids don't appear to make sense
  • Avoid splitting contracts between suppliers with identical bids
  • Establish a mechanism for suppliers to voice competition-related concerns after the contract is awarded; for example, conduct interviews with unsuccessful vendors or those who have stopped bidding or no longer offer the product or service
  • Review past tender processes and results periodically, especially in industries where bid-rigging is more common
  • Ensure that staff are properly trained
    • The Competition Bureau offers free information sessions to public-service procurement officers at all levels of government to help them recognize and prevent bid-rigging. Use our online form to request a session for you or your team.
  • Ensure all staff are trained to recognize and prevent bid rigging
  • Audit the training process to ensure training is effective

Additional resources