Contract and procurement fraud
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| Bid Suppression
Bid suppression occurs when two or more contractors enter an illegal agreement whereby at least one of the conspirators refrains from bidding or withdraws a previously submitted bid. The goal of these schemes is to ensure that a particular competitor’s bid will be accepted. Bid suppression schemes, however, can take on other forms. Because many schemes involving collusion among competitors require that a limited number of bidders agree to the conspiracy, price inflation will become apparent if a new or uncooperative bidder enters the competition. To prevent this, conspirators might pay off outside companies to refrain from bidding or withdraw an already submitted bid. Conspirators might also use more forceful means to discourage uncooperative entities from participating in the bidding process. For example, to protect their monopoly, conspirators might fabricate bid protests or coerce suppliers and subcontractors to avoid dealing with non-cooperating companies. Market Division Market division (or market allocation) schemes involve agreements in which competitors divide and allocate markets among themselves and agree to refrain from competing in each other’s designated portion of the market. In these schemes, the competitors generally divide the markets according to geographic area—the competitors take turns on contracts according to the geographic area—or make divisions based on the customer—the competitors allocate specific customers or types of customers among themselves. The result of these schemes is that competing firms will not bid against each other, or they will submit only complementary bids when a solicitation for bids is made by a customer or in an area not assigned to them. The customer thereby loses the benefit of true competition and ends up paying a higher price than would be dictated by fair bidding under normal economic forces. Corrupt contractors often conceal market division schemes by submitting bids from shell companies (i.e., companies that have no physical presence and generate little independent economic value). Submitting bids from fictitious entities gives the appearance of competition. Furthermore, the real contractor can raise his prices because the other bids are fraudulent and are sure to be higher than his own. In effect, the bids from fictitious suppliers serve to validate the exaggerated quote from the winning contractor. Download 0.62 Mb. Share with your friends:
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