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Bid-Rigging : Awareness and Prevention

  • High Cost Crime
  • The Law
  • Recognizing Bid-Rigging
  • Prevention
  • Taking Action
  • Contact Us

Bid-Rigging and its Costs

  • Carries heavy costs

  • Makes competitive tendering pointless

  • Criminal offence - s. 47 of the Competition Act

  • Involves a secret agreement on bids or tenders to frustrate or manipulate competitive bidding process

  • Can occur in any market – all products and services are at risk

  • Buyers can play a major role in combating bid-rigging

  • "The costs of bid-rigging can be enormous. Buyers and supply chain organizations play a vital role as front-line detectors of this illegal conduct. We encourage all of our members to adopt the practices recommended by the Competition Bureau and to report suspicious behaviour."

- Robert W. Dye, President, Purchasing Management Association of Canada

Case Example: Electrical Contractors

In the Electrical Contractors case:

  • Pearson Airport, Skydome Hotel, BCE Place, and other projects were targeted by bid-rigging schemes involving electrical contract work during construction or renovation

  • At least 24 bidding competitions were rigged during a five-year period

  • 8 electrical contracting firms and 1 general contractor were convicted

  • Fines totalled more than $3 million

The Competition Act

  • Federal law promoting competition in the marketplace


  • Applies to most businesses in Canada


  • Contains both criminal and civil provisions


  • Criminal penalties include fines and imprisonment

Bid-Rigging: s. 47

47. (1) In this section, "bid-rigging" means:

(a) an agreement or arrangement between or among two or more persons whereby one or more of those persons agrees or undertakes not to submit a bid in response to a call or request for bids or tenders, or

(b) the submission, in response to a call or request for bids or tenders, of bids or tenders that are arrived at by agreement or arrangement between or among two or more bidders or tenderers, where the agreement or arrangement is not made known to the person calling for or requesting the bids or tenders at or before the time when any bid or tender is made by any person who is a party to the agreement or arrangement.

(2) Every one who is a party to bid-rigging is guilty of an indictable offence and liable on conviction to a fine in the discretion of the court or to imprisonment for a term not exceeding five years or to both.

Key Elements of Bid-Rigging Offence (s. 47)

  • Two or more persons;

  • agree or arrange

    • for one or more of them not to submit a bid or tender, or
    • for one or more of them to submit a bid or tender arrived at by their agreement;

  • in response to a call or request for bids or tenders; and

  • the agreement or arrangement was not made known to the person who called or requested the bids or tenders, at or before the submission of bids.

Penalties for Bid-Rigging

  • No limit on fines

  • Jail term up to five years for individuals

  • Victims have a statutory right to sue perpetrators to recover damages caused by bid-rigging (s. 36)

  • Criminal record may be registered with the Canadian Police Information Centre (CPIC)

Common Forms of Bid-Rigging

  • Cover bidding – fake bidding

  • Bid suppression – withholding bids

  • Bid rotation – rotating agreed best bid

  • Market division – carving up the market

  • More than one of these techniques may be used

Case Example: Business Forms

  • Four commercial printers colluded on the supply of multi-part business forms

  • Basic conspiracy: Allocation of customers to suppliers

  • Where one conspirator had won the last tender or contract with a customer, the other three would:

    • bid above the "established" supplier's list price (cover bidding); or
    • not bid at all (bid suppression)

  • This guaranteed that the same conspirator always won the tenders

    • How was the conspiracy detected?

  • A new entrant was invited to join the conspiracy

  • The new entrant came to the Bureau with information

  • Informant agreed to wear a "body pack" to a meeting with one of the conspirators

  • Conspiracy caught on audiotape

  • Guilty pleas by all four ($400K each) plus guilty pleas by two others to similar conduct

Detection is Key for Protection

  • Bid-rigging schemes are secret and difficult to detect

  • Some types of industries are more susceptible to bid-rigging

  • Various warning signs may signal that a bid-rigging scheme is in place

Some Industries are More Susceptible

Be especially vigilant when tender involves:

  • Homogeneous products

  • Simple products or services

  • Goods/services which have not seen significant technological advances/changes

  • Products with few or no close substitutes

  • A small number of suppliers or customers

  • Supplier base with few new entrants

  • An active trade association

Warning Signs Involving Bid Submissions and Outcomes

  • Competitors’ bids are received together

  • Identical irregularities in bids

  • Suppliers meet before they submit tenders and you are not present

  • Suppliers that would normally tender fail to do so

More Warning Signs Involving Bid Submissions and Outcomes

  • Same supplier is often the successful bidder

  • Winning bidder does not accept the contract

  • Winning bidder subcontracts work to unsuccessful bidders

  • Pattern suggesting rotation of successful bids among several suppliers

Warning Signs Involving Pricing

  • Bids from local companies involve similar transportation costs as non-local bidders

  • Identical bid amounts

  • Large difference between price of winning bid and other bids

  • Significant change from past price levels occurs after bid from new or infrequent supplier

  • Range of quoted prices has moved suddenly, or existing discount arrangements have changed suddenly

  • Only one bidder contacts wholesalers for necessary pricing information

Warning Signs From Suppliers' Statements

  • Use of the same terminology when explaining price increases

  • References to “industry suggested prices” or “industry price schedules”

  • Refusal to sell to you or in your area because of an agreement

  • Knowledge of competitor’s confidential bid

Preventing Rigged Bidding

Protect procurement integrity in key areas:

  • Establishing bidding pool

  • Drafting tender specifications

  • Awarding contracts

  • Training and auditing

Prevention: Establishing Bidding Pool

  • Maximize the pool of potential bidders

  • Know your suppliers and their market prices

  • Be aware of price changes for supply inputs

  • Know prices in other jurisdictions

  • Avoid obligatory bids

  • Keep bids confidential – do not disclose specifics of the pool

Prevention: Drafting Tender Specifications

  • Require disclosure regarding potential subcontractors and their pricing

  • Allow for substitute products whenever possible – focus on specific performance

  • Avoid preferential treatment for a certain class of suppliers

  • Avoid predictability – consider aggregating or disaggregating contracts

Prevention: Awarding Contracts

  • Avoid splitting contracts between suppliers with identical bids

  • Ask questions if prices or bids don’t make sense

Prevention: Training and Auditing

Prevention: Disclosure of Communications

  • Use a “Certificate of Independent Bid Determination”

  • Certificate requires disclosure of communications between bidders

  • Certificate available online at:

    http://www.competitionbureau.gc.ca/epic/site/
    cb-bc.nsf/vwapj/certificate_bid_e.pdf/$file/certificate_bid_e.pdf

  • Establish a complaint mechanism for suppliers to convey competition concerns


  • “Part of preserving the legacy of the 2010 games is ensuring their financial viability. Through fair competition for contracts, not only does the successful bidder win, but so does the public. That's why VANOC includes a ‘no collusion’ requirement in our Request for Proposals, requiring that proponents prepare their proposals independently from all other proponents. We may also request a Certificate of Independent Bid Determination to ensure full compliance.”

    - Kenneth Bagshaw, Q.C.,
    Chief Legal Officer, Vancouver Organizing Committee for the 2010 Olympic
    and Paralympic Winter Games (VANOC)

Certificate of Independent Bid Determination (Excerpt):

  1. the Bidder discloses that (check one of the following, as applicable):

    1. the Bidder has arrived at the accompanying bid independently from, and without consultation, communication, agreement or arrangement with, any competitor;

    2. the Bidder has entered into consultations, communications, agreements or arrangements with one or more competitors regarding this call for bids, and the Bidder discloses, in the attached document(s), complete details thereof, including the names of the competitors and the nature of, and reasons for, such consultations, communications, agreements or arrangements;

  2. in particular, without limiting the generality of paragraphs (6)(a) or (6)(b) above, there has been no consultation, communication, agreement or arrangement with any competitor regarding:

    1. prices;

    2. methods, factors or formulas used to calculate prices;

    3. the intention or decision to submit, or not to submit, a bid; or

    4. the submission of a bid which does not meet the specifications of the call for bids; except as specifically disclosed pursuant to paragraph (6)(b) above;

  3. in addition, there has been no consultation, communication, agreement or arrangement with any competitor regarding the quality, quantity, specifications or delivery particulars of the products or services to which this call for bids relates, except as specifically authorized by the Tendering Authority or as specifically disclosed pursuant to paragraph (6)(b) above;

  4. the terms of the accompanying bid have not been, and will not be, knowingly disclosed by the Bidder, directly or indirectly, to any competitor, prior to the date and time of the official bid opening, or of the awarding of the contract, whichever comes first, unless otherwise required by law or as specifically disclosed pursuant to paragraph (6)(b) above.

If You Suspect Bid-Rigging

  • Thoroughly record details of all relevant behaviour

  • Do not discuss with suspected participants

  • Decide whether or not to continue with the tender

  • Contact the Competition Bureau

Conspiracy

  • Conspiracy is a crime under s. 45 of the Competition Act

  • Prohibits agreements to prevent or lessen competition “unduly” or to enhance prices “unreasonably”

  • Key elements of conspiracy:

    • Two or more persons
    • Who conspire, combine, agree or arrange
    • To lessen competition unduly OR to enhance prices unreasonably

  • Fines to a maximum of $10 million

  • Jail term up to five years for individuals

Investigation and Enforcement

  • Evidence and detection include these sources:

  • Preliminary investigation

  • Formal Powers - Investigative tools include searches, subpoenas, wiretaps, and enforcement agency cooperation

  • Criminal matters referred to the Public Prosecution Service of Canada for consideration and prosecution before courts

All Industries are at Risk

  • Bid-Rigging (s. 47) – reinforcement cable, flour milling, bus services, electrical contractors, crown timber

  • Conspiracy (s. 45) – carbonless paper, rubber chemicals, compressed gas, concrete, pulp baling wire, insecticides, fax paper, ductile iron pipe, ambulance operators, pharmacies, waste disposal, driving schools, lysine, citric acid, sodium gluconate, snow removal, choline chloride, bulk vitamins, sorbates, notaries

  

The Competition Bureau

  • The Competition Bureau is an independent law enforcement agency

  • We contribute to the prosperity of Canadians by protecting and promoting competitive markets and enabling informed consumer choice

  • Bureau cases involving bid-rigging and conspiracy have resulted in fines totalling hundreds of millions of dollars

How to Contact Us

Mail Address:
50 Victoria Street
Gatineau, Quebec
K1A 0C9

Date Modified: 2008-04-07

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