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Bid Rigging…Global Growth Requiring Urgent Policy Response – Where Are we Headed?

On February 18, 2016, OECD (Organization for Economic Cooperation and Development) published this statement, “Elusive global growth outlook requires urgent policy response”. Although, the article doesn’t mention bid rigging – governments need to take a hard look at their policies and processes when getting quotes for major projects.

On May 29, 2016 – The Globe and Mail published an article stating “The federal Competition Bureau is warning governments to be on the lookout for signs of bid-rigging and other shady activity as Ottawa opens the floodgates to spend billions on infrastructure projects across the country.”

Bid rigging has been in existence for many years; companies have been charged in the past for this and yet it still prevails. In 2014, criminal charges were laid for a bid-rigging conspiracy in connection to information-technology contracts at Library and Archives Canada. Another recent example in April 2016; “Bombardier Inc. taking on the mayor of Chicago and the city’s transit agency… alleging that a $1.3 billion (U.S.) rail car contract awarded to a rival Chinese bidder was “rigged.”

Is bid rigging driven by greed or opportunity? Dealing with numerous RFPs over the years, I can say from experience that we all need to take ownership. Customers are being instructed to keep costs down, and vendors are trying to survive in markets that are expecting more for less. As a result, the industry has become so competitive, depleting any margin. Procurement is mandated to get the best product/service for the best price. Companies focus on ways to win the bid while still being able to stay afloat financially. All government RFPs say no collusion – this is the right thing to do. But what happens is the vendors that don’t work together compete against each other for virtually no margin. This is a problem that we can’t ignore.

So, what do we need to do to prevent corruption and what are the red flags to avoid bid rigging?

  • The client needs to be respectful to costs
  • Vendors can’t survive without any margins
    • The customer needs to understand what a fair market margin is
  • Audit and visit the vendors that are shortlisted
    • Are they able to do what they are committing to
  • The agreement should be guided by a transparent reporting structure
    • Contract management doesn’t stop upon award – it is just the beginning
  • Create service level agreements and key performance measurements that include a clear profit margin
  • Audit the program regularly once established
  • Ensure the award is based on merit, be aware of ‘sweetheart’ deals
  • Investigate the process

Duty of care is usually a term used to ensure due diligence is maintained in safeguarding employees. What about the duty of care to businesses and the negative impact on a cutthroat process? Bid Rigging creates debt that ultimately affects everyone.

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Counterfeiting is a Big Business and Was Estimated to Hit Over $1.7 Trillion Dollars Globally in 2015

counterfeit-goodsOne of the commenters on my recent blog about cargo theft suggested that I address the global concern of counterfeit products. Everyone knows that making fake products and then selling them to consumers is illegal. However, I wonder how many people realize just how big the problem is if they willingly or unwillingly purchase goods and how much incentive they give to counterfeiters worldwide. Who and what is the money supporting when purchasing these illegal products? The reality is, if consumers buy it – it will never go away. It is important to point out that there are “two types of counterfeit product purchases by consumers”, according to Dr. Haider Ali’s article titled, Why People Buy Counterfeit Brands. Deceptive counterfeiting takes place where the consumer does not know that they have purchased a counterfeit product. It is surprising how authentic some counterfeit products look. In contrast, “non-deceptive purchases of counterfeit products take place where the consumer willingly buys the counterfeit products.” First and foremost, with respect to ‘deceptive’ counterfeiting, consumers should do some due diligence and check the authentic websites to determine who in fact is an authorized reseller. It can be difficult to tell the difference and it is surprising how even some stores themselves look authentic.

On the other hand, ‘non-deceptive purchases’ of counterfeit is where the suppliers may need to “consider why the demand exists”. This is where items are sold in the backs of cars, alleyways, flea markets and basically anywhere counterfeit is bought and sold – the black market. Although there has been a significant amount of research into why and who would buy counterfeit brands. There are surprisingly many reasons on the attractiveness of buying counterfeit.

According to a 2014 report released by the US Department of Homeland Security, “US Customs seized more than 1.2 billion US dollars worth…where more than 60 percent of the goods were from China”. This includes not only clothing, shoes and luxury items but also auto parts and medical supplies.

Luxury retailers do invest a lot of time to crack down counterfeiters. For example, CTV news released a story of a 45-year-old Chinese woman that was being sued for counterfeiting by eight luxury brands.

  • Legal troubles began in 2008 when Chanel sued her for $6.9 million in damages for selling counterfeits online. She still hasn’t paid the damages, according to Chanel spokeswoman Kathrin Schurrer.
  • In 2009, a Florida judge ruled against Xu Ting and shut down seven websites she was accused of helping run that sold fake Louis Vuitton, Marc Jacobs, and Celine. She did not show up in court.
  • In 2010, Gucci, Balenciaga, Bottega Veneta and Yves Saint Laurent — all brands belonging to France’s Kering group — filed a lawsuit in New York federal court against Xu Ting, her future husband, younger brother, and mother along with six others who the companies said sold more than $2 million worth of fake handbags and wallets online to U.S. customers.

Mark Cohen, former intellectual property attache at the U.S. embassy in Beijing explains, “At the end of the day, there may be an economic calculation about how much money it’s worth to pursue these people” for any business. These counterfeiters do not and will not stop if consumers purchase. We as consumers need to also understand who we are supporting when purchasing counterfeit. Designers brands and businesses have worked very hard to give consumers an opportunity to purchase beautiful and creative pieces with a level of quality that is second to none.

Posted in: Protective Services and Investigations

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