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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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