Corruption happens because there is impunity. That’s the reason why corruption is widespread at all levels – from the person who asks for a bribe on the street to those who hold prominent positions.
— João Manuel Gonçalves Lourenço
Most of us assume that a system of competitive bidding for government contracts precludes chicanery. Here’s an excerpt about bid rigging from Wikipedia.
Bid Rigging as acts of corruption
- Change order abuse occurs when a contractor colludes with project officials, wins a low bid, then asks to change the contract afterwards. This is approved by officials, resulting in a much higher bid being retroactively approved.
- Bidder Exclusion allows project officials to essentially choose their bid. There are multiple methods to achieve this end including:
- Instituting unreasonable qualification parameters, excluding non-preferred firms, or effectuating the same by shortening the time of acceptance periods for new bids following a request.
- Advertising projects to select bidders or bidding markets, thereby reducing publicity of bid procurement.
- Bundling of contracts to exclude bidders.
- Coercion and intimidation can also be used or simply rejection of individual bids over trivial matters.
- Purchase splitting to reduce the minimum bid amount. This functions as contracts are split up to reduce the actual procurement amount and keep it under a threshold value. This reduces competitive bidding and enables less oversight at the project level as bid prices drop and kickbacks can be allotted.
- Leaking of bid information, which requires a relationship of some degree between the project and a bidder as the bidder is handed information to gain an unfair advantage.
- Bid Manipulation is another method for officials to choose the bidder of their choice but occurs after receipt of bids. The methods for this would include either changing bid parameters, evaluation processes, or other activity to effectively select the bidder of choice.
- Rigged Specifications allow more bidder exclusion by officials by either tailoring requests to individual bidders or creating a vague criterion to reasonably choose a preferred bidder.
- Unbalanced bidding involves high bid prices for commencing phases of development and low prices for later stages. This effectively increases the flow of funds for the bidding firm. This occurs when bidders cite high prices for items, intending to raise the number of units and purchase them at a competitive rate while simultaneously skimming profits from the artificially high bid price. Additionally, bidders may give low quotes for non-necessary items (knowledge gained through collusion or experience) to disadvantage other firms as their bid amount is more competitive. This also serves to increase the cost of entry for new firms.
- Unjustified Sole Source Awards are bids chosen on criterion unrelated to their competitiveness. This can be performed either blatantly, by falsifying bids, or by price splitting.
And another: THE MOST COMMON PROCUREMENT FRAUD SCHEMES AND THEIR PRIMARY RED FLAGS, by W. Michael Kramer (International Anti-Corruption Resource Center)