Tips for Foiling School Bid-Rigging Conspiracies

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Even though conspiracies to violate antitrust laws often are difficult to detect, school administrators can take steps to avoid being victimized, according to state and federal officials involved with recent bid-rigging cases.

A good first step is to become familiar with how such schemes operate. The chief forms of collusion schools need to guard against are:

  • Price fixing. Occurs when competitors secretly enter an agreement to alter their prices, discounts, or credit terms. Most common in situations where companies offer their product or services to all customers at the same published prices.
  • Customer allocation. Occurs when competitors reach an agreement determining which customers, or classes of customers, each will serve. Most common in the service sector. Such schemes often consist of an agreement by each participant to serve only certain geographical areas or territories.
  • Bid rigging. Occurs when competitors secretly reach an agreement before a bidding process, their intent being to predetermine who will submit the winning bid. The others in the conspiracy then submit "complementary bids,'' or bids that are deliberately high, to insure they do not get that contract.

Bid-rigging schemes can be carried out in a variety of ways, and the conspirators may divvy up bids by territory, type of customer, market share, or some other basis. Often, those involved in such a scheme will allocate contracts on a rotating basis to avoid detection.

Precautions Against Collusion

To counter such schemes, state and federal officials advise school-business officers to:

  • Solicit as many bids for a given contract as feasible.
  • Keep detailed records of all contract bids for at least three years.
  • Regularly call surrounding school systems to compare experiences in soliciting bids.
  • Be alert to situations in which all of the prices for goods or services are uniform and all suppliers refuse to negotiate those prices. Also look out for situations where companies announce the same prices or reduce or eliminate discounts at the same time.
  • Be wary if one company seems to seek the school system's business over and over, while other competitors that should want its business do not seem interested.
  • Be especially alert if different companies submit identical bids, or all bidders submit bids far above the school system's estimates, or there is a clear gap between the winning bid and all others.
  • Contact the local prosecutor's office or the nearest office of the U.S. Justice Department when suspicions of collusion arise.
  • Consider entering into purchasing cooperatives to jointly solicit bids.--P.S.

Vol. 13, Issue 03

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