Bid rigging/collusion/fraud

Bid rigging is an agreement among bidders to manipulate a competitive bidding process. Bidders might decide in advance who will win, agree that some of them will not bid, or submit prearranged bids. Collusion is the wider category: coordinated conduct between competitors to defeat competition or artificially inflate prices. Fraud covers deliberate misrepresentations, omission of material facts, forged documents or signatures, failure to meet contract specifications, and fraudulent billing.

The three terms are used together in procurement-integrity guidance because they attack the same thing: a fair, competitive process that gives the buyer real value. NATO's procurement manual and Canadian competition and procurement policy both treat them as serious integrity risks. In Canada, bid rigging is addressed under section 47 of the Competition Act and is a criminal offence.

How NATO's procurement manual describes collusion and fraud

NATO states that collusion schemes seek to circumvent competitive bidding and may artificially inflate prices. It identifies bid rigging as a scheme designed to ensure that a favoured supplier wins and competitors are excluded. It defines collusive bidding as an agreement among bidders to submit artificially high-priced offers or otherwise defeat competition. For fraud, it lists deliberate misrepresentations, material omissions, forged signatures or documents, failure to meet specifications and fraudulent billing. The full text is in the NATO procurement manual.

Bid rigging under section 47 of the Competition Act

Under the Competition Act, bid rigging includes agreements not to submit a bid, agreements to withdraw a bid, and agreements that determine the bids the parties will submit. The Competition Bureau's glossary sets out this definition.

The Bureau distinguishes bid rigging from broader competitor agreements such as price-fixing, market allocation and supply restriction, which it covers in its competitor collaboration guidelines. The same guidance explains that the bid-rigging provisions do not apply where the arrangement is disclosed to the tendering authority at or before the time bids are submitted or withdrawn. A consortium or joint bid that is disclosed is therefore treated differently from a secret agreement.

Where Canadian federal rules prohibit it

• PSPC: Supplier guidance on bidding on federal opportunities lists examples of bid rigging. They include agreements on how bids are priced or written, which contracts each business will win, withdrawing or avoiding bids, and submitting intentionally non-competitive or incomplete bids.
• Procurement Code of Conduct: PSPC's Code of Conduct requires applicable contracts, solicitations and related documents to include clauses prohibiting corruption, collusion, bid rigging and other anti-competitive conduct.
• Shared Services Canada: Its Standard for Ethical Behaviour in Procurement prohibits corruption, collusion, bid rigging and other anti-competitive activity.
• Treasury Board: The policy framework directs contracting authorities to notify the former Industry Canada where collusion or bid rigging is suspected. It also directs them to report identical bids or unusually unreasonable prices that may indicate an effort to reduce competition.

Red flags and common schemes

CanadaBuys identifies increased communication between a bid manager and competitors around a tender as a red flag for bid rigging. Its guide on spotting red flags of procurement fraud is written for suppliers.

Environment and Climate Change Canada's fraud-risk assessment names contractor collusion schemes such as bid rotation and bid suppression. It also describes an arrangement between an employee and a supplier to award a contract on weak requirements, then increase the price later through amendments. Collusion can therefore involve a buyer's own staff as well as competing suppliers.

What it means for a supplier bidding on Canadian public contracts

Submit an independent, truthful and competitive bid. Do not coordinate prices, bid content, bid timing, withdrawal, rotation or contract allocation with competitors. If you plan a consortium or other bidding arrangement, disclose it to the tendering authority as required. After award, meet the contract specifications and avoid false statements, forged documents, undisclosed material omissions and fraudulent invoices.

Read the conduct and anti-collusion clauses in each solicitation and contract, because they bind your bid team. If you suspect procurement fraud or bid rigging, report it through the channels the procuring organization identifies. Federal policy requires contracting authorities, not suppliers, to notify the relevant competition authority. Limit contact with competitors around an open tender, since that contact is itself a recognized red flag.