Bid rigging - Don't do it

Bid rigging - Don't do it

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If you’re a contractor, let me know if the following situation is familiar to you.

A prospective client has invited you to bid for a job, but due to existing commitments you don’t have the time or resources to do the calculations necessary to prepare a proper bid. However, you naturally want to keep the client happy so that you stay in consideration for the next project, one which you’ll want to win. How can you submit an offer that looks credible, but is not so tempting as to land you with a contract that hasn’t been properly scoped out and you didn’t want to begin with? Maybe you know someone at a competitor who is putting in a considered bid? Maybe he’ll let you use this as a base for your own on the understanding you’ll make yours objectively worse?

Don’t do it.

I’ll preface the rest of this blog by stating that I am not a competition lawyer (I defer to my colleagues who are) and so will not hazard a guess as to whether UK competition law post-Brexit will develop in step with EU legislation or diverge. At the time of writing the UK and EU have agreed a six month extension to the date of departure so this question remains in hiatus for now.

Since the current legal regime for preventing anti-competition practices remains very much in force, it should be of interest to those in the construction industry to note a case last year in Denmark concerning contractors who were found guilty of unlawful bid rigging. Members of a demolition cartel had been sharing their bids on the basis that a member who was secretly uninterested in being awarded the contract could submit a higher bid that was not expected to win, but would ensure they remain in consideration for future projects. This was found to be in breach of EU legislation.

While the court handed down the largest personal fines to date in any Danish case, it stopped short of imposing penal sentences on the directors engaged in the unlawful activity, although it had that discretion. This appears to have been due to the subjective intent of the parties involved. The Court considered amongst other factors that:

  • the conduct had taken place over a limited period of time;
  • the conduct affected a limited part of the market;
  • the defendants only “borrowed” offers when they lacked the time to calculate their own; and  
  • the companies involved had not obtained any financial gain.

Details of the case can be found at the Danish Competition and Consumer Authority website.  The Judge was evidently satisfied that the defendants’ objective had not been to obtain higher prices and this absence of greed was a mitigating factor. This case can therefore be distinguished from the bid rigging scandal that shook the UK construction industry in 2009, where the desire to maximise profits was identified as the behavioural driver for this practice. However, it serves as a reminder that even where a contractor’s intent is not to cause harm, any departure from the rules of the bid is fraught with risk.

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