When businesses in the construction industry collaborate to fix prices on bids for federal contracts, they tread into risky and often illegal territory. Bid rigging is a serious criminal offense under federal law.
Bid rigging undermines the principles of fair competition, which are essential to a healthy economy. It distorts the market, often leading to inflated prices for goods and services. This is especially problematic in government contracts, where taxpayer money is at stake.
Understanding bid rigging
Bid rigging occurs when businesses collude to decide who will win a contract. This can take many forms. Sometimes, competitors agree in advance who will submit the winning bid, with other companies submitting intentionally higher or noncompetitive bids. In other cases, competitors may decide to rotate which company will win specific contracts. No matter the method, the intent is to circumvent the competitive bidding process and guarantee a particular outcome.
The legal implications
Bid rigging often falls under antitrust laws, specifically the Sherman Act. Convictions under this act can result in severe penalties, including hefty fines and prison time. For individuals, the fines can reach up to $1 million, and they may face up to 10 years in prison. Corporations can face even steeper fines, sometimes reaching tens of millions of dollars.
The role of federal agencies
Various federal agencies, including the Department of Justice and the Federal Trade Commission, aggressively investigate and prosecute bid rigging in federal contracting. These agencies have broad powers to scrutinize bidding processes and contracts, and they often work in tandem with other federal entities like the Department of Defense or the General Services Administration, depending on the nature of the contract.
It’s beneficial for defendants to work with someone familiar with these situations. Defense strategies may involve challenging the evidence of collusion, demonstrating competitive bidding practices or negotiating plea agreements.