Collusion is not welcome by clients in any tendering or proposal. Collusive Tendering or “Bid Rigging”, aside from being unethical, it is illegal for competitors to work together to fix prices rather than compete against each other. This conduct restricts competition and can force prices up and reduce choices for consumers and other businesses.
Collusive tendering refers to when two or more competitors collude to undermine the competitive tendering process in order to gain an unfair advantage.
Collusive Tendering, also referred to as Bid rigging, a occurs when two or more competitors (Tenderers) agree they will not compete genuinely with each other for tenders, allowing one of the Tenderers to ‘win’ the tender.
Collusive tendering practices include:
- any agreement between tenderers as to who should be the successful tenderer
- any meetings of tenderers to discuss tenders before the submission of tenders if the client is not present
- any exchange of information between tenderers for the payment of money or the securing of a reward or benefit for unsuccessful tenderers by the successful tenderer/s
- any agreements between tenderers to fix prices or conditions of contract (price-fixing is any collaboration between tenderers on prices or conditions to be included in contracts without the consent of the client)
- any assistance to any tenderer to submit a cover tender (a cover tender is a tender submitted as genuine, which has been deliberately priced in order to not win the contract)
- any agreement between tenderers before submission of tenders to fix the rate of payment of building association fees, where the payment of such fees is conditional on the tenderer being awarded the contract.
Exceptions to the prohibitions on price-fixing exist for certain joint production or supply of goods or services and for certain agreements for the collective acquisition of goods or services. Agreements between related companies are also exempted. The joint venture exception is complex, and legal advice should be sought by anyone considering a joint venture that may otherwise breach the cartel provisions.