Bid Rotation

Often bid rigging schemes materialize in the form of bid rotation. This refers to the practice of competing bidding firms “taking turns” at winning the job. Bid rotation is in effect a form of market allocation where competitors are entitled to their “fair share” of the industry profits. Like subcontracting arrangements, bid rotation schemes are often employed in combination with bid suppression or cover bidding. For example, company A might agree to submit a high bid that is sure not to win the job at the current offering in order to let company B win the job at a higher price. In exchange, company B will agree to do the same at the next offering. This enables company A and company B to effectively take turns winning jobs, while giving the appearance of legitimate bidding. By removing what would be a successful lower bid from the process, both companies are able to charge more for their services. This deprives the contracting agency of the benefits of competitive bidding, which is designed to deliver performance of the job at the lowest possible cost.