Subcontracting

One way in which bid rigging schemes are perpetrated is through subcontracting arrangements. Conspirators will agree not to submit bids or to submit “cover” bids not intended to be successful, on the condition that some parts of the successful bidder’s contract will be subcontracted to them. For example, suppose construction company A knows that they can perform a school construction job at a lower cost than construction company B is capable of offering. Construction company A might agree with construction company B to submit a bid for the school construction job at an artificially high price in order to let company B win the contract. In exchange, company B will subcontract out the drywall and sheetrock portions of the job back to company A, who submitted the high bid. In this way, the two companies attempt to share in the spoils of the artificially high profit margin created by the absence of an accurately low-priced bid.