Just a few weeks ago, on a terrifying late May evening, southwest and west central Ohio was ravaged by powerful tornadoes, leaving a path of destruction reminiscent of the devastation suffered by the City of Xenia in 1974. The National Weather Service has classified at least one of the tornadoes that struck that night as an EF-4, the second-highest category on the scale that measures the strength of such storms.
Homes in Dayton, Celina, Trotwood, and other communities were leveled, power lines were downed, and roads were made impassible by debris. Tragically, at least one person was killed and several more were injured by the fierce storms. As the tornadoes left the area, public officials and first responders set to work doing search and rescue, restoring power to city water plants and pump stations, and even using Ohio Department of Transportation snow plows to remove downed trees from Interstate 75.
But disaster recovery takes far longer than just a few hours or days. In the weeks and months following a natural disaster, public officials must address damage to school and university buildings, city offices, and county courthouses. They must replace equipment and vehicles destroyed by the storm. In some cases, very strong tornadoes can even damage sidewalks, parking lots, and other pavement.
It is an unfortunate fact that the public officials facing such a daunting task need to be on heightened alert for anti-competitive behavior by vendors who are intent on taking advantage of the crisis situation. In 2006, for example, a contractor and subcontractor colluded to rig the competitive process in connection with the reconstruction of New Orleans levees that were severely damaged by Hurricane Katrina. The owners of those firms each received prison sentences of five years or more for engaging in the conspiracy.
So, what is there about post-disaster recovery efforts that makes vendor misconduct more likely? There are three main factors.
- Publicity
The tornadoes that cut a swath through Dayton and surrounding communities last month made news around the world. That kind of publicity can be beneficial, as it often brings with it an outpouring of charitable donations. But it also serves to notify unscrupulous businesses that many federal, state, and local dollars will be flowing into the numerous projects needed in order to make the affected communities whole again. Big dollars mean big incentives to rig bids, allocate markets, and fix prices.
- Vulnerable Products and Services
Some goods and services are more susceptible to anticompetitive vendor activity than others. When an item or a service is relatively homogeneous –
i.e., one vendor’s product/service is essentially the same as any other’s – the deciding factor when awarding the contract is usually price. Unscrupulous vendors can be confident that they can “rig” the bidding process by agreeing among themselves who will submit the “low” price. (The price is not, in reality, low at all in these situations because the lack of competition inflates it.) Services like paving, roofing, and tree removal are examples of purchases that generally fall into this category and call for extra vigilance.
- Public Officials Stretched to Their Limits
A vendor that is unethical enough to game the competitive bidding system is probably also unethical enough to take advantage of the chaos that ensues after a disaster strikes. Knowing that the workloads of school officials, county administrators, and township trustees are now double or triple what they were before the disaster, such vendors are more likely to enact an anticompetitive scheme in the hopes that the public official will simply be far too busy to question unusual bid results.
These words of warning are not meant to send the message that all vendors are dishonest. On the contrary, most are ethical firms that can be valuable partners with community leaders as they work to rebuild what nature destroyed. But when public purchasers are alert to anticompetitive schemes, they can greatly increase the chances that their projects will be awarded to ethical companies and that their taxpayers’ dollars will go as far as possible.