Public officials must constantly balance the need to purchase safe and effective products and services against the need to get the most for their finite financial resources. Competitive bidding – whether through a sealed bid or live auction – is a vital tool in this process. Unfortunately, as we’ve reported in many issues of “Competition Matters,” dishonest bidders can derail that process. A public school district in the town of Caguas, Puerto Rico, recently experienced that firsthand.
In 2013, the Caguas school district conducted an auction to award four-year contracts for its bus routes that would transport the district’s children to and from school. But the companies that appeared to compete at the auction for the routes were not really competing at all. Company officials met before the auction and divided the contracts among themselves, deciding which company would win which route. Most importantly, they agreed not to compete with each other, but rather to submit sham bids for the routes that they were not “supposed” to win in order to give the appearance of vigorous competition.
Fortunately for the taxpayers of Caguas, the scheme was discovered and the U.S. Department of Justice launched a criminal investigation. On Jan. 27, 2017, a jury found the owners of these four school bus companies guilty of conspiring to rig bids and allocating the market for school bus transportation services from 2013 through 2015. The owners also were convicted of mail fraud and conspiracy to commit mail fraud. Sentencing will take place in May 2017.
If you suspect that sham bids have been submitted in a sealed bid process or live auction, contact the Ohio Attorney General’s Office by submitting a tip on the
Antitrust Bid-Rigging Web tip form or call us at 614-466-4328.