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The Ethics of Reporting Vendor Behavior

Imagine this scenario:  it is time once again for your organization to award the contract for the coming year’s supply of widgets.  Every year for the last decade, you’ve gotten bids from the same three widget vendors – A, B, and C.  There appears to be a healthy rivalry among the companies with the contract changing hands periodically.  You have a good relationship with the representatives of all three companies, making your day-to-day dealings with the winning vendor – regardless of which one wins – smooth and efficient throughout the year.

This year, however, when the bids are opened, you have an uneasy feeling.  Something seems off.  Vendor C failed to bid at all, and Vendors A and B submitted noticeably higher bids than last year – both around 15% higher.  All three vendors provide you with explanations, all of which are plausible, but that nagging feeling persists.

So, you find yourself on the horns of an ethical dilemma.  Do you report the situation and your uneasy feeling to the Attorney General’s office, or do you keep your suspicions to yourself?  After all, you think, they are just suspicions.  How do you balance your interest in treating your vendors fairly and maintaining a good relationship with them against your obligation to your organization and the public you serve?  It is not an easy question, for certain.  But consider the following points, which might help you as you weigh your options:
  1. Reporting does not always spell trouble for the vendors.  The Investigative Unit of the Ohio Attorney General’s Antitrust Section approaches initial inquiries on the leads it receives with care and discretion, using a variety of techniques to gather information about market conditions and the vendors in a confidential and non-public way to determine whether there is good cause to launch a formal investigation under Ohio’s antitrust law (R.C. Chapter 1331).  If there is no cause for concern, the matter may not go beyond this stage.
  2. Failing to report your suspicions may end up punishing honest vendors.  A market in which conspirators are allowed to get away with their wrongdoing is inherently unfair to those who refuse to collude, as it gives a competitive advantage to those who do.  Some anticompetitive schemes result in a group of colluding vendors underbidding an honest bidder, for example, then working together in a pre-arranged principal/subcontractor relationship to cut corners in quality on the job or to submit pre-planned change orders to inflate the ultimate price.  The deserving bidder – and the taxpayers – lose out.
  3. Your “gut” feelings are not simply wild speculation.  They are borne out of your skill and experience as a public purchaser.  Trust your instincts, as they may be the only line of defense against harmful vendor activity.
  4. You can preserve your relationship with the vendors by reporting anonymously. Take a look at the Ohio Attorney General’s website.  You can report a tip – anything from solid evidence of collusion to simple observations of an unexplained price hike or a sudden inability to get multiple bids – either with or without providing your name and contact information.  If you do report anonymously, however, please provide as much detail as possible, since our investigators will be unable to follow up with questions.
Hopefully, these points will provide food for thought that will help you weigh the ethical pros and cons of reporting suspicious vendor behavior.  The bottom line is that the risk to honest vendors of a mistaken report is relatively low.  But the cost of failing to report a collusive scheme can be very, very high.