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Bid-Rigging the United States’ Strategic Petroleum Reserve

In September 2020, Cajan Welding & Rentals LTD., a Louisiana-based company that provides equipment rental and maintenance services, pleaded guilty in federal court to participating in a scheme to undermine the U.S. Department of Energy’s procurement process for servicing the Strategic Petroleum Reserve, the nation’s emergency supply of crude oil.

According to court documents, from 2002 through 2016, Cajan Welding colluded with co-conspirators to obtain nonpublic pricing and cost information for equipment and services needed to operate the Reserve. Specifically, the co-conspirators provided paper copies or emails containing the nonpublic information to Cajan Welding to use before and during the procurement process. In so doing, Cajan Welding clearly gained an unfair advantage over other vendors.

Cajan Welding was able to reap significant ill-gotten gains from its anticompetitive conduct, namely, over 50 subcontracts and payments of over $15 million from the U.S. Department of Energy. This unscrupulous behavior hurt taxpayers and federal government agencies, depriving them of one of the most important benefits of competition: getting the best possible value for services needed to operate the nation’s resources. 

Additionally, a co-conspirator, Johnny Guillory Sr., was charged in February for his part in the scheme.

The circumstances surrounding this case serve as a reminder for public purchasers to review bids and watch out for any signs that vendors may be subverting the competitive bidding process.

Moreover, this case is a good illustration of the fact that sometimes one or more participants in a conspiracy are not competitors, but rather third parties who lend a hand to wrongdoers, often in exchange for a cut of the proceeds. Be sure to put safeguards in place so that you have oversight of third parties with access to information that could skew the bid process.

With a few simple steps, you can discourage anticompetitive activity and increase your chances of detecting it if it occurs:
  • Keep an up-to-date list of potential bidders and solicit bids from as many competitors as possible.
  • Require bidders to identify partners, subcontractors and joint ventures in their bids.
  • Require non-collusion affidavits with every bid.
  • If something looks strange, ask bidders to explain.
  • Retain bid and purchase records for at least five years, allowing for review.
  • Do not reveal the names of prospective bidders or cost estimates before the contract is awarded, unless required to do so by law.
If you suspect anticompetitive activity, contact the Antitrust Section of the Ohio Attorney General’s Office at 614-466-4328 or submit a bid-rigging tip here.