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Keeping Bidders Honest at Online Government Auctions

The competitive bidding process is designed to facilitate transparency and accountability in procurement, provide bidders with a fair and equal chance to compete for and potentially be awarded a bid, and allow purchasers to receive the best value and quality for the goods and services that they seek. As such, public purchasers rely on the competitive bidding process to best provide for the communities that they serve and safeguard the taxpayers’ money from bad actors or unscrupulous deals.
Recently, more and more public purchasers use e-procurement as the principal means to get goods and services. E-procurement brings the entire procurement process onto a digital platform — allowing for increased transparency, accessibility, efficiency, and cost savings. Another significant benefit that e-procurement programs yield over traditional face-to-face competitive bidding processes is the elimination of the opportunity to collude that bidders receive by being in physical proximity to each other. But are e-procurement programs fool-proof when it comes to stifling collusion? Sadly no. As one recent incident shows, bidders that are intent on engaging in anticompetitive practices such as bid-rigging can find ways to collude even when the bid process is solely electronic.
In February, Alan Gaines, a Missouri-resident, was indicted by a federal grand jury for engaging in a scheme to rig bids issued online by the Government Services Administration (“GSA”) for surplus government equipment. According to court documents, Gaines and his co-conspirators rigged GSA-issued bids for surplus government equipment from about July 2012 to about May 2018 in an effort to eliminate competition in the market for such items. Specifically, Gaines and his co-conspirators communicated with each other by phone, text message, and email before and during the GSA’s online auctions to determine who would compete, refrain from competing, or win certain bids. They divided the winnings amongst themselves afterwards.
Gaines’ co-conspirators, Marshall Holland and Igor Yurkovetsky, have pled guilty for their part in the anticompetitive scheme.
The charge Gaines faces for violating federal antitrust laws carries a maximum penalty of 10 years in prison and a $1 million fine for individuals.
The Antitrust Section of the Ohio Attorney General’s Office will soon begin offering a presentation on the risks and benefits of e-procurement programs from a competition perspective.  If your organization is interested in learning more about this presentation or scheduling it for an upcoming meeting or conference, please call Beth Hubbard at 614-466-4328.