When a request for proposal is tailored to give an advantage to certain competitors and ensure their success, the competitive bidding process is corrupted.
The competitive bidding process is designed to foster transparency in procurement, to provide bidders with a fair opportunity to compete for and potentially be awarded a bid, and to allow purchasers to receive the best value for the goods and services that they seek.
Bid specifications should not be tailored with the hopes of ending up with a specific supplier or product, but that is exactly what happened in the “Buffalo Billion” bid-rigging scheme in New York. Companies shared information about their experience and qualifications with the individual designated by the state’s governor to oversee the bids, and then the bid specifications were tailored to steer business to those companies.
In July, several defendants were convicted in federal court for rigging the bids on construction projects related to the Buffalo Billion initiative, the state of New York’s economic development program for communities located in upstate and western New York. Specifically, the individual designated to oversee the initiative, Alain Kaloyeros, conspired with the executives of two development firms, COR Development and LPCiminelli, to secretly manipulate the competitive bidding process so that contracts worth millions of dollars were unfairly awarded to those firms.
According to the evidence presented at trial, Kaloyeros shared information about upcoming projects with two executives at COR Development (Steven Aiello and Joseph Gerardi) and one executive at LPCiminelli (Louis Ciminelli) before the requests for proposals were issued, and those executives provided Kaloyeros with their firms’ experience and qualifications. Kaloyeros subsequently tailored the requirements of the bids so that only firms that matched the experience and qualifications of COR Development and LPCiminelli would have any plausible chance to be awarded the contracts. As a result, COR Development and LPCiminelli won contracts without much competition and under the false pretense of a legitimate competitive bidding process.
In December, a federal judge sentenced to Kaloyeros to 42 months in prison, Aiello to 36 months in prison, Gerardi to 30 months in prison, and Ciminelli to 28 months in prison for their roles in the Buffalo Billion bid-rigging scheme. Additionally, the federal judge ordered Kaloyeros to pay a $100,000 fine and Aiello, Gerardi, and Ciminelli to each pay a $500,000 fine.
The circumstances surrounding this case are a stark reminder for public purchasers to:
- Review bids closely and look out for signs that vendors may be working together. To protect against illegal behavior, work to determine if vendors are engaging in anticompetitive activity and report anything unusual or suspicious. (See previous editions of “Competition Matters” for patterns that can form if vendors collude, physical clues of possible collusion, and other red flags.)
- Ensure that consultants or others retained to prepare the bid specifications for their competitive solicitations do so impartially and not with a view to steering the business to any particular bidder.
- Pay close attention when well-publicized grants or other funding sources are available, such as the case with the Buffalo Billion initiative. Well-publicized funding sources may attract bad actors.
If you would like to speak with the Antitrust Section of the Ohio Attorney General’s Office about anticompetitive activity, please call 614-466-4328.