how does bid rigging work and why is it illegal?

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how does bid rigging work and why is it illegal?

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Three construction companies bid to build a bridge that a government wants to build. The cost of the bridge would normally be $100 million, but the bidding companies work together Company A bids $215 million, Company B bids $210 million, Company C bids $200 million. Because the bids were fairly close to each other the government thinks if it allocates the work to Company C then it will get a good deal.

Company C then hires Company A and B as subcontractors to build the bridge and they all share the $200 million between them. The government (the general public) have paid $100 million too much for the bridge.

There are also powerful lobbying groups for the construction industry as well as bids that are not open to newcomers. It’s a terrible scam.

Another way it works: There are three bridge building companies. Government needs a bridge built. Bridge costs $100 million. Company A & B are already busy building bridges so they bid $200 million (to cover overtime and adding additional crews). Company C bids $190 million (knowing that A & B can’t actually handle the extra work).

Next month, a $100 million bridge needs built. Company A, now done with their bridge, and knowing that B & C are busy, bids $190 million.

Next month, a $100 million bridge needs built. Company B, now done with their bridge, and knowing that A & C are busy, bids $190 million.