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.
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.
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