4.2 Collusion in the bidding process

Explanation of risk area

Collusion – illegal cooperation or conspiracy aimed at distorting the tendering and procurement process – can create the appearance of competition while in fact directing resources to particular powerbrokers through a network of seemingly independent companies. Collusion can increase the risk of mission resources being used to strengthen corrupt and criminal networks, and of diversion of resources to benefit insurgent or terrorist groups.

Where collusion becomes a significant issue, it distorts the economy of the area and closes off opportunities for real competition. This means that an opportunity to support independent companies and networks that can, with time, create power centres that push for better governance for the new businesses, is lost. It can also distort operational assessments by conveying the picture of a decentralised environment that supports competition and economic development, and hiding significant underlying problems.

For development contracts, which often aim explicitly at diversifying the type and number of economic actors and at strengthening competition, collusion can be a significant issue. In some tenders, development funders told us in 2018, companies would apparently coordinate bids to rotate contract awards between them, effectively forming cartels and preventing strong competition from taking root.

Indicators & Warnings

Companies submit bids that only win in certain geographical areas

Regular suppliers do not submit bids for contracts as would normally be expected considering their background, abilities and means

Companies submit a large number of bids without winning any, possibly creating ‘cover’ for others

Only one company offering to complete a project to the required deadline (this could indicate the timeline is unrealistic and the company might try to raise costs at a later stage)

One-off, but disqualifying flaws in bids that could otherwise win the tender (suggesting intentional failure to enable others to win)

Apparent shell companies (no employees, no offices, little or no work history) submitting bids

Bid documentation sent from the same address and/or containing identical errors, for example in calculations, addresses, or names

Concentration of power and functions in the hands of one person or group

One person or group acting as jobs gatekeeper for large communities

History of allegations and investigations against companies or individuals