Corruption happens because there is impunity. That's the reason why corruption is widespread at all levels - from the person who asks for a bribe on the street to those who hold prominent positions.
-- João Manuel Gonçalves Lourenço
Most of us assume that a system of competitive bidding for government contracts precludes chicanery. Here's an excerpt about bid rigging from Wikipedia.
Bid Rigging as acts of corruption[edit]
- Change order abuse occurs when a contractor colludes with project officials, wins a low bid, then asks to change the contract afterwards. This is approved by officials, resulting in a much higher bid being retroactively approved.[1]
- Bidder Exclusion allows project officials to essentially choose their bid. There are multiple methods to achieve this end including:
- Instituting unreasonable qualification parameters, excluding non-preferred firms, or effectuating the same by shortening the time of acceptance periods for new bids following a request.
- Advertising projects to select bidders or bidding markets, thereby reducing publicity of bid procurement.
- Bundling of contracts to exclude bidders.
- Coercion and intimidation can also be used or simply rejection of individual bids over trivial matters.[2]
- Purchase splitting to reduce the minimum bid amount. This functions as contracts are split up to reduce the actual procurement amount and keep it under a threshold value. This reduces competitive bidding and enables less oversight at the project level as bid prices drop and kickbacks can be allotted.[3]
- Leaking of bid information, which requires a relationship of some degree between the project and a bidder as the bidder is handed information to gain an unfair advantage.[4]
- Bid Manipulation is another method for officials to choose the bidder of their choice but occurs after receipt of bids. The methods for this would include either changing bid parameters, evaluation processes, or other activity to effectively select the bidder of choice.[5]
- Rigged Specifications allow more bidder exclusion by officials by either tailoring requests to individual bidders or creating a vague criterion to reasonably choose a preferred bidder.[6]
- Unbalanced bidding involves high bid prices for commencing phases of development and low prices for later stages. This effectively increases the flow of funds for the bidding firm. This occurs when bidders cite high prices for items, intending to raise the number of units and purchase them at a competitive rate while simultaneously skimming profits from the artificially high bid price. Additionally, bidders may give low quotes for non-necessary items (knowledge gained through collusion or experience) to disadvantage other firms as their bid amount is more competitive. This also serves to increase the cost of entry for new firms.[7]
- Unjustified Sole Source Awards are bids chosen on criterion unrelated to their competitiveness. This can be performed either blatantly, by falsifying bids, or by price splitting.[8]
And another: THE MOST COMMON PROCUREMENT FRAUD SCHEMES AND THEIR PRIMARY RED FLAGS, by W. Michael Kramer (International Anti-Corruption Resource Center)
BRIBES AND KICKBACKS
A bribe is usually defined as the giving or receiving of a “thing of value” to corruptly influence the actions of another, most commonly to influence a contract award or the execution of a contract. A “kickback” is a bribe paid by the contractor after it is paid. Most bribes in exchange for large contract awards in international development projects are paid as kickbacks, usually 5%-20% of the contract value.Corrupt payments
The bribe need not be in money or cash, and often is not. Any benefit given or received with the intent to corruptly influence the recipient can be a bribe.
“Things of value” that have been given and received as bribes include:
- Expensive gifts, free travel and lavish entertainment
- “Loans,” whether or not repaid
- Use of credit cards
- Sexual favors (hiring of prostitutes, etc.)
- Overpaying for purchases, e.g., paying $20,000 for a car worth $5,000
- Cash
- Fees and commissions, even if recipient allegedly provided services to the payer
- Hidden interests in business transactions
Often the payments follow the general sequence outlined above, with the amount and form of payments becoming more significant and incriminating as the scheme progresses.Corrupt influence
- Corrupt influence often is reflected as, among other things:
- Qualifying an unqualified or untested company to bid or be a vendor
- Improper or non-competitive contract awards
- Paying too much for goods or services
- Buying too much of an item, or buying inappropriate items
- Continued acceptance of low quality or non-compliant goods or services
As the corruption continues, the abuses often turn into fraud, such as fictitious invoices, with the parties conspiring to split the profits. Eventually the excesses of the scheme lead to its detection, as the mounting evidence of favorable treatment and fraud, and the conspicuous expenditures of the conspirators, call attention to their behavior.The major red flags of bribes and kickbacks
- Improper (e.g., non-competitive) selection of a contractor Unjustified favoritism of a certain contractor, e.g. approval of high prices, excessive purchases, continued acceptance of low quality goods, etc.
- Unnecessary broker or middleman involved in transactions
- Procurement official accepts inappropriate gifts and entertainment
- Unexplained increase in wealth by procurement official
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