This article surveys a broad range of collusive contracting practices that lead to tainted contract awards and calls on Canadian public institutions to adopt proactive oversight measures to detect and deter these illegal and unethical practices.
Bid-Rigging and Other Offences
Bidding-rigging is a quasi-criminal offence under the federal Competition Act. The offence includes bid suppression schemes where bidders avoid direct competition by pre-selecting a sole bidder who wins an award at an inflated price, as well as price collusion schemes where an inflated low bid is covered up by other bidders who submit higher dummy bids. While bid-rigging remains a well-documented problem, resulting in large fines and long prison terms, it is far from the only collusive contracting practice undermining the integrity of public sector contract awards.
Influence peddling, where individuals seek payments in exchange for influencing government contracting decisions, and kickback schemes where contractors bribe accomplices in public institutions to influence contract award decisions, are two criminal offences that also involve collusive contracting practices. As recent rulings reveal, the destruction of government contracting records to cover up improper contract decisions can also, among other things, constitute a criminal offence, as can other fraudulent practices relating to false invoicing or expense claims.
Illegal and Unethical Practices
Lobbying activities directed at senior decision-makers can also compromise the integrity of a procurement process, particularly when the lobbying is aimed at improperly influencing an award decision. While single-point-of-contract protocols prohibit bidders from communicating with anyone within the public institution other than the officially designed contact person, those institutions need to be vigilant in enforcing these rules to prevent unlawful awards.
Unsolicited proposals, where suppliers pitch a contracting opportunity to a public institution to win a sole-source award that circumvents open tendering rules, and third-party funding schemes that are tied to pre-approved suppliers who never competed for the work, are other murky zones for potentially collusive conduct.
Conflict of interest can also undermine the validity of a contract award. For example, conflicts can taint an award when a government official’s personal interests conflict with the duty to exercise independent judgment in a contract award decision. In fact, Canada’s ethics commissioner has rendered multiple adverse rulings in recent years due to the improper involvement of conflicted cabinet ministers in contract award decisions. In recent years bid protest rulings and public audits have also found multiple unfair advantage situations where contract specifications or bid award criteria were manipulated by the government’s technical advisors to create an unfair bidding advantage for certain suppliers. In fact, unfair advantage is particularly entrenched when incumbent suppliers benefit from biased requirements, unfair informational advantages, or compressed bidding timelines that create an improper advantage over outside bidders.
Preferential Contracting and Shady Sole-Sourcing
Recent high-profile audits have also exposed patterns of preferential treatment in the award of multiple sole-source contracts to the same suppliers. These awards are often concealed by contract splitting, through which internal accomplices in public institutions divide contracts into smaller awards or underestimate cost estimates to circumvent open tendering duties. Once these tainted incumbencies are established, they can be leveraged in subsequent sham bidding processes to further entrench the incumbents. While often motivated by expediency and enabled by weak oversight, multiple global case studies show that these preferential patterns are often accompanied by kickback bribes paid by suppliers to their internal accomplices.
Given the above, when sole-source awards are made without a well-documented record to support the reason for bypassing a bidding process, those awards should be scrutinized for potential collusion. In fact, domestic and international trade treaty rules include a series of long-recognized anti-avoidance measures that serve as further red flags for potentially collusive practices, including the improper use of false fronting arrangements and third-party purchasing agents to circumvent public tendering duties.
Weak Contract Administration and Reporting
Weak contract administration serves as another telltale sign of potential collusion. When multiple sole-source contracts are awarded to the same supplier and contain vague specifications and weak payment oversight mechanisms, the obvious question is whether these awards were merely the product of administrative incompetence or whether they are evidence of internal collusion.
Flawed public reports are another telltale sign of potentially collusive conduct. When a public institution releases inaccurate or misleading information regarding contract award details that conveniently obscures a pattern of improper sole-sourcing to the same supplier, that cluster of sole-source awards should be investigated for potential collusion.
Future Considerations
Given the widespread and well-documented risk of collusive contracting practices, public institutions need to establish proper oversight measures, supported by proper awareness training, to avoid becoming the next collusion case study.
