Procurement officials should be watching for signs of bid rigging and collusion, according to a report from the Housing and Urban Development Department inspector general.
The report on anticompetitive bidding is part of the HUD Officer of Inspector General Fraud Bulletin series, which provides guidance on how to spot and deter bad actors seeking to abuse the uncertain circumstances of the pandemic. Though the report does not indicate whether anticompetitive bidding schemes have taken place during the pandemic, it encourages procurement officers to keep their eyes open.
“In a disaster environment, such as the one created by the COVID-19 pandemic, competitive pricing can be impacted by the lack of competition, the scarcity of products, the urgent need to acquire products and services quickly, and the lack of substitute product availability,” the report reads. “Although this does not mean that anticompetitive fraud schemes have occurred, the fluid environment increases the risk that they will.”
Collusion prevents the market from allowing the product with the best quality at the best price from rising to the fore during the bidding process, according to the report. Anticompetitive schemes include practices like submitting “token bids” to make it look as though the winning company beat out the competition, when really it was chosen by colluding parties behind the scenes. Other schemes involve agreements to abstain from bidding or withdraw from the bidding process in order to ensure one company wins.
The report outlines a variety of indicators that procurement officers should be looking out for when reviewing bids. A clear sign that something fishy is going on is if the same companies are always bidding and the same companies are always winning, or if there are strange patterns like bidders submitting materials in the same order in each round of the process.
Other suspicious activities have to do with subcontracting. If a losing bidder is then hired on as a subcontractor, or a qualified contractor doesn’t bid and then shows up as a subcontractor later, those companies may be colluding. If companies all suddenly raise prices at the same time, that’s a sign of coordination, too.
Bids that look similar in terms of how they are filled out — even down to similar handwriting or mistakes in mathematical calculations — or the same signature on different bids may indicate that an unscrupulous actor is preparing multiple, anticompetitive bids.
Aid provided through the Coronavirus Aid, Relief, and Economic Security, or CARES, Act is a juicy target for those trying to abuse the current crisis situation. HUD alone has received more than $12 million in CARES funding, according to the report.
A USA Today investigation earlier this month found hundreds of millions of dollars went to vendors with less than stellar track records after a shaky bidding process that didn’t see competitive bidding. The investigation found the government gave $219 million to companies that didn’t face any competition to receive the funds.
The HUD inspector general released fraud guidance on several other topics including advice for renters, borrowers and homeowners. Scams are major issues after natural disasters like hurricanes, and the depth, longevity and confusion surrounding the COVID-19 crisis has provided fraudsters with ample opportunity to take advantage of people. The Federal Trade Commission tracks scam complaints related to COVID-19. Since January, consumers have reported over 140,000 scams and more than $93 million in fraud losses.