Bid rigging is a form of procurement fraud that occurs when participants in a bidding process for public contracts conspire to undermine the integrity or transparency of the process, sometimes with the complicity of public officials. Common examples of violations include collusion among bidders to fix a common price, requests for proposals deliberately and unnecessarily tailored so that only select bidders can meet their requirements, and lowballed bids with hidden costs and fees.
In Japan, where corruption is generally perceived to be relatively rare, bid rigging—nyusatsu dango—is a persistent and problematic form of public corruption. In many cases, bidders make secret agreements among themselves about who will win and at which price. Other bidders will then deliberately submit losing bids. The colluding bidders will then attempt to keep prices high, or rotate the allocation of winning bids among themselves, undermining the neutral, independent, and competitive nature of the process. Such bid rigging deprives government agencies and enterprises at all levels of taxpayer funds.
Of course, bid rigging is not just a problem in Japan alone. A 2014 survey by PriceWaterhouseCoopers found procurement fraud to be the second-most common economic crime reported by companies worldwide. A 2008 study found that corrupt practices added 20-25% to the costs of public contracts in Europe.2 A 2013 estimate by the Organisation for Economic Co-Operation and Development (OECD) found a similar loss to corruption in procurement contracts among member states.3 A study of Japan’s legal and administrative reforms against bid rigging over the last fifteen years may hold lessons for other jurisdictions struggling to curb this common form of public corruption.
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Suppressing Bid Rigging: Lessons from Japan,
Available at: https://scholarship.law.columbia.edu/public_integrity/67