Bidding for Projects:
For any project that an Engineering company wants to design, they first must partake in the primary bid. Multiple Engineering firms can be apart of any bid. It's much the same as an auction. This practice is also used by other industries such as Construction and Architecture. For example, if Target wants to build a new headquarters, they will have a general idea on how many square feet, how tall and the quality of the building that they want. Any Architecture firm who is interested will request the specifications that Target wants. Each firm will then estimate the cost for them to design the headquarters and then place those prices on bid day. Target will choose which offer they like best, while also considering past projects that the Architecture firm has designed. The winning Architecture firm then designs the building and passes those drawings on to Construction and Engineering companies, where a similar bid process will happen.
What is Bid Rigging:
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Bid Rigging is Illegal
in the United States |
In some cases, Architecture, Engineering and Construction companies get greedy and will do anything to win the bid. Work may have been slow and they are desperate for work, so they will rig the bid. Bid rigging is a form of fraud in commercial contracts between all companies and breaks every ethical code in all industries. Engineering ethics is a system of moral values and it sets obligations that Engineers must abide by for the society, their clients, and their profession. There's two forms of bid rigging. The first is when competing companies agree to place similar bids, thereby eliminating price competition. For the second, companies agree on which of them will submit the lowest bid and rotate bids in such a way that each firm wins a different bid. An article by the Coffman Law Firm cites a situation that happened in Texas which will describe how bid rigging works. In 2004, there were three, billion dollar construction projects in Texas. Three of the biggest construction companies in North America participated in the bid. Each construction company agreed to rig the bids in order for each company to win one. For the first bid, the construction company that planned to win the bid would give their estimate price for the job. Their price was the lowest and also their means and methods for the job were the most thought out. In the mean time, the other two construction companies placed prices that were well above the first construction company. This process continues for all three bids, and all three companies earned jobs. Eventually, they were all caught and suffered lawful punishment and fines.
Breaking the Code of Ethics:
As I have stated before, bid rigging breaks every code of ethics in all industries. The fourth canon of the Engineering Code of Ethics states that Engineers shall act for each employer or client as faithful agents or trustees. The fifth canon says to avoid deceptive acts and the sixth states for Engineers to conduct themselves honorably, responsibly, ethically and lawfully to enhance honor and reputation. In all, Engineers are supposed to do what's best for themselves and their company while abiding by the rules truthfully. Bid rigging cheats the system and breaks the Code of Ethics. In some cases, companies who have been caught bid rigging aren't allowed to partake in any other projects in the state that they were caught in. The three construction companies that were caught in Texas are never allowed to construct anything in Texas every again and even some Engineers lost their licenses. Some companies have even gone out of business due to the fines against them. Should bid rigging be allowed? No! In other countries, like Japan, bid rigging is used for nearly every job. They bribe customers into choosing them and also fix the bids. This can be a good thing for larger companies who can offer more. But smaller companies and also United States companies have no chance of winning any bid because they can't bribe the customers with anything. Kiewit Engineering is a construction company that dominates North America. But they refuse to partake in any projects in other continents because they simply cannot keep up with other foreign companies bribes.
The Future of Bidding:
In a world that is becoming more politically correct everyday, I believe it will be a thing of the past. 20 years ago, it was common for every company to rig bids, even in the United States. Whenever companies bid on projects, it is very competitive and everyone wants to win. But breaking the law and moral ethics is taking it too far. I believe that the current consequences for bid rigging are just right in the United States and I hope that someday there will be a uniform law throughout the world. Although the punishments may seem like a slap on the wrist to most companies, it sends a message to all.
This is a good piece on bid rigging. Your example is very helpful in explaining what exactly bid rigging is. I interned at a construction company for two summers and I learned a little bit about bidding. I even had the chance to submit a bid for a job myself. However, I don't think that bid rigging will become a thing of the past. People have always been greedy and always will be. There will always be cheaters in the world and because of this, bid rigging will continue no matter what the consequences are.
ReplyDeleteI enjoyed reading this blog on bid rigging. It is something not most people think about when it comes to ethics but needs to be said. From personal experience it has been strange to watch some groups not even wanting the job so they intentionally bid themselves out while other groups are doing everything thing they can to get the next job. I agree it is sad and extremely unethical to rig and bid and its something many engineers will need to take a look at in their careers.
ReplyDeleteIt's an interesting idea to think about. This article on bid rigging truly brings the politics behind engineering out of the woodwork and into the eye of the reader. Personally I knew that it historically occurred, and did to some extent now, but this article shined a ton more light on the subject for me. I do think that Richie is correct when he says that it will not be going away anytime soon- the human condition won't allow it to.
ReplyDeleteI was surprised to read that this is an acceptable practice in Japan. I thought your topic was very engaging and explained well.
ReplyDeleteWell done! It is a new topic to me and really interesting.
ReplyDeleteI have never heard of "Bid Rigging" until your blog. For someone not knowing anything it was easy enough to understand yet complex enough for me to expand my knowledge about the topic. It's a shame that companies will break the law as well as ethical issues just to get win the bid. It seems that no matter what the area is, people can easily be run by greed. I think what they did in Texas with taking away some of their licenses and not allowing them to work in the state ever again is a good form of punishment. These companies probably think they are just "bending" the rules and everyone else is doing it so they might as well too. It takes strong consequences like that rather than a slap on the wrist to stop this type of behavior.
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