Bid-rigging in public procurement: cartel strategies and bidding patterns

Abstract

AbstractBid-rigging harms economies and societies. While existing research has primarily focused on quantifying the economic damages resulting from bid-rigging cartels, there is a relative dearth of studies exploring how firms interact and the specific techniques they use to rig tenders. Our paper examines the bidding behaviours associated with bid-rigging. Specifically, we investigate how cartel companies exploit legal opportunities, engage in joint and similar bidding and adapt tactics based on the number of colluding bidders. Our study relies on judicial evidence and a dataset of 1,242 companies (including 112 colluding entities) participating in 357 roadwork bid auctions in Italy. Through bootstrap logistic regressions, we analyse company-level indicators and their association with cartel involvement. The results reveal that cartels frequently exploit subcontracts and price similarity. Moreover, we find that bid-rigging tactics vary depending on the number of bidding cartel companies involved. When colluding companies are the majority of bidders, cartels rely on widespread member participation to cover a broad range of prices. Conversely, when cartel companies constitute less than half of the bidders, they tend to form temporary associations. These findings untangle the complexity inherent in cartel agreements and strategies, highlighting the importance of assessing firm interactions and relational patterns within co-bidding networks for a comprehensive understanding of collusive dynamics.