Competition Bureau Canada

Competition Bureau Canada

February 17, 2009 11:55 ET

Competition Bureau Announces Charges Against Companies Accused of Rigging Bids for Government of Canada Contracts

OTTAWA, ONTARIO--(Marketwire - Feb. 17, 2009) - Criminal charges have been laid against 14 individuals and 7 companies accused of rigging bids to obtain Government of Canada contracts for information technology services, the Competition Bureau announced today.

The Bureau found evidence indicating that several IT services companies in the National Capital Region secretly coordinated their bids in an illegal scheme to defraud the government by winning and dividing contracts, while blocking out honest competitors.

The Bureau's investigation found evidence of criminal activity in 10 competitive bidding processes from 2005, for contracts worth approximately $67 million. The contracts related to IT professional services provided to the Canada Border Services Agency, Public Works and Government Services Canada, and Transport Canada.

"Bid-rigging is a serious criminal offence that harms buyers of products and services, competing businesses, and ordinary Canadians who ultimately pay the bills," said Melanie Aitken, Interim Commissioner of Competition. "The Bureau will not hesitate to take action against bid-riggers when it uncovers evidence that the law has been broken."

Bid-rigging is a criminal offence where bidders secretly agree not to compete or to submit bids that have been pre-arranged among themselves. Their goal is to thwart the competitive tendering process and inflate prices to purchasers.

The Bureau actively reaches out to businesses and governments to educate procurement officials about bid-rigging, and to ensure they arm themselves with the tools to prevent, recognize and report such illegal activity to the Bureau. Procurement officials who believe they may have been victimized by bid-rigging are encouraged to bring the matter to the attention of the Competition Bureau.

An extensive Bureau investigation included cooperation secured under its Immunity and Leniency Programs. Under the Immunity Program, the first party to disclose to the Bureau an offence not yet detected, or to provide evidence leading to the filing of charges, may receive immunity from the Director of Public Prosecutions. Parties that approach the Bureau early in its investigation of criminal activities may be able to benefit from leniency - reduced penalties in return for their cooperation. These programs are among the Bureau's best weapons to combat these secret criminal anti-competitive agreements.

Details of the offence and charges, including the names of the parties involved, are provided in the Backgrounder.

The Competition Bureau is an independent agency that contributes to the prosperity of Canadians by protecting and promoting competitive markets and enabling informed consumer choice.


BACKGROUNDER

Competition Bureau Announces Charges Against Companies Accused of Rigging Bids for Government of Canada Contracts

The Investigation

In 2005, Public Works and Government Services Canada (PWGSC) officials contacted the Competition Bureau to voice concerns about certain bidding processes, and the Bureau began an investigation.

In conducting its investigation, the Bureau found evidence indicating that bidders, in response to calls for bids for the supply of IT services to Canada Border Services Agency (CBSA), PWGSC and Transport Canada, secretly agreed in advance on the technical and financial proposals they would submit.

The Bureau's investigation focused on 10 contracts. Eight of the contracts, worth $62 million, relate to IT services for CBSA. The other two contracts are for IT services for Transport Canada (worth $4 million) and PWGSC (worth $1 million). The bidding processes for the CBSA and PWGSC contracts were managed by PWGSC, while Transport Canada managed its own contracting process.

The evidence indicates that the bidders' objective was to collectively win and divide the contracts awarded, while blocking competitors who were not part of the conspiracy. As a result of the agreement, the bidders were allegedly able to maximize the rates at which services were to be provided to the various departments.

Bid-rigging conspiracies are, by their nature, difficult to detect and to prove to the criminal standard of beyond a reasonable doubt. Over the course of the Bureau's investigation, a number of investigative tools were used, including interviews and searches. Bureau officers searched 10 locations, including head offices and homes, and seized over 125,000 paper and electronic records.

In addition, the Bureau secured cooperation from applicants under its Immunity and Leniency Programs, respectively. Under these programs, the first parties to disclose to the Bureau an offence not yet detected or to provide evidence leading to the filing of charges may receive immunity or lenient treatment from the Director of Public Prosecutions, as long as the parties cooperate with the Bureau. The Immunity and Leniency Programs are among the Bureau's best weapons to combat these secret anti-competitive agreements.

No allegations are being made against those who performed the actual work for the client departments, nor are any government employees implicated.

Bid-rigging and the Competition Act

Bid-rigging is a serious criminal offence that harms everyone but the perpetrators who cheat the system - it hurts buyers of products and services, competing businesses, and ordinary Canadians who ultimately pay the bills. Some recent studies suggest that in cases where bid-rigging occurs, the price paid for the good or service typically increases by about 20 per cent.

Under Canadian law, when bidders collude on prices, they are committing a crime punishable by jail time and fines. The Competition Act makes it is a criminal offence for two or more bidders, in response to a call or request for bids or tenders, to secretly agree that one party will refrain from bidding, or to agree on the bids they will submit, without informing the party issuing the call for bids of these arrangements. Penalties for bid-rigging include a fine at the discretion of the court and/or a prison sentence of up to five years.

Attacking cartels, including bid-rigging offences, is one of the Bureau's enforcement priorities. The Bureau has offices across the country active in bid-rigging prevention and investigations.

In addition to its enforcement activities and in an effort to prevent and detect such criminal activity, the Bureau offers educational sessions to businesses and all levels of government about bid-rigging. The Bureau has given 170 educational presentations to procurement agencies, including PWGSC, since 2005, and continues to work with its government partners to educate them on how to detect and prevent bid-rigging.

For information on how to detect, prevent and report suspected incidences of bid-rigging, please see the Bureau's presentation, Bid-Rigging: Awareness and Prevention.

A table of the charges laid is available at the following address: http://media3.marketwire.com/docs/Competition_E_0217.pdf

Contact Information

  • For media enquiries:
    External Relations and Public Affairs Branch
    Marilyne Nahum
    Communications Advisor
    819-953-9760
    or
    For general enquiries:
    Competition Bureau
    Information Centre
    819-997-4282
    Toll free: 1-800-348-5358
    TTY (hearing impaired): 1-800-642-3844