Detecting Warning Signs of Bid Rigging and Unbalanced Bidding
The Quebec Charbonneau Commission, a $40 million public inquiry, noted that public procurement in the construction industry is recognized internationally as a prime target for organized crime. That inquiry uncovered widespread corruption in the province and led to the resignation of three mayors and multiple criminal charges.
With this audit, our Auditor General was the first to alert City of Toronto officials of the similar risks in Toronto.
All public-sector audit shops, especially those who deal with construction and contract management audits, would benefit from learning about the tools used in this specific case in order to spot potential similar problems.
The City did not have a database to capture basic tendering and subcontracting information. Without this information, the City could not properly identify questionable bidding practices or patterns, and could not properly analyze the market.
The presentation will detail the extra step our team took. Instead of just providing a recommendation for the City to develop a proper database and close the issue, our staff came up with an innovative solution: they created their own database and analyzed a massive amount of data (30,000 bid prices from 163 tender calls over five years). This major undertaking provided a much-needed ‘bird’s eye view’ of the market, bidding patterns and pricing, and persuasive evidence.
There was a high risk that much of the available data could be lost because it was being haphazardly stored. In order to secure the evidence, audit staff drove to the City Divisions at 7 a.m. one morning to physically gather over 100 boxes filled with bid-related documents and contracts. They brought these boxes back to the office, cataloged the documents, and used them to compile the database.
The presentation will walk through how our team did their analysis – they reverse-engineered the procurement process for these contracts. This method turned up invaluable information because staff was able to clearly identify various signs of potential bid-rigging. This database was so successful that audit staff gave this database to management as a starting point for them to create their own. Subsequent to the audit, at the request of senior management staff, audit staff provided several training workshops to supervisory and front-line staff on the significant issues that existed in the bidding process.