Ethical Dilemma of Bid Rigging in Construction (Essay Sample)

Student’s Name Professor’s Name Course Date Ethical Dilemma of Bid Rigging in Construction Unethical practices may occur in the construction industry often resulting to dilemmas. The unethical practices emerge from the conflict of interest between professionals, that is, contractors, architects, surveyors, site engineers, and clients among others. Overbilling, bid rigging, bid cutting, and shopping are among the unethical practices under bidding that contractors commit (Shah and Alotaibi, 58). The focus of this paper is bid rigging and the ethical dilemma it poses in the construction industry. The practice entails deceitful agreements to manipulate the bidding process by bidders hence resulting in unfair advantages. Addressing bid-rigging requires conversance with perspectives surrounding the issue for easy generation of potential solutions. The essay outlines the conflict between ethical responsibility and individual gains hence requiring a comprehensive framework to achieve integrity and fair competition. Understanding Bid-Rigging The construction industry is founded on the context of competition hence submission of bids for projects is based on the expected costs and planned quality of work. Bid rigging undermines fairness by enabling contractors to collude and choose the winner in advance, often by dividing up contracts among themselves. According to the American Institute of Constructors (1), bid rigging appears in the forms of cover bidding, bid rotation, suppression, phantom, and non-conforming bids. Cover Bidding Cover bidding is the practice of one or more contractors banding together to submit high offers with no intention of winning the contract. It is also referred to as complimentary bidding or courtesy bidding. Rather, they are entered to give the appearance of competition (Power, 1). The goal is to guarantee that a preferred bidder wins the contract while preserving the appearance of an impartial and transparent bidding procedure. The procurement entity or client is tricked into believing they are receiving competitive bids when, in fact, the result is decided by this deceit. Bid rotation In this form of bid rigging, several contractors rotate through becoming the lowest bidder in a bidding process. Every participant in this program has the opportunity to win contracts throughout a set time frame (Shah and Alotaibi. 58). They manage the bidding process to ensure that each participant receives a piece of the contracts without actually engaging in competitive pricing by announcing in advance which bidder will win certain projects. This strategy distorts the procurement process's inherent competitiveness, which drives up costs and lowers quality because there isn't any real competition.  Bid Suppressing In order to secure a contract at a higher price than they would have in a truly competitive environment, a bidder may suppress their bid by withdrawing their bid or by choosing not to bid to guarantee that another predetermined bidder wins the contract (American Institute of Constructors, 1). This strategy involves bidders working together to remove competitive offers, which reduces the number of competitive bids and may result in overpayment for the client. Phantom Bidding This refers to false bids made to mislead the client or the procurement entity. The idea is to create the illusion of competition by creating bids that look real but aren't really from separate, eligible bidders. These fraudulent bids may be used to influence the terms or prices put forth by other bona fide bidders, creating the impression of a competitive bidding process while guaranteeing that a specific bidder receives the contract. Non-Conforming Bid This refers to submissions of proposals that do not meet the predetermined specifications listed in the bidding documents. Bidders occasionally purposefully submit partial or non-compliant bids, giving the impression of conformity while still containing malicious intent. This strategy can be used to deceive the purchasing body or exclude other legitimate bidders (Shah and Alotaibi., 65). All these bid-rigging practices undermine fair competition hence termed illegal in the construction industry. The Ethical Responsibility Perspective Proponents of bid-rigging have their arguments to support the act but in my view, it is unethical for several reasons. First, the core ideas of equality and justice in a competitive market are undermined. Competition fosters efficiency, fair pricing, and innovation in a robust and ethical market. Bid-rigging undermines this impartiality by preventing legitimate companies from participating on equal grounds. Businesses that engage in bid-rigging schemes influence the bidding process and artificially raise prices, resulting in contracts being awarded based on covert agreements rather than merit. This undercuts the fundamentals of fairness in business transactions. For this reason, Power (1) indicates that in 2019 the U.S. attorney’s office in collaboration with federal agencies charged companies up to $100 million and individuals a 10-year jail term for bid-rigging since it altered competition. Similarly, the Competition and Marketing Authority (1) in the UK charged ten construction companies in 2023 about £60 million for interfering with competition laws through bid-rigging. Second, bid-rigging contradicts the values of integrity and transparency. It is essential to guarantee that the most competent organizations receive contracts through an open and transparent bidding procedure. Bid-rigging however, is deceitful and encourages dishonesty and secrecy (Imhof, 239). This unethical practice promotes a lack of transparency and damages the construction industry's credibility and confidence in addition to misleading clients and stakeholders. It is challenging to rebuild confidence in the neutrality of upcoming projects as a result of this lack of trust.  The distrust can go beyond the individuals directly engaged and damage the industry's reputation. Xiao (363) states that antitrust authorities are burdened with identifying the bid rigger’s relationship networks before their successful domination of the industry. Third, bid-rigging is an ethical practice that leads to an inefficient economy. The best contractors may not be chosen for projects when contracts are given out based on collusive tactics rather than open competition. This drives up costs at the expense of quality and eventually impacts the economy negatively. When taxpayer funds are diverted from public construction projects because bid-rigging has deliberately inflated the costs, the funds lose their value. Additionally, customers wind up paying more for products and services, which affects their financial security and interferes with the equilibrium of the market. Ya’acob et al., (3) rank bid rigging among the most common unethical practices that multiplied the economic expenses of construction hence driving the adoption of Building Information Modelling technology in Malaysia. The technology eliminated unethical practices in construction according to their study. Finally, the detrimental impact that bid-rigging has on emerging and local businesses raises serious ethical concerns as well. These small companies, which are also essential to the construction sector, could find it difficult to compete with bigger, collusive organizations. Preventing these smaller businesses from winning contracts based on their merit inhibits their potential to develop and survive. Sato (3) indicates that bid-rigging is an unreasonable trade restraint in Japan and that enterprises that engage in driving small and local businesses away through the practice have to be answerable as dictated by Japan’s Bid Rigging Act. If not controlled, the practice limits the diversity and creativity that smaller construction companies frequently contribute to the construction industry, in addition to hindering their expansion. The Individual Gain Perspective Bid rigging proponents have a different perception of how the practice benefits individuals and businesses despite being illegal in the construction industry. First, it is believed that bid-rigging is attractive following its potential to increase profits. Individuals who engage in bid-rigging can guarantee that they obtain projects at greater prices than they would in a fair and competitive bidding procedure by banding together with rivals to predict who will win particular contracts (Gerrard, 1). This ensures a continuous flow of work at inflated rates, increasing the parties' financial profits. Therefore, the anticipation of increased profitability drives individuals and companies to participate in bid-rigging activities. Sato (7) even states that sometimes government agencies are involved in bid-rigging with the perception of offering support to local businesses for a flawless bidding process. Second, for those engaged, bid-rigging can drastically lower risk and uncertainty. There's always a chance of losing out on contracts in a competitive bidding situation, which means that time, energy, and money wasted on bid preparation are not guaranteed to be awarded the project. Individuals can remove this uncertainty and guarantee a steady supply of projects and revenue by banding together and manipulating bids. Amoah and Steyn (90) established that bid rigging supporters see it as the only way to win contracts regardless of the effect it might have on construction ethics. Individuals looking for stability and guaranteed work in the construction business find bid-rigging a tempting option due to the decreased chance of losing bids. Third, the possibility of cost-sharing and less competition is another important factor that, from the perspective of individual gain contributes to bid-rigging. It is believed that working together with other bidders makes it possible to divide up the costs associated with the bidding process, s...