As an agency using taxpayers’ money for construction projects, it’s critical to ensure that those dollars are spent wisely. Unfortunately, the highway construction industry has a long history of bid rigging and anticompetitive practices. This is not to say that all highway construction vendors are involved in these practices, but it only takes a few to do real harm to an agency’s program, so an agency should do all it can to spot non-competitive behavior and bid rigging.
Laying the Groundwork: Pre-Award Analysis
An agency should be conducting pre-award analysis and review of the bids received on contracts in the monthly bid lettings. Additionally, a long-term market analysis spanning multiple years should be performed. This was reinforced by a recent FHWA memorandum dated March 10, 2025, titled “Analysis Methods for Detecting Potential Anticompetitive Bidding”. The second paragraph of this memorandum states, “Amend FHWA guidance to recommend that State DOTs conduct frequent, regular, systematic reviews of procurements made over multiple years using specific statistics to identify anticompetitive bidding patterns and, to the extent practical, reduce reliance on historical data when developing engineer’s estimates.”
Pre-award analysis provides the agency with information on what is currently happening on its contracts. Over time, it often points to work types that should be investigated more closely with a market analysis.
Pre-award analysis should include evaluating the vendor’s item prices to determine if they are reasonable. This process should include looking for unbalanced prices (item prices that are abnormally high or low). One form of item price unbalancing is front-end loading, where vendors shift dollars to items that are paid early on the contract. This benefits the vendor because it gets the contract dollars earlier, and harms the agency because it is paying out contract dollars earlier than anticipated, which may disrupt cash flow projections.
Item price analysis should also look at the main differences from the prices in the engineer’s estimate. Additionally, are vendors inconsistently bidding different prices on contracts they won versus contracts they lost? Also, do vendors price differently when certain vendors also bid on the contract?
Pre-award analysis should include evaluating the vendors that bid and didn’t bid. Did logical vendors not bid? Do some vendors not bid when another vendor bids? Did vendors pull plans for the contract and not bid? These are signs of a non-competitive market.
Pre-award analysis is not looking for bid rigging per se; however, it does lay the foundation for later market analysis. The goal of pre-award analysis is to gather information to make a more informed decision to award or reject bids on the monthly bid letting contracts. To determine if bid rigging is possibly occurring, you need the large quantity of contracts you will typically have in a market analysis.
Going Deeper with Market Analysis
It is beneficial to an agency to question vendors about their bids or non-bids from a pre-award analysis. For non-bids, this can be done in a non-confrontational manner by asking the vendor how the agency could have packaged the contract to make it more attractive for the vendor to bid. For unbalanced and/or front-end loaded items, my experience is that the vendors will always have some excuse, but the bottom line is that the vendors quickly learn that the agency is doing analysis of the bids received, and often the behavior changes to the agency’s benefit.
Agencies should do frequent market analysis of a specific work type (i.e., asphalt or concrete paving, pavement marking, etc.). This type of analysis spans multiple years (often five years). Often, the pre-award analysis helps an agency determine the work type a market analysis should focus on.
A market analysis includes most of the analysis mentioned above for the pre-award analysis, plus much more that will briefly be described here.
A market analysis works with the contracts of the specific work type across the entire state. To do a proper market analysis, market areas will need to be defined for a specific work type. The market area is a group of adjacent counties that have very similar vendors bidding on the contracts. It is not unusual for vendors to appear in multiple markets, but the top vendors in each market should be different. Market areas vary in size—some may include six counties, others eight. Most markets cover more than three or four counties, unless the area has a large city or many single-bid contracts.
Market share analysis is usually the first step. It measures how much money each vendor has been awarded over a set period, typically focusing on the top five vendors, with the rest grouped as “others.” Shares should be calculated for the full time frame (e.g., five years) and annually. Red flags include a few vendors dominating the market, evenly split shares among top vendors, or stable shares over time – these are all signs of possible market allocation. In contrast, year-to-year variation suggests healthy competition.
A proper market analysis evaluates vendor competition. Do certain vendors have a strong bidding relationship with another vendor? When these vendors bid head-to-head, do the wins account for a high percentage of the bids (they don’t necessarily need to be even)? Do the vendors closely split the wins? Do some vendors never bid against certain other vendors? Do vendors often win in one market and often lose in a different market?
Spotting Red Flags in Vendor Behavior and Pricing
Bid and price analyses are important to market analysis because ultimately, price is the determining factor in comparing competitive and collusive markets. Price analyses should be performed from several different perspectives. The goals are to analyze price patterns for collusive indications and to determine how prices compare to benchmark competitive prices. Vendors don’t participate in bid rigging without raising prices. Several red flags should occur if prices are higher in one market than another market for no apparent reason. Another red flag should occur if prices are higher when certain vendors are bidding and winning.
To make it appear that there is competition, losing vendors will submit complementary or sham bids, which are bids intentionally meant to lose. Complementary bids are a clear sign of collusion.
In summary, there are four main forms of collusion:
- Market Allocation (vendors divvy up market areas).
- Complementary Bidding or Sham Bidding (certain vendors bid to intentionally lose).
- Suppression of Bids (vendors agree not to bid).
- Bid Rotation (vendors alternate winning and losing contracts).
Sometimes agencies wish to keep a market analysis secret for fear that vendors may start destroying evidence such as documents, emails, and text messages. Our experience is that the contracting industry has an uncanny ability to find out that a market analysis or investigation has started, and, in many cases, prices decrease. If vendors change their behavior after an investigation starts, this is a huge red flag.
Acting on Your Findings
It should be stated that individual analyses (market shares, vendor competition, or bid and price analysis) by themselves do not prove collusion; each of these analyses builds on each other to come to the conclusion that bid rigging may be occurring.
An agency’s analysis will be based on circumstantial data analysis. If a proper analysis has been done, that is all an agency needs to report to the state Attorney General office and/or the USDOJ of suspected anti-competitive activity.
Authors
Nate Binder
Digital Marketing Manager
A proud graduate of Florida State University, Nate works with subject matter experts and sales professionals to produce targeted marketing collateral.