Estimating Damages from Bid-Rigging in the Construction Industry

Abstract

Bid-rigging is common in many industries, and in recent years we have seen litigation concerning damages from bid-rigging increase with a variety of collusion scandals being disclosed. Several studies have estimated damages due to bid-rigging in construction. However, these studies were limited from two perspectives: they mainly focused on damages estimated by econometrics, and they did not consider specific characteristics of the real circumstances in each construction project. This study proposes an objective methodology to estimate damages due to bid-rigging in construction, especially for design-build and turnkey projects, which have bidding processes with unique characteristics: design and cost proposals are solicited from the shortlisted design-builders. The decision tree (DT) technique was used as the basis for the proposed decision-making model for estimating damages in these cases. In addition, the case study using a real bid-rigging case demonstrated the feasibility of the proposed decision-making model by making an objective estimate of damage due to bid-rigging in a design-build project. This study’s main contribution is the incorporation of a DT during the decision-making process for objective estimation of damages due to bid-rigging in construction projects.