Harbert Companies and Bilhar: Cover Bids on USAID’s Cairo Sewer Contract

Harbert Companies and Bilhar agreed to pay $47 million to resolve bid-rigging claims over a Cairo sewer contract funded by the U.S. Agency for International Development. The government alleged that other bidders agreed to stay out or bid intentionally high so that a joint venture including Harbert International would win. For someone who knows how a construction estimate was prepared, that is the revealing question: was the bid priced to win the work, or to help somebody else win it?

The Department of Justice announced the settlement on March 20, 2012. Harbert International’s joint venture won Contract 20A to build a sewer system in Cairo, Egypt. The bid-rigging allegations concerned that construction contract, bid and performed in the late 1980s and early 1990s.

What Is the Meaning of Bid Rigging?

Bid rigging means bidders agree to manipulate the competition for a contract. In the Cairo case, the government alleged that various Harbert entities made agreements with potential bidders to ensure that the joint venture would win. Harbert International was part of that venture, which ultimately won the sewer contract.

The alleged bargain reached beyond the winning bid. A potential competitor could help by submitting a price deliberately too high to win, or by withholding a bid altogether. The government said the return for that cooperation was a payoff.

We see an absurd bargain in the allegations: paying a contractor to help someone else get the job. The competing bid, when there was one, served the intended winner. Taxpayers were funding a sewer system while the alleged agreements worked to remove the competition for building it.

What Are Types of Bid Rigging?

Cover bidding and bid suppression are the forms reflected in the Cairo allegations. A cover bid is deliberately designed to lose, giving the intended winner an apparent competitor. Bid suppression removes a rival offer through an agreement not to bid or to withdraw a bid. The Cairo release specifically describes agreements not to bid and agreements to bid intentionally high.

With a cover bid, the communication behind the submitted price can expose the agreement. With suppression, the agreement explains a decision to sit out. Both can serve the same arrangement: the winner gets the contract, and a would-be rival gets something for helping clear the way.

The Construction Estimate Behind a Cover Bid

A construction bid connects a price to the work being offered. Quantities, individual prices, materials and construction methods give an estimator a way to understand how that price was built. A deliberately losing bid turns the estimating exercise toward a different objective: protecting another bidder’s win.

The 2018 Creative Construction Conference paper Review of Collusion and Bid Rigging Detection Methods in the Construction Industry describes research into a road-construction cartel on Long Island. Members submitted fake competing offers, and their prices showed a weaker connection to costs than other bidders’ prices:

The estimate explains how the company would build the job. The instructions behind a cover bid can explain whose price it was supposed to protect.

The same paper proposes bringing tender prices and winners together with ownership, subcontracting, consortium records and bills of quantities. Applied to an allegation like Cairo’s, they give us a way to examine the winning venture alongside the companies expected to compete against it. The connection between the businesses matters as much as the comparison between their prices.

A meaningful price comparison also needs a useful benchmark. The review describes comparisons with other businesses operating in the same market, or with the same market in a different period. For an estimator, that brings the analysis back to the work and the costs behind each offer.

From the Bid to the Government’s Payment

The government alleged that the Harbert companies submitted false claims to the aid agency and caused others to submit them through the bid-rigging scheme. The alleged bargain to keep rivals from competing reached beyond the award to the claims for government payment.

An insider working on an estimate may see the bidding decision, while someone in project accounting may see the charges that followed.

We use the contract and billing records to connect those views. For an allegation about a purchased withdrawal or a deliberately losing bid, the questions include who made the agreement, which offer it affected, what happened to the award and how the resulting claims reached the government. A payoff record adds another connection: what the supposed competitor was getting out of the arrangement.

What Happened to the Harbert Companies and Bilhar?

Harbert Corporation, Harbert International Inc. and Bill Harbert International Constructions Inc. settled the government’s allegations against them. A court had already found against Harbert Construction Services (U.K.) Ltd. and Bilhar International Establishment on the bid-rigging claims. The settlement covered all of those companies.

The allegations against the settling Harbert companies concerned agreements intended to secure the venture’s win and the resulting false claims. Harbert International’s role in the winning venture connects the construction award to those allegations.

The Whistleblower Case Behind the Settlement

A whistleblower first brought the Cairo bid-rigging allegations in a qui tam lawsuit in the U.S. District Court for the District of Columbia. The Justice Department’s Civil Division, the U.S. Attorney’s Office for the District of Columbia and the U.S. Agency for International Development’s Office of Inspector General handled the case.

The alleged agreements between bidders were at the center of that whistleblower case. An insider who knows why a price changed or why a business stepped aside can connect the written offers to the decisions behind them.

A whistleblower case under the False Claims Act can pay a whistleblower reward of 15% to 30% of what the government recovers.

What Are the Red Flags of Bid Rigging?

Communications coordinating competitors’ prices, intentionally losing bids, shared control and statements of independence contradicted by the bidding record are red flags of bid rigging. In a payoff allegation like Cairo’s, the payment agreement gives those records another purpose: explaining why a business agreed to lose or abstain.

The construction review distinguishes market features, such as concentration and barriers to entry, from the behavior of particular bidders. It also describes the value of insider reports containing direct evidence of collusion. That is where an estimator’s or project employee’s account can add something a comparison of prices misses: who gave the instruction, what it was meant to achieve and which bid followed it.

Who was supposed to compete, and what had they actually agreed to do?

A similar issue appeared in the civil case involving Sea Star Line and Horizon Lines. The government alleged that former executives exchanged confidential bid prices through personal email accounts and allocated cargo routes at predetermined rates for U.S. Postal Service mail and Department of Agriculture food shipments between the continental United States and Puerto Rico. The useful parallel is the communication behind the offer: the Cairo allegations described payoffs for high bids or abstention, while the shipping allegations described shared prices and allocated routes.

You Know How the Bid Was Priced

If you know a bid was designed to lose or a competitor was paid to stay out, speak with our whistleblower experts about the bidding. We build your strongest bid-rigging whistleblower case around the bids, the agreements and the government’s money, and bring in government procurement whistleblower lawyers who understand collusion. You bring the view from inside the bidding, and we stay beside you through the case.