Detection of Collusive Behavior

Collusion is an insidious issue in the construction industry. Even though it is widely acknowledged as unethical and illegal, there are not many research studies conducted to detect collusive bidding. This study proposes a step-by-step method to detect collusive bidding by analyzing historical bidding data provided by a construction owner. The construction owner in this study is a public agency that commissioned 108 construction projects that were worth $1.3 billion during a 10-year study period (2001–2010). The number of bidders (80 in total) was small considering that a total of 108 contracts were awarded in the study period. Five of the 80 bidders jointly undertook 72% of the total contracts awarded by this public agency during the study period. The proposed detection method is on the basis of a regression model and involves identifying the potential cartel bidders using two tests called the residual test and the cost structure stability test. After conducting the study, it was found that two of the six potential cartel bidders that were identified in this study had been audited by the public agency for bid fraud, and that another potential cartel bidder had been found guilty by the courts and forbidden from doing business with the public agency.