Bid Rigging

Bid rigging is the illegal practice of predetermining who will win a the contract to build a project. It's a form of collusion that allows contractors to extract higher prices than they might otherwise get in a truly competitive bidding environment.

If you've ever seen The Sopranos, bid rigging comes up a lot. In that case, it works like this: supposedly rival companies get together and decide who will submit the winning bid for a contract. Instead of competing to see who can present the lowest possible price, companies predetermine a price they are looking to make. One company (say, Tony Soprano's Barone Sanitation) then submits the predetermined winning bid amount. The other companies (like Johnny Sack's Cinelli Sanitation) submit higher bids, ensuring that the "low" bid wins the contract.

The companies might take turns securing contracts that way, assuring that prices stay high (basically acting as a monopolistic cabal). Or the other companies in the scheme might receive a payoff from the company winning the bid.