Bid-rigging on government contracts is costing New Zealand taxpayers about $360 million a year, the Commerce Commission estimated on Sunday, and its chair has a blunt warning for the firms involved.
“I have a message for those involved in this illegal activity – we’re coming for you,” Commerce Commission chair Dr John Small said in a statement released on 27 September.
It is the first time the competition regulator has put a dollar figure on the harm. Government agencies spend about $51.5 billion a year buying goods and services, from roading and bridge repairs to IT systems and office supplies. The Commission said it was publishing the estimate to shine a light on the problem, and released a technical note setting out how it was calculated.
Bid-rigging happens when some or all of the firms tendering for a contract secretly agree who should win. Losing bidders may stay out of the tender or put in deliberately high “cover” prices so the chosen winner looks competitive. The buyer thinks it has run a fair contest, but it ends up paying more than it would have in a genuine one.
“Ultimately, when this illegal conduct occurs all Kiwis pay,” Dr Small said. “It is essential we protect the integrity of processes involving the expenditure of public funds.”
Speaking to TVNZ’s Q+A, Dr Small described $360 million as a conservative figure and said the true cost could be as high as $650 million a year, 1News reported. The estimate assumes about 3.5 percent of contracts are rigged and that rigged contracts cost around 20 percent more than they should.
Those numbers hang together. A 20 percent overcharge on 3.5 percent of spending works out at 0.7 percent of the total, and 0.7 percent of $51.5 billion is roughly $360 million. Spread across a population of about 5.3 million, that is close to $70 for every New Zealander each year. The upper estimate of $650 million would be about 1.3 percent of government procurement spending, or more than $120 a person.
The New Zealand figure also sits comfortably alongside overseas work. Earlier this month Britain’s Competition and Markets Authority estimated that bid-rigging costs UK public buyers between £1 billion and £3.5 billion a year, against roughly £400 billion of annual public procurement. That is between 0.25 and 0.9 percent of spending, a range that brackets the Commerce Commission’s central estimate of 0.7 percent.
Dr Small told Q+A there was some reason to think the public sector was particularly exposed because government contracts are “often ongoing, frequent contracting relationships”, with the same firms bidding against each other again and again. He added that “the scale of the projects are often big, so there’s a lot of money at stake.” He noted that rigging also happens in private contracting.
The Commission has already taken one bid-rigging case to its conclusion in the criminal courts. In December 2024 Auckland construction company MaxBuild was fined $500,000 and its director Munesh Kumar was sentenced to six months’ community detention and 200 hours of community work, in the first criminal prosecution for cartel conduct since it became an offence in April 2021. The case involved rigged bids for the NZ Transport Agency’s Northern Corridor Improvement Project and Auckland Transport’s Middlemore Bridge refurbishment.
That case came to light by accident. In April 2022 an employee of the second company involved mistakenly sent a spreadsheet containing pricing information, including references to MaxBuild’s prices, to the joint venture running the Northern Corridor project on behalf of the Transport Agency. The second company, which has interim name suppression, was later fined $30,000 because it could not afford the $595,000 penalty the court considered appropriate, the Commission said in October 2025. At the time Dr Small said, “If a competitor asks you to put in a fake bid on a project, say no.”
Cartel conduct, which covers price fixing, carving up customers or markets, and bid-rigging, is banned under section 30 of the Commerce Act. Since 8 April 2021 it has carried a maximum penalty of seven years in prison.
Because such deals are made in secret, the Commission relies heavily on insiders to expose them. Anyone who becomes aware of cartel conduct can report it through the Commission’s anonymous reporting tool. The first member of a cartel to come forward can also apply for leniency, which can mean immunity from criminal prosecution and from civil proceedings, avoiding both jail and financial penalties.
“Both our Anonymous Reporting Tool and leniency programme continue to generate very strong leads, and we have investigations underway where public procurement has been targeted,” Dr Small said.
According to 1News, anonymous reports have risen about 30 percent a year over the past two years, with 34 received in the last 12 months. Dr Small told Q+A that New Zealand “has almost as many leniency applications as they do in the United States.”
“Cartels in public procurement are a specific enforcement priority for the Commission – we take an extremely dim view of any illegal activity that rips off taxpayers,” he said.
The Commission said it was also pursuing cartel conduct elsewhere, with ongoing actions in the real estate and grocery sectors. Court action is under way against four Harcourts franchises in Christchurch and their franchisor over alleged price fixing, and last year the regulator concluded cases involving customer allocation and price fixing in the courier industry. Alongside enforcement, it is running an outreach programme to teach businesses and procurement staff how to spot and avoid cartel behaviour.
For public agencies, the message is that a tender that looks competitive on paper may not be. For the firms bidding on those contracts, the Commission is making it plain that a quiet agreement over who wins the next job is now a criminal matter, and that the other party to that agreement may already be talking.
Do you work in construction, roading or government purchasing, and have you seen tenders that did not feel like a fair fight? Should New Zealand be doing more to protect public money from rigged bids? Share your view in the comments below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job 🙂
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