Defense contractor Berg Companies agreed to pay $3.3 million in July 2025 to settle allegations that it violated the False Claims Act by rigging bids on contracts with the Defense Logistics Agency. According to the Department of Justice, Berg coordinated with a prime vendor and two sub-vendors to submit inflated, non-competitive quotes so that other vendors would win contract awards at artificially high prices, resulting in the Department of Defense being overcharged for military shelters.
The case is a reminder that bid rigging remains a persistent enforcement priority under the False Claims Act, and as federal agencies increasingly turn to cloud computing and artificial intelligence tools to run their operations, the same scheme could just as easily surface in that arena.
How the Berg Bid Rigging Scheme Worked
The government alleged that Berg’s scheme depended on what is sometimes called complementary bidding, where multiple vendors coordinate behind the scenes so that only one appears to win a contract through fair competition. Prime vendor programs like the one at issue require the prime vendor to solicit bids from multiple independently competing sub-vendors to ensure that the government receives the best available price.
Berg admitted that from 2019 to 2021, it coordinated with the prime vendor and two other sub-vendors to submit deliberately inflated quotes on shelter contracts, allowing a different vendor to win the award at an inflated price while giving the appearance that competitive bidding had occurred. Two whistleblowers, including a former salesperson for one of the sub-vendors, filed the case that led to the settlement.
Bid Rigging Violates the False Claims Act
Government contracts that rely on competitive bidding require vendors to submit bids independently, without coordinating with competitors on price. When a contractor colludes with other bidders to manipulate the outcome, whether by feeding a rival information, submitting a deliberately high or non-compliant bid to let a partner win, or dividing up which contracts each company will “win,” it defeats the purpose of competitive bidding and typically results in the government paying more than it should.
Any claim for payment submitted under a contract obtained through this kind of manipulation can be considered a false claim, exposing the contractor to liability under the False Claims Act.
Bid rigging schemes take several forms:
- Complementary bidding, where a vendor submits an intentionally uncompetitive bid to give a partner the appearance of winning fairly
- Bid rotation, where colluding vendors take turns being the winning bidder on a series of contracts
- Market or customer allocation, where competitors agree not to bid against each other for certain customers or types of work
- Cover bidding, where a vendor submits a bid it knows will not be accepted simply to create the appearance of competition
Bid Rigging Risk Is Following Federal Agencies Into Cloud and AI Contracts
Federal agencies are rapidly expanding their use of cloud computing platforms, AI-driven data analytics, and related technology to run everything from procurement to fraud detection. The Department of Justice has said it is using its own AI and data analytics tools, through what it calls a Data Fusion Center, to identify fraud patterns in government contracting, including in cloud and technology procurement.
As spending on government AI and cloud contracts grows, the same vulnerabilities that allowed Berg’s scheme to persist for two years apply just as easily to technology vendors. A handful of large cloud and AI providers already dominate the market for the infrastructure agencies need, and smaller technology vendors bidding on subcontracts or teaming arrangements face the same incentive to coordinate bids that traditional defense contractors do.
Agencies awarding AI and cloud contracts through prime vendor or multiple-award structures should expect continued scrutiny of whether the required competitive bidding is genuine.
Whistleblowers Play a Central Role in Uncovering These Schemes
Bid rigging is often difficult for the government to detect on its own because the entire scheme is designed to look like ordinary competitive bidding. Employees, competitors, and business partners who have direct knowledge of coordinated bidding are frequently the only people positioned to recognize the pattern before it results in significant losses to taxpayers. Whistleblowers who file a qui tam lawsuit under the False Claims Act step into the shoes of the government to pursue the claim and may be entitled to a portion of the government’s recovery, along with legal protection from retaliation by their employer.
Speak to a Whistleblower Attorney About Bid Rigging on Government Contracts
If you have information about a contractor coordinating bids, manipulating a bidding process, or otherwise defrauding the government on a technology, cloud, or AI-related contract, you can speak to a whistleblower attorney at Keller Grover. Contact our legal team today to discuss your rights and options.