The increased transportation costs ended up being due to corruption

The company was now 5 years old and sales are over $10M. We employ 45 people and are growing in double digits. We have had very little staff turnover and most of the employees have become shareholders. We have been using more subcontractors to get work done. We always have competitive bids especially as we are located in a relatively small city.

My accountant came to me and said that she was concerned that transport costs were increasing to an unacceptable level. It looked like next year would see a 15% increase. She also said she talked to friends in other companies and they weren’t seeing the same cost increases. She suspected that all our bidders were operating in concert to raise prices. We did a lot of work and found out she was right, they were taking turns winning but the price always went up.

We talked with our operations manager and he said he always chose the low bid. We decided to talk to one of the haulers. What he told us was hard to believe. He said

there was a bidding ring but that it was organized by our operations manager. He was taking a 5% kickback on any bid. The hauler in question had refused to pay and was therefore cut out.

After much debate we called the police. Their investigation showed that our manager was corrupt, that his brother was involved, and that this had been going on for at least three years.