One of the most common tactics employed by defense and other contractors is called “lowballing.” They win government contracts by making the lowest bid and then, once the work has begun and it is too late for the government to change contractors, they suddenly discover additional “unforeseen” costs that result in their having to raise prices, often well above the highest bid made by their competitors.

It turns out that Mitt Romney’s firm, Bain Capital, practiced a clever variation on this con when bidding for companies it wished to acquire. Bain lodged the highest bids, and then, after winning exclusive rights to negotiate, would suddenly find “all sorts of warts, bruises and faults with the company being [acquired],” writes William D. Cohan, a Wall Street veteran and columnist for Bloomberg News. “Soon enough,” he adds, “that near-final Bain bid … would begin to fall, often significantly,” and the company would have to “accept the lower price,” or begin seeking a best bidder all over again.

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Charles Peters

Charles Peters is the founding editor of the Washington Monthly.