Favoritism, Collusion, and Financial Misconduct in Government Contracts: What Are the Penalties and How Are They Prosecuted?

Introduction

Government contracts involve large-scale financial resources and, unfortunately, are often susceptible to corruption, favoritism, and legal violations. Terms like “rent-seeking,” collusion, unfair bidding, and embezzlement frequently appear in cases involving tenders, procurement, and public projects.

In this article, we explain — in clear legal terms:

What favoritism (“rent”) and collusion mean under Iranian law

What financial offenses can occur in public contracts

What the punishments are

How individuals or institutions can file complaints

What Is Favoritism (Economic Rent)?

Favoritism or rent-seeking refers to unfair or exclusive access to government resources, projects, or advantages granted to specific individuals or groups.

In public procurement and contracts, rent typically occurs through:

Awarding contracts without legal tenders or through illegal exemptions

Providing confidential information to one bidder

Assigning contracts to connected individuals or companies

Manipulating pricing or inserting favorable contract clauses

Rent-seeking may appear legal on the surface but can be a form of financial corruption.

What Is Collusion?

Under Article 5 of the Law on Prohibition of Government Employees’ Involvement in Contracts and other applicable regulations:

Collusion is an illegal agreement between two or more parties to gain advantage in government contracts, tenders, or auctions.

Common examples include:

Contractors coordinating fake bids to control pricing

A government employee secretly favoring a specific contractor

Manipulating bid evaluation scores to benefit a selected company

What Offenses Are Considered Crimes in Government Contracts?

According to the Islamic Penal Code, the Anti-Corruption and Bribery Law, the Tendering Law, and other financial regulations, the following actions are considered criminal:

Bid rigging or collusion in public tenders

Unlawful exemption from legal procedures

Illegal payment of funds or benefits to selected individuals

Leaking confidential tender documents

Using official positions to favor specific bidders