This practice, often known as bid-rigging, allows them to decide in advance who will win a tender.
Others then submit higher or non-competitive bids to make the process look fair.
The report explains that this system may involve rotating winners among a group of companies.
In one project, one contractor wins, while in the next, another member of the same group takes the deal.
This pattern makes it difficult for authorities to detect wrongdoing, as the process appears open and competitive on the surface.
Public procurement makes up about 60 percent of government spending in Kenya, meaning it is one of the biggest areas where public funds are used.
This includes money set aside for building roads, schools, hospitals, and other important services.
Because of the large amounts involved, the sector has become highly attractive to businesses looking to secure contracts.
However, the report warns that this also makes it vulnerable to abuse.
When contractors work together instead of competing, prices can be pushed higher than they should be.
As a result, the government may end up paying more for projects, while fewer resources are left for other needs.
In the long run, this affects service delivery and slows down development.
The findings suggest that the problem is not limited to a few isolated cases.
Instead, it may point to a more organised system where certain groups have learned how to manipulate procurement processes without raising suspicion.
This makes it harder for honest companies to compete and reduces trust in public institutions.
Experts say that tackling this issue will require stronger oversight and better systems to detect unusual bidding patterns.
They also recommend stricter enforcement of competition laws and greater transparency in how tenders are awarded.