No, they're not set by the highest bidder. They're set by the tenth lowest bidder, except that the number isn't ten.
If the number of suppliers needed happens to be ten, then the ten lowest bidders prevail, and the highest bidders lose out. The ten lowest bidders all get the rate offered by the tenth lowest bidder, ie. if a supplier bids at its own cost, it'll likely make a profit (or not get a contract at all).
If the number of suppliers needed happens to be ten, then the ten lowest bidders prevail, and the highest bidders lose out. The ten lowest bidders all get the rate offered by the tenth lowest bidder, ie. if a supplier bids at its own cost, it'll likely make a profit (or not get a contract at all).