The Competition and Markets Authority (CMA) is rolling out a tool that could help public sector buyers spot bid-rigging.
The tool allows buyers to scan their own datasets in-house and flags up the typical signs of bid-rigging, including suspicious numbers or bidding patterns, suspicious pricing and low endeavour entries.
Speaking at the Local Government Procurement Expo in London last week, John Kirkpatrick, senior director for advocacy at the CMA, said when a cartel overcharges, prices can increase by up to 30%. “That’s a non trivial sum, so there’s a lot of money involved here,” he said.
Bid-rigging is a form of non-competitive behaviour where businesses collude to decide who will win beforehand. It can happen in various ways, including bid suppression – where a company agrees not to bid – withdrawing bids, market allocation, bid rotation and cover pricing – where the win price is pre-decided.
Bid-rigging agreements usually include some form of compensation for the losing parties, meaning everyone in the cartel wins but the supplier pays more.
In the UE, half of cartel enforcement involves bid-rigging, said Kirkpatrick.
“There are sometimes characteristics of public sector tender processes which are quite attractive to the cartelists,” he said. “They look promising, they look like fruitful territory for people who want to rig the bids.”
While there are some sectors that are more prone to bid-rigging, in Europe it has been found everywhere from the procurement of heavy equipment including fire engines, to professional services and insurance.
“Recently the Italian competition authority has successfully fined the big four accountancy companies for bids to manage their own structural funds administration,” said Kirkpatrick.
“Slightly embarrassing, I grant you. But it does go to show this kind of behaviour is not limited to a few local business people meeting in a pub to stitch things up.”
The tool, which is being made publicly available, uses data that procurement departments should already have and scans it for signs of bid-rigging. While it can not definitively say where bid-rigging has happened, it can flag up tenders that might need to be investigated more closely.
Procurement departments are not required to share any of their data with CMA to use the tool. “You can analyse your own data on it, and then what we’d like you to do is share your experience with us and with one another.
“The advantage of this is that nobody needs to share their data with anybody, if you’ve got commercially confidential material in there which you don’t want to distribute… The only thing we ask is you tell us what sort of experience you’ve had using the tool, and if you’ve found anything, report it to us.”
Kirkpatrick said he hopes this tool will just be the first version, and that other organisations will be able to use it as a starting point to build more sophisticated detection methods.
CMA has previously released free online modules to help procurement professionals spot the signs of bid-rigging.
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