Cartels and Bid-Rigging — Guidance on Behaviour and How To Spot It

The Cabinet Office and the Competition and Markets Authority (CMA) issued a set of products a couple of weeks back that address the issues around cartels and bid-rigging amongst suppliers to the public sector. Over the years, there have been many examples at UK, European and even global level that show such activities are not unusual, unfortunately. The aim is to make procurement people more aware of the potential issues, understand how to spot the signs of cartel-type behaviour, and highlight what can be done about it.

There is an open letter to procurement professionals, a short "60 second summary” as it is called, and perhaps most interestingly, an e-learning package. That's quite an innovation for government procurement guidance, and one we welcome.

The documents go through the types of cartel behaviour - firms splitting the market through agreeing not to bid, bid rotation, or cover pricing (putting in deliberately high bids to distort the view of a competitive price). There is some useful material around spotting the signs - for instance, bid documents from different potential providers that look very similar (although we do wonder if the dodgy firms are really that stupid!)

So we thought we would experience the e-learning package directly. Overall, we give it 7/10. It is a good idea, and there is no doubt it will embed knowledge better than just a two-page guidance document. It generally covers pretty much the material in the guidance note, going into detail in a few more areas and providing some links to other material. But we thought in some areas, the format might have allowed a little more depth and exploration of the issues. It seemed at times to tend towards the simplistic, although of course many of the people who take the course may not be quite as "veteran" as this user.

The material is generally stronger on how to spot signs of cartel behaviour than it is around stopping it happening in the first place. One area where we feel the guidance and the e-learning is a little weak is in terms of one of the key steps that buyers can take to achieve that. The best way of protecting yourself against this behaviour is to have access to dynamic markets, with a good flow of new market entrants. It is much harder for the villains to maintain a successful cartel if new firms are constantly entering the market – and of course there are many other benefits arising from dynamic supply markets.

So we would have liked to see a bit more discussion of that issue - it is a huge topic in itself, but some thought around how public sector (and indeed private sector) buyers and organisations can stimulate markets, promote and access new suppliers might have been helpful. OK, we’re biased, but developments such as SpendLead seem to be one useful way that buyers can be open to new suppliers and drive more dynamic and innovative markets.

Anyway, if you do have any fears, the CMA has a hotline which people can email or call if they suspect cases of bid-rigging or other anti-competitive practice, so if you have any doubts, do get in touch.

 

First Voice

  1. Ian Heptinstall:

    Another area only hinted at, but very influential, is buyer behaviour, and how this encourages some practices, such as cover pricing. There is no mention that cover pricing can be far from corrupt, and only used because buyers often don’t responses like “No bid this time, but I would be interested in the future”.

    In the construction industry example used in the training there is no mention that this defence was used successfully to significantly reduce the fines issued to contractors in the 2009 case.

    It also assumes without question than a simple competitive bidding process delivers best value. I realise this refects the understanding public sector policy, but this doesn’t make it a law of nature.

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