Local government procurement professionals have been warned to watch out for bid-rigging and cartel behaviour by a senior official at the UK’s markets regulator.
John Kirkpatrick, senior director of research, intelligence and advocacy at the Competition & Markets Authority, told LGC cartels had been found targeting public sector internationally and there was “no reason to suppose” the UK was any different.
“I think [the problem] is bigger than it’s currently being treated as,” he warned.
The CMA has launched an online tool to help officers identify tell-tale signs of bid-rigging. This can include companies colluding to push the price of a bid up by one of the cartel submitting an artificially high bid to make other bids appear better value, a practice known as cover pricing. This might later be rewarded by the successful bidder sub-contracting some of the work to the competitor.
Mr Kirkpatrick said: “Public service organisations let an awful lot of contracts into markets where there is potential for bid-rigging.”
While contracts for “blue collar” services such as waste and maintenance were particularly vulnerable, Mr Kirkpatrick said the “global experience” showed services such as recruitment, IT and consultancy had also been targeted by unscrupulous firms.
He added: “If you get the same two or three bidders always bidding, year in year out for the same contracts with you and your neighbours that’s an environment in which collusion can flourish.”
In 2009 the CMA’s predecessor, the Office of Fair Trading, uncovered widespread cover pricing in the construction sector which led to 103 firms being fined a total of £129m. Tenders including those for schools, hospitals and housing were affected.
Mr Kirkpatrick said: “The main thing is just be aware of the risk. If you’re aware of the risk then it’s much more likely that you’ll spot something odd.
“Procurement professionals have seen patterns of tendering before, if they see something odd, [for example] if they see a late drop out, if they see an unusual similarity between either the prices or the content of the bids.
“If they come to learn subsequently of sub-contracting arrangements between parties who they know to be competitors, rather than think that’s probably just the way it is what we want them to be doing is think ‘I wonder if that’s indicative of something else’.”
If a council suspects bid-rigging might be going on, Mr Kirkpatrick said it should pause the procurement and take a closer look. If they find any evidence of cartel behaviour they should pass it to the CMA.
He said simple steps such as requiring bidders to sign a non-collusion declaration could also be very effective.
“If someone is colluding and they’ve signed a declaration that’s not going to look good if it comes to court,” he said.