Opening remarks by Angel Gurría,
Brasília, 3 November 2015
Dear Ministers, dear Ambassadors, ladies and gentlemen,
I am delighted to speak to you this morning on the vital and timely issue of public procurement and collusion. This joint event, organised with the Conselho Administrativo de Defesa Econômica (CADE), kicks off my three-day visit to Brazil, during which I will launch with Ministers Vieira and Levy the OECD-Brazil Programme of Work as well as the 7th OECD Economic Survey of Brazil and the first ever Environmental Performance Review of Brazil. Clearly, our bilateral cooperation is getting even stronger!
Our competition work with Brazil goes back many years. In recent times, we have greatly appreciated Brazil’s input into developing, and subsequent adherence to, the 2014 OECD Recommendation on International Co-operation on Competition Investigations and Proceedings. For its part, CADE is a well-recognised enforcer, and a reference internationally. CADE has also become a valuable partner for the OECD Competition Committee. So, we are proud to partner with you for today’s event and look forward to deeper collaboration going forward.
Today, I want to talk about the particular importance of competition in public procurement. In most countries, this is one of the largest government spending activities, accounting for 4.3 trillion euros in OECD countries alone in 2013. In Brazil, public procurement represents just over a quarter of total government expenditure.
Meanwhile, the evidence suggests that bid rigging can add an additional 20% or more to procurement prices. In some cases, the additional cost can be up to 50%! At a time when public finances are under such pressure, taxpayers cannot be expected to accept the heavy financial burden imposed by collusion and bid-rigging in public procurement contracts. For example, the Mexican Social Security Institute, IMSS, has estimated that the cost savings arising from the procurement reforms it undertook following OECD advice on tackling bid-rigging are in the order of USD 700 million annually.
In Brazil, the government is aiming to improve transport infrastructure and is eager to mobilise private investors to achieve this. Improvements in the mechanisms used for concessions and public works that strengthen competition are therefore urgent and essential. Sound governance models are also needed to ensure the effective delivery and operation of these projects.
Currently, public procurement in Brazil is subject to barriers, like local content preferences, and administrative burdens on businesses. Removing, or even reducing them, has the potential to unleash competition, spur productivity and encourage innovation. Similarly, promoting more open and competitive procurement, in line with the recently adopted OECD Recommendation on Public Procurement, would prompt Brazilian suppliers to invest in research and improve efficiency, thus enhancing their competitiveness in domestic and export markets.
At the same time, more efficient public procurement should allow for the provision of more and better quality infrastructure, facilitating the development of hubs of sustainability and innovation in the regions, and improving the connectivity of hard-to-reach places. It can also help improve the standards of public service delivery, including in big cities and rural areas, with the purchase of better quality materials. In short, better competition and public procurement policies will not only save money, but can boost productivity and deliver more inclusive growth.
The OECD has been leading the fight against bid-rigging in public tenders across the world for the past decade. Actually, the first OECD projects to tackle bid-rigging were here in Brazil and in Chile in 2007. Since then, the OECD has adopted Guidelines and, in 2012, a Recommendation on Fighting Bid-rigging in Public Procurement to help authorities detect and prevent bid-rigging by checking procurement laws and practices to explore whether they make collusion by suppliers easier. More recently, the OECD has been working closely with governments on the new international airport in Mexico City and the 2015 Expo in Milan, for example.
The OECD develops analysis, trains public procurement officials, and supports events like this one. In the last two months alone, our competition experts have travelled across the world to train, evaluate and advise officials in places as far apart as Mexico, Jamaica, Romania, Colombia, Qatar, Philippines and now Brazil. Everywhere we go, our message is the same: there must be zero tolerance for collusion!
Ladies and gentlemen, today’s discussion could not be more timely or more important. It’s not just a question of protecting the public purse. It’s much more fundamental than that! More efficient public procurement is a critical component to social and economic development. Improving the competition framework can help drive productivity, promote inclusive outcomes, and foster private sector development based on good practices. In short, today’s discussion is about better competition and public procurement policies for better lives, and the OECD is proud to partner with CADE and the broader competition community in this important work.