Corruption

Fighting against bid rigging: OECD-CFC-IMSS co-operation

 

Signing of the Memorandum of Understanding on the Implementation of the Guidelines for Fighting Bid Rigging in Public Procurement between the OECD, the CFC and the IMSS

 

Remarks by Angel Gurría, OECD  Secretary-General (read in Spanish)

 

Mexico City, Mexico, 13 January 2011

General Director Karam Toumeh, President Pérez Motta, Ladies and Gentlemen:

It is my privilege to sign this Memorandum of Understanding between the OECD,  the Federal Competition Commission (CFC) and the Mexican Institute of Social Security (IMSS).

The fight against bid rigging is crucial for the economic development of nations.

Bid rigging occurs when companies that bid to provide a good or service join together in advance and rig their bids, usually with the objective of ensuring the buyer pays more money.

Bid rigging is a problem that plagues government procurement around the world and costs OECD taxpayers billions of dollars.

Experiences in OECD countries show that when companies collude and form a cartel, the cost of goods and services can increase by 20% or more. The most immediate victims of a cartel are its customers. When the customers are government agencies, cartels harm taxpayers and therefore the whole economy.

The impact is obviously particularly serious when collusion affects the provision of an essential good for the lives and well-being of citizens: health care. 

Mexico is not immune to such corruption. As we have seen recently the Federal Competition Commission (CFC) has been investigating and processing very sensitive cases of bid rigging in the pharmaceutical industry. The IMSS is a particularly attractive target for anti-competitive practices in bidding.

This is not a coincidence. The IMSS is the third largest government purchaser of goods and services in Mexico and the largest single public purchaser of pharmaceuticals and other medical supplies, including medical devices and equipment. In 2009, the institution spent nearly U.S. $2,500 million on pharmaceuticals and other medical supplies.

It is therefore highly significant that the IMSS has requested OECD support in order to help them to adopt international best practices for fighting bid rigging. We are also delighted that the IMSS has opened discussions with the OECD office in Mexico to conduct a broader review on the integrity of its procurement processes.
The effects of bid rigging in the health sector of a country like Mexico, where poverty levels are high and health problems widespread, are colossal. But the damage caused by bid rigging goes far beyond a single sector. Collusive practices, in any sector, break the backbone of a market economy, distort the interaction between the public and the private sector and increase the operating costs of an economy. The loser is always citizens and democracy. 

This is why governments are taking steps to end these practices, and the OECD is helping them to do it with cutting-edge instruments. Based on the best practices from all around the world, the OECD Competition Committee has developed Guidelines for Fighting Bid Rigging in Public Procurement.

These Guidelines focus firstly on how government contracting rules and procedures can make bid rigging more difficult for contractors and secondly on aiding government officials to identify suspicious bidding.

Thanks to the cooperation that is launched today, IMSS, CFC and OECD will work together to apply the Guidelines developed by the OECD to  IMSS procedures. This partnership is path breaking. It is the first time the OECD will work directly with a government to apply the Guidelines to a large public procurement programme. I am sure there will be other governments around the OECD that will follow this example. 

General Director Karam Toumeh, President Pérez Motta, Ladies and Gentlemen:

This cooperation is a crucial step in the fight against corruption in Mexico. I want to congratulate the IMSS for its commitment to improving procurement procedures; as well as the CFC for the persistence and effectiveness of its efforts to safeguard competition in the interests of Mexicans. This is a bold move, of great importance for Mexico, and it will also demonstrate the OECD’s value for governments and taxpayers.

However, this is just the beginning of the process. Now comes the work, the diagnosis of the Mexican case, the identification of the weaknesses, the decisive actions and above all, the drive to ensure a rigorous implementation.  The full implementation of the Guidelines can help Mexico to save millions of dollars each year, money that can then be channeled into addressing Mexico’s major social needs.

It is therefore a great honor to sign this cooperation agreement that unites IMSS, the CFC and the OECD in the fight against bid rigging. I am proud to be here with you to take the first step in what, I am sure, will be a fruitful journey filled with many benefits for Mexico.

Thank you very much.

 

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