Checklist to design tender methods to reduce bid rigging

 

 

 

 

Purpose

  • To promote effective competition in public procurement and to achieve better value for money through targeting bid rigging risks in the design of the tender methods.

Description

 

Policy makers may use the checklist to design policies, practices and guidelines to minimise collusion and fight against anti-competitive behaviour in the procurement process.

 

The legislated rules that govern public procurement, the way in which a tender is designed can act to hinder competition and help sustain bid rigging practices. It is critical that procurement regulations do not unwittingly facilitate collusive arrangements.


Bid rigging occurs when suppliers/bidders agree among themselves to eliminate competition in the procurement process, thereby denying the public a fair price. Suppliers/bidders can eliminate competition in public procurement through many simple ways, for example:

 

  • Cover bidding: A competitor agrees to submit a non-competitive bid that is too high to be accepted or contains terms that are unacceptable to the buyer.
  • Bid suppression or withdrawal: A competitor agrees not to bid or to withdraw a bid from consideration.
  • Market sharing: A competitor agrees to submit bids only in certain geographic areas or only to certain public organisations.
  • Bid rotation: Competitors agree to take turns at winning business while monitoring their market shares to ensure they all have a predetermined slice of the pie.
  • Non-conforming bids: Competitors deliberately include terms and conditions they know will not be acceptable to the procuring authority.

 

Although the schemes used to rig bids vary, they all a common point: the suppliers/bidders agree to eliminate competition so that prices are higher and public organisations pay more.

 

The presence of certain factors increases the need for vigilance against bid rigging, including:

  • Small number of suppliers/bidders. The probability of bid rigging is higher if there are few suppliers/bidders. Bid rigging requires suppliers/bidders to reach an agreement that eliminates competition. It is also easier to reach an agreement if the same suppliers/bidders are involved in repeated procurements.
  • Standardised or simple products. The chances of bid rigging are greater if the products,  services or works being purchased are standardised, simple and do not change over time. Under these circumstances it is easier to work out an agreement and have it last.
  • Little or no entry. If entry in a certain market is costly, hard or time consuming, suppliers/bidders are protected from the competitive pressure of potential new entrants. The protective barrier helps support bid-rigging efforts.


Professional training is important to strengthen procurement practitioners’ awareness of competition issues in public procurement. Efforts to fight bid rigging more effectively can be supported by collecting historical information on bidding behaviour, by constantly monitoring bidding activities, and by performing analyses on tender data.

 

This helps procurement (and competition) authorities to identify problematic situations. It should be noted that bid rigging may not be evident from the results of a single tender. Often a collusive scheme is only revealed when one examines the results from a number of tenders over a period of time.

 

 

Further reading

 

 

OECD (2009), Guidelines for Fighting Bid Rigging, www.oecd.org/competition/bidrigging (available in 15 languages).

 

OECD (n.d.), Cartels and Bid Rigging, www.oecd.org/competition/cartels.

 

Norwegian Competition Authority (Konkurransetilsynet) (n.d.), Checklist: Avoid Tender Cooperation in Public Procurement (Sjekkliste: Unngå anbudssamarbeid ved offentlige anskaffelser), www.konkurransetilsynet.no/ImageVault/Images/id_1802/ImageVaultHandler.aspx.