NMa releases brochure on how to prevent cartel agreements in procurement
How do you detect and prevent illegal cartel agreements in procurement? Questions like this one are answered in the brochure the Netherlands Competition Authority (NMa) has published today. The brochure has been specifically written for those that are in charge of procurement and assessment of tenders and offers.
If competitors collude prior to submitting their bids or offers, for example in a tender procedure, it usually means that the buyer ends up paying a higher price and/or being offered less quality. The buyer thus pays too much, even though the reason for holding a tender in the first place is to get value for your money, because competitors will then be competing on price and quality. Pieter Kalbfleisch, chairman of the Board of the NMa, explains: 'This brochure helps in recognizing the first signs of illegal collusion between competitors during procurement procedures. It makes people aware of the risks that tender procedures may entail, and it provides suggestions on what people can do if they suspect any illegal cartel agreements between competitors'.
The most prevalent types of bid rigging are:
Bid suppression or bid limiting. Firms that would normally bid agree not to submit a bid or to withdraw their bids so that another firm can successfully win the contract.
Complementary bidding or cover bidding. Firms bid an amount knowing that it is higher than that of the firm that is 'allowed to win'. Another variation is that the bids contain conditions that are certain to be unacceptable to the agency calling for the bids.
Bid rotation or market sharing. Firms take turns being the designated successful bidder. Another variation is that firms share the market on a geographical basis.
Warning signs and suggestions
The brochure covers a number of warning signs that are meant to help people remain watchful of unusual circumstances or unforeseen events during procurement procedures. In addition, the brochure lists a number of suggestions on how to prevent as much as possible collusion from happening during tenders by, for example, ensuring that as much competitors as possible submit bids, but also by not letting competitors know who they are up against.