Dealing with Bid rigging in public sector procurement

Bid rigging is one of those cartel behaviors that benefit a few at the cost of the majority in public sector procurement.  Truth is when dealing with public funds any mistake will always be reflected in tax payers money.

WHAT IS BID RIGGING?

A quick internet search will have you know that Bid rigging is a fraudulent scheme in procurement auctions resulting in non-competitive bids and can be performed by corrupt officials, by firms in an orchestrated act of collusion, or between officials and firms.

We are talking about suppliers agreeing to limit competition in the procurement process, thereby denying the customer a fair price.

It basically a form of market manipulation because bidders collude and in so doing decide who gets the tender.

HOW CAN IT OCCUR?

There are a number of ways that this can happen some of which include:

1. Bid suppression: where one or more of the colluding parties will respond with a “no-bid” or withdraw their bid, so that the winning bid can be awarded to another bidder by default.
2. Cover pricing – in this case bidders arrange for one or more of them to submit an artificially high bid, distorting the procurer’s impression of the competitive price
3. Bid rotation – where firms agree to take it in turns to submit the lowest bid this way the colluding parties take turns at being the winning bidder in a particular market or area.
4. Phantom bidding: Artificially inflating what legitimate buyers will pay by employing fake bidders who have no intention of winning but can push the price up with their bids.

The whole point of colluding is so that the bidders can control amongst themselves who gets the tender and also keep it within their circle

WHY SHOULD PUBLIC SECTOR PROCURERS CARE ABOUT BID RIGGING?

You see you may say it’s none of my business when this happens in private sector and that the business owner or owners ought to be careful but in public sector:

1. it can cost the taxpayer money remember the money could have been used in other areas
2. it can exclude potentially more efficient competitors from the bidding process since they are not part of the ‘circle’
3. it may reduce suppliers’ incentives to improve quality or innovate

HOW CAN ONE SPOT BID RIGGING PATTERN?

If you are one of those involved in the procurement process or you are part of the team trying to change the system you can look for suspicious things like:

1. Bids received at the same time or containing similar or unusual wording
2. Different bids with identical prices
3. bids containing less detail than expected
4. the likely bidder failing to submit a bid
5. the lowest bidder not taking the contract
6. bids that drop on the entry of a new or infrequent bidder
7. the successful bidder later subcontracting work to a supplier that submitted a higher bid
8. expected discounts suddenly vanishing or other last minute changes
9. suspiciously high bids without logical cost differences (for example, delivery distances)
10. a bidder that betrays discussions with others or has knowledge of previous bids

CONCLUSION

Remember in public sector procurement bid-rigging will cost the tax payer. As for the suppliers well they are going to do whatever it takes to get paid so…be smart during the awarding process and educate your team on the bid rigging concepts and detection tactics

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