January 7, 2013

Using defensive tactics to avoid bid-rigging

Procurement Perspectives | Stephen Bauld

The issue of bid-rigging is becoming a great concern for both owners and contractors. If bid-rigging is difficult to detect and even harder to prove, it is obviously even more difficult to avoid.

Nevertheless, there are certain basic measures that a municipality can take to reduce its level of exposure in this area. Some of the most important measures include the following:

• Train staff to be attentive for information suggesting bid-rigging, such as unexplained refusals to deal;

• Avoid providing assistance to collusion. Some private sector owners do not disclose the name of a business or other organization that have picked up a tender package, as doing so facilitates communication among bidders. Improve record keeping. Know who bids for city contracts, who wins and who loses.

• Confirm that all entities submitting bids are apparently legitimate operations. Carry out random checks on business addresses and telephone numbers. Check to see if the same address and phone number is given by purportedly different companies. Make sure that the “business” addresses are not located at an apparent personal residence. Check references.

• Make it very clear to suppliers that the municipality takes bid-rigging and similar wrongdoing very seriously. Encourage suppliers to step forward if they are approached about joining a bid-rigging scheme.

• Exchange information with other public sector buyers, as to the prices bid for services and materials of any given kind. Require all bidders to submit a certificate disclosing and contract that they have with any other bidder concerning the contract.

• Encourage bidders from outside the local area to bid for municipal contracts. True e-procurement would help in this process. The risk of collusion is greatest when the same “usual suspects” always bid for the same or similar kinds of work.

Be prepared to re-tender a contract when there are suspicious circumstances.

Pooled purchasing arrangements with other municipalities discourage collusion among suppliers because there is less chance of spreading work around.

Most municipalities buy very similar things including buses and road salt.

When consumers exchange pricing information, it allows them to see whether they are in fact being offered a competitive price.

When one municipality finds that the lowest bid in a tender it has conducted is far above the highest price bid compared to another municipality in a similar tender, there are reasons to suspect collusion.

No one should be condemned without a trial.

It is always possible that even the most apparently suspicious circumstances may have a legitimate explanation.

However, where there appears to be something amiss, it is not unreasonable to call upon suppliers to provide the information that is needed to clear up the apparent irregularity.

Honest suppliers have nothing to fear.

Dishonest suppliers are not worthy of the buyer’s loyalty.

>The Organization for Economic Co-operation and Development also notes that appropriate professional training in relation to bid-rigging and the requirements of competition law helps to strengthen awareness of the problem of bid-rigging.

Once staff have been trained, it may be worthwhile to devote some resources to the study of existing procurement relationships.

A study of historical information on bidding behaviour can reveal a great deal: often a collusion scheme is only revealed when one examines the results from a number of tenders over a greater period of time.

Stephen Bauld, a leading Canadian government procurement expert, is a member of the Daily Commercial News editorial advisory board. He can be reached at stephenbauld@bell.blackberry.net.

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