Recently the Competition & Markets Authority (CMA) published an open letter to public sector procurement officials with advice on how to spot bid rigging. We look at the letter and some of the tell-tale signs to be aware of.
While none of the issues raised in the open letter and accompanying guidance of the CMA are new issues – ie, they are part of existing competition law; the CMA press statement and open letter do serve as an important reminder and message to procurers to be vigilant for instances of bid rigging and to take action where they suspect this. It also serves as a warning and reminder to bidders about the risks of taking part in bid rigging.
The guidance which the CMA has produced alerts us to three main types of bid rigging:
- Bid rotation – where bidders agree to take turns to bid for a cycle of contracts.
- Cover pricing – where some bidders who do not intend to win the contract falsely inflate bid prices so that a pre-agreed particular bidder wins.
- Bid suppression – where competitors agree among themselves that certain bidders will not bid for an opportunity.
Under the Public Contracts Regulations 2015, a public authority when tendering contracts has the discretion to exclude a bidder from a procurement where the authority has a “sufficiently plausible indication to conclude that the bidder has entered into agreements with other companies aimed at distorting competition”.
That would cover bid rigging agreements and so any bidder which an authority has reasonable grounds to believe has been engaged in bid rigging (whether in connection with the tender it is currently bidding for or a previous tender) runs the risk of exclusion from the competition.
The other consequences for any bidders who are found to have acted in breach of competition law (which includes being involved in bid rigging) are potentially extremely serious, including financial penalties of up to 10 per cent of turnover, damages claims from third parties, imprisonment and fines and reputational damage.