Procurement officers in the NHS and across the public sector have been warned to watch out for bid rigging and cartel behaviour by a senior official at the UK’s markets regulator.
John Kirkpatrick, senior director of research, intelligence and advocacy at the Competition and Markets Authority, told HSJ sister title Local Government Chronicle that cartels had been found targeting the public sector internationally and there was “no reason to suppose” the UK was any different.
“I think [the problem] is bigger than it’s currently being treated as,” he said.
The CMA has launched an online tool to help officers identify the signs of bid rigging. This can include companies colluding to push the price of a bid up by one of the cartels submitting an artificially high bid to make other bids appear better value – a practice known as cover pricing. This might later be rewarded by the successful bidder subcontracting some of the work to the competitor.
Mr Kirkpatrick said: “Public service organisations let an awful lot of contracts into markets where there is potential for bid rigging.”
While contracts for “blue collar” services such as waste management and maintenance were particularly vulnerable, Mr Kirkpatrick said “global experience” showed services such as recruitment, IT and consultancy had also been targeted by unscrupulous firms.
He added: “If you get the same two or three bidders always bidding, year in year out, for the same contracts with you and your neighbours that’s an environment in which collusion can flourish.”
In 2009 the CMA’s predecessor, the Office of Fair Trading, uncovered widespread cover pricing in the construction sector leading to 103 firms being fined £129m. Tenders for hospitals, housing and schools were affected.
Mr Kirkpatrick said: “The main thing is just be aware of the risk. If you’re aware of the risk then it’s much more likely that you’ll spot something odd.
“Procurement professionals have seen patterns of tendering before, if they see something odd, [for example] if they see a late drop out, if they see an unusual similarity between either the prices or the content of the bids.
“If they come to learn subsequently of subcontracting arrangements between parties who they know to be competitors, rather than think that’s probably just the way it is, what we want them to be doing is think ‘I wonder if that’s indicative of something else’.”
If an organisaion suspects bid rigging might be happening, Mr Kirkpatrick said it should pause the procurement and take a closer look. If they find any evidence of cartel behaviour they should pass it to the CMA.
He said simple steps such as requiring bidders to sign a non-collusion declaration could also be effective.
“If someone is colluding and they’ve signed a declaration that’s not going to look good if it comes to court,” he said.