Fair Trading Commission Detecting Bid Rigging Public Procurement

Fair Trading Commission Detecting Bid Rigging Public Procurement Seminar 16 th & 17 th June 2010 Savannah Hotel

Warning Signs When Bids are Submitted • same bidder may always win bid of a certain • • 2 type or size a bidder never wins but keeps bidding a bidder wins whenever it bids, even if it bids rarely one company who consistently wins bids but always subcontracts to smaller firms companies that tend to withdraw unexpectedly with no clear reason for doing so

Bid Rigging Examples (USA) • Two companies supplied nylon filament for paintbrushes made by prisoners at a federal prison • 90 contracts over 7 years • Each company won 50% of the contract each year How detected: • Two procurement auditors happened to discuss these contracts over lunch (Equal division over same period) 3

Warning Signs in Documents Submitted Similar anomalies in documentation • same type of paper • same misspellings • handwriting • wording • calculations and miscalculations 4 • alterations

Bid Rigging Examples (USA) Two companies submitted bids for the repair government equipment damaged by a storm. How Detected: A procurement official noticed that each cover letter had the same typographical error (an unnecessary word): 5 “Please give us a call us if you have any question. . ”

Warning Signs Related to Pricing • Similar prices are quoted from different suppliers the same for a long period of time, previously different from one another, increased price and it is not justified by increased costs, or eliminated discounts, especially in a market where discounts were historically given • A large difference between the price of a 6 winning bid and other bids

Bid Rigging Examples (CANADA) Government of Canada contracts for IT services 14 individuals and 7 companies accused of dividing contracts Contracts worth approximately $67 million How Detected: In 2005, Public Works and Government Services Canada (PWGSC) contacted Competition Officials. The Pricing of three bidders were similar to each 7 other but completely different from other bidders.

Suspicious Statements of Coordination Look for indications that the bidders have communicated with each other • Statements in the press • Statements from industry meetings “industry suggested prices” • Statements indicating that 8 • ‘we have reached an agreement’,

Bid Rigging Examples (CANADA) Alberta Canada – Bus Services Two providers submitted bids in sealed bids Vast majority of contract awarded to one. Fined $8, 000 CND 9 How Detected: Other called saying that both had submitted very bids Official took copious notes of the telephone conversation (Notes used for prosecution)

Suspicious Behaviour • Winning bidder chooses not to accept the award of the bid • Winning bidder withdraws before the award is made • Seasoned bidders submit bids W/O basic documentation • There is an unusually small number of bidders in an otherwise robust market 10

Bid Rigging Examples (USA) Conspiring early 1980's to rig bids to supply milk and other dairy products to public school districts and other public institutions in several states 133 milk bid-rigging cases, 80 corporations and 84 individuals. Criminal fines over$59. 8 M, Civil damages over $8 M 29 individuals have been sentenced to jail How Detected: The small number of suppliers was a key 11 indicator,

Caution about indicators of bid rigging Warning signs should not be taken as proof that firms are engaging in bid rigging 12

The more aware of these signs, the more likely one is able to assist in detecting bid rigging. 13

Detecting Bid Rigging Public Procurement Seminar June 16 th & 17 th 2010 Fair Trading Commission Good Hope, Green Hill, St. Michael info@ftc. gov. bb 246 -424 -0260