The Competition and Markets Authority: Bid-rigging risk in NHS procurement
As part of our #PracticeMatters theme this month we spoke to the team at The Competition and Markets Authority (CMA) who shared their insight about the risks of bid-rigging in NHS procurement and the types of bid-rigging to look out for.
By being alert to bid-rigging dangers and how to report them – you can feel more confident that your procurement projects deliver true value for money for the NHS.
Every year, billions of pounds are spent procuring goods and services in the UK, particularly by the public sector. Where businesses compete to win contracts, purchasers get fair prices and choice, including more innovative products and services. However, if companies collude to rig bids for contracts and decide amongst themselves who will win a tender, they deceive customers who often end up spending more than necessary, and for less in return.
The CMA is the UK’s primary competition and consumer protection authority, a non-ministerial government department with offices across the UK. The CMA will investigate and hold those suppliers to account who cheat public sector tenders by colluding to win contracts rather than competing fairly.
The CMA has investigated several cases where public sector bodies have been the victim of anti-competitive supplier behaviour, including bid-rigging practices. The construction sector has been a particular area of focus – with the CMA imposing substantial fines running into millions of pounds across 6 separate enforcement cases – those affected included publicly funded projects. You can read about these cases here.
Bid-rigging can occur in any sector and conditions that make illegality more likely include:
- where there is a small number of suppliers,
- homogenous products being sold,
- stable demand in the market
- barriers to entry to the market
- where competing suppliers already know each other, perhaps via a trade association
Watch the CMA’s short explainer video that explains what bid rigging looks like in practice.
Types of bid rigging to look out for
Bid rigging can come in a variety of forms. Some of the most common are:
Bid rotation
- Companies agree to take it in turns to have the most attractive bid on a project, thereby ensuring that they all have an agreed share of the market
- This is usually done in conjunction with cover pricing and/or bid suppression
Cover pricing
- Companies that don’t intend to win the contract communicate with their competitors and agree to submit inflated prices for the job so that another (often pre-arranged) bid from another company looks much better value.
Bid suppression
- Companies agree not to submit a bid at all, which means other firms face less competition to win the contract.
- This is normally done in exchange for some kind of payment, or as part of an arrangement where the winning bidder then sub-contracts part of the work out to the non-competing firm.
Risk Indicators
This is not an exhaustive list and more details on the risk indicators (red flags) can be found on CMA website: Cheating or competing - Cheating or competing.
- Where there is a pattern of unusually higher bids than would be expected; that might suggest there is some cover-pricing taking place.
- A company bids higher on some bids than on others with no apparent cost differences and this might suggest that a bid-rotation type arrangement is present
- Bid prices drop on the entry of a new or infrequent bidder; cartels generally work better where there are stable market conditions and the companies involved all know each other and have existing relationships and arrangements. Introducing an element of new competition to the process causes existing cartels problems and forces them to react either by having to lower prices or, in some cases the CMA have seen, approach the new competitor to join the cartel.
- The same or similar increments between bids (for example, all respective bids increase by 5%).
If you think a supplier could be acting illegally, never be tempted to confront them yourself as this could tip off those involved to destroy evidence and jeopardise a future investigation. Your first point of call should be to raise your concerns internally, seek legal advice and contact the CMA to report your concerns.
Tools to help you
There are tools and advice on the CMA’s Cheating or Competing campaign page to help procurers spot and report harmful anti-competitive practices among suppliers, including:
- A free e-learning tool designed specifically for public sector procurers
- A 60-second-summary with advice for public sector procurers
- Animated videos that explain behaviours that are illegal under competition law
- A bid-rigging screening tool is in development that can test your data for suspicious bidding patterns
CMA staff are available to talk to public sector procurement teams about how to reduce the risks of bid-rigging, drawing out lessons learnt from cases and the typical 'red flags' to watch out for.
To arrange a CMA presentation for your procurement team and to discuss the bid-rigging screening tool, contact: CMA_ProcurementSupport@cma.gov.uk
How to report
If you’ve seen something suspicious in relation to any of your contracts, then please contact the CMA who will take your suspicious seriously and have strong powers of investigation to take action:
Call the CMA: 020 3738 6888 and / or email: cartelshotline@cma.gov.uk