Policy Brief: Fighting Cartels in Public Procurement

Governments devote a large share of taxpayers’ money to public procurement – purchasing goods and services from road building to school textbooks. But how can they be sure that they are getting good value for money, and that companies seeking public contracts are not conspiring to undermine the principle of competitive bidding?

One key area is bid-rigging where companies illegally agree on a price for a service or contract or agree not to bid at a tender. So governments should focus on fighting bid-rigging in their public procurement systems – a significant portion of domestic cartel operations involve bid-rigging in auction or procurement procedures.

Frequently, the procurement authority is best placed to detect signs of unlawful bidding arrangements, as it has
good knowledge of the relevant industry sector and it can observe patterns in bidding processes that could indicate unlawful collusion.

At the same time, competition authorities should expand their programmes to alert governments to the dangers of cartels directed against them, and work more extensively with procurement officials in an effort to fight bid-rigging more effectively. Procurement authorities can influence how
bidding procedures are organised to make it more difficult for companies to form cartels. However, programmes to systematically educate procurement officials exist in only a few OECD countries. This suggests that in many countries procurement authorities and officials are not yet sufficiently aware of the danger of cartels among firms participating in bidding procedures and of the important role they can play in preventing and detecting cartels.