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New weapons against bid rigging

In the war against bid rigging, the Commerce Commission has today released new guidelines to secure a fair playing field for consumers.Bid rigging - a form of cartel conduct - is prohibited by the Commerce Act 1986.Cartels are formed when companies collud

Kristina Koveshnikova
Wed, 11 Jul 2018

In the war against bid rigging, the Commerce Commission has today released new guidelines to secure a fair playing field for consumers.

Bid rigging - a form of cartel conduct - is prohibited by the Commerce Act 1986.

Cartels are formed when companies collude with their competitors to increase or maintain prices, divide geographical territories, customers or projects between themselves, agree to limit production, and/or engage in bid rigging, according to the Commerce Commission.

As this process is generally carried out in secret, it can be very difficult to detect and that’s where the three related resources step in.

They were developed to assist buyers in both the public and private sectors in recognising and deterring bid rigging.

Commerce Commission general manager Kate Morrison said based on international experience government bodies can be targets for cartels, so the guidelines will be especially beneficial for those involved in public procurement

“However, the private sector also stands to benefit from knowing how to recognise and deter bid rigging, as open and effective competition achieves best value for money,” she said.

Guidelines and two accompanying fact sheets give purchasers information about how potential bid rigging can be spotted and reported.

It suggests looking for suspicious bidding patterns which include: a pattern of winning bidders revealed over time, for example, the bid being won in a pattern such as A, B, C, A, B, C, or particular bidders always winning contracts of a particular type or size; a bidder that bids relatively high in some tenders but then relatively low in other similar tenders; and a bidder that never wins but keeps on bidding.

It’s also important to look for suspicious bidding behaviour where likely bidders don't submit a bid, bids that are suddenly withdrawn or bids received containing identical wording, particularly if it is unusual wording, as well as suspicious pricing.

The new guidelines also include tips on how tender processes can be designed so that bid rigging can be prevented.

“Illegal collusive conduct damages the welfare of New Zealanders by raising prices and negatively affecting other factors such as choice, innovation, quality and investment,” Ms Morrison said.

For more information go to http://www.comcom.govt.nz/bid-rigging.

DO:
• Question bidders about their pricing;
• Note their replies and carefully record for future reference;
• Check your records for any other suspicious signs;
• Act normally, so as not to alert the bidders;
• Continue with the tender process; and
• Report your suspicions to the commission.

DO NOT:
• Accuse the bidders of illegal behaviour – if you are right, this may give them time to cover their tracks. If you are wrong and your actions damage a bidder’s reputation, you may be accused of defamation;
• Launch your own internal investigation without contacting the commission – this might alert cartel members that they may be exposed and give them time to destroy evidence; or
• Attempt to apply your own penalty rather than reporting to the commission.
 

Kristina Koveshnikova
Wed, 11 Jul 2018
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New weapons against bid rigging
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