The Competition and Markets Authority (CMA), in partnership with Spend Network, has recently developed and launched a free tool to help procurers screen their tender data for signs of potential anti-competitive behaviour. For those in procurement, this will help to identify and investigate unfair practices. For those bidders working in an anti-competitive manner, this heightens the risk of revelation and investigation.
The competition risk
The CMA estimates that having a cartel in your supply chain can raise prices 30% or more. Cartel activities include suppliers working together to avoid competing for customers or contracts and they can do this in a number of ways, one of which is to fix tenders for contracts by agreeing what each bidder will bid – this commonly referred to as ‘bid-rigging’.
The CMA has a useful collection of information on bid-rigging detection and prevention, including:
Practical Law resources on cartel behaviour include:
- UK cartels and restrictive agreements: a quick guide
- EU cartels and restrictive agreements: a quick guide
Using the tool
The tool is a downloadable app that an organisation can use within its own systems, meaning that procurers do not ‘share’ their data for analysis with the CMA or any other third party.
To use the tool, procurers will need to upload the following documents and information from the tendering exercise:
- Invitation to tender document
- Bid submissions from all bidders
- The identity of the winning bidder
They will also need to create a ‘bidinfo’ file for the pricing information contained in each bid. The data from each tender is scored against each test, and each test is weighted.
The tool uses algorithms to test for suspicious signs in three key areas, any or all of which could be a sign of bid-rigging:
- The number and pattern of bidders
- Pricing patterns
- Document origin and low endeavour submissions
To refine the tests, the CMA and Spend Network have used data from over 100 tenders involving nearly 500 bids. The combined and weighted total gives a ‘suspicious score‘ for the tender exercise. The suspicious scores highlight which tenders are more likely than others to be suspect. The procurer can then choose to go back to the bid documents and ask questions. They can also choose to share this information with the CMA via their cartels hotline.
CMA’s next steps
The CMA will review the use of the tool and any significant developments in early 2018. They will also facilitate the sharing of experience and insights between users, Spend Network and other interested parties.