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 a tender, they rip off customers who often end up spending more than necessary, and for less in return.
What you need to know
Bid rigging is a form of cartel, an anti-competitive arrangement in which businesses collude with rivals to undermine competition when tendering for contracts. At the CMA we have produced a short video that explains what bid rigging looks like in practice.
This is a particularly serious type of anti-competitive activity. It removes the incentive for companies to compete to win a contract, which in turn means purchasers do not get true value for money. It can artificially increase prices by 20% on average.
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.
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 guide on competition law risk, which includes case studies and examples of businesses that have been fined for anti-competitive activity
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, contact: CMA_ProcurementSupport@cma.gov.uk
It is important for all public sector procurers to be alert to the dangers of bid-rigging and that you take steps to reduce the risks of being a victim, including reporting it if you think something looks suspicious. Only then can you be confident that you are getting the best deal and making the best use of resources.
How to report
If you’ve seen something suspicious in relation to any of your contracts, then please contact us. We will take your suspicious seriously and we have strong powers of investigation to take action:
Call us on 020 3738 6888
Fill out our online reporting form
Email: cartelshotline@cma.gov.uk
This blog was by-lined by Sean McNabb, CMA Director, Cartels Enforcement, who was a speaker at the Tackling Covid-19 Fraud Across the Public Sector Conference in May 2021.
