Data Analysis in the PCA’s Public Procurement Strategic Action Plan Nuno Rocha de Carvalho Portuguese Competition Authority “Romanian Competition Council: Accomplishments and Perspectives” May 23 2016, Bucharest 15

PCA’s Strategic Plan Broad Approach & Policy Mix The PCA has set Public Procurement as a key priority The PCA has devised a Strategic Action Plan for Public Procurement Broad Approach: Fighting bid rigging Promoting efficiency Aligning incentives with public bodies carrying procurement Awareness Accountability Policy Mix: Advocacy + Strengthening enforcement Ex-ante + Ex-post action Cornerstones of the PCA’s Strategic Plan Fight Bid Rigging Promote Efficiency Align Incentives Goals 15

Fighting Bid-Rigging Reactive detection methods Reactive detection methods: Complaints and Leniency The PCA’s 2006 Leniency Programme was revamped in 2012 and is now more successful Reactive detection tools are indispensable to PCA’s fight against bid rigging Use of Reactive detection methods is prevalent in competition agencies’ anti-cartel enforcement and the PCA is no exception Will always remain central in fighting bid-rigging - ensure “hard” evidence for the case. 15

Fighting Bid-Rigging Complementarity between reactive and proactive action Is there an overreliance on reactive action (complaints and leniency applications)? Diversifying the NCAs detection tool box is essential to maximise both detection and deterrence Well acknowledged strategic complementarities btw Proactive and Reactive detection tools: Proactive Detection Methods may be key for efficient reactive action (OECD): Change the perception of the detection risk: weaken incentives for collusion or lead to cartel instability Allow detection of cartels to occur sooner (esp., long-lasting stable cartels) Increased detection risk may in turn be a driver of more leniency applications Mixed approach Within a case, it may be useful to use a broader range of articulated tools, to guide the investigation and produce a body of compelling evidence. 15

Using Screens to detect Bid Rigging in Procurement Pros and cons vis à vis other market settings Encouraging Factors Added Challenges Data availability (in the public domain / e-procurement) Bidding rings may take different and quite complex forms Often more discernible patterns The different bid-rigging schemes are not mutually exclusive Interface with Contracting Authorities (“The Third Party”) May involve various procurement procedures - over time, across different geographical areas, different contracting authorities, different goods and services 15

Detecting Bid Rigging Contracting Agencies Often, discussions dichotomise investigations as ex officio vs. leniency-triggered, but this is not so clear-cut In practice, the dividing line between reactive and proactive detection methods can be blurry: an NCA’s investment in data analysis usually follows a complaint or suspicion In Public Procurement, contracting agencies have a key role in providing input vital to targeting the data-screening exercise: Prior knowledge on what sectors/procurement contracts/events to look at; Prior knowledge on the potential bid rigging mechanism, participants and time-frame; Input on fine-tuning the NCA’s screen of data. 15

Data availability, coverage and quality Encouraging developments Increasing availability of procurement data for a variety of purposes (auditing, fighting corruption, benchmarking) Broad e-procurement datasets open interesting avenues for proactive detection methods may be a powerful tool in fighting bid rigging may increase the detection rate. New EU Directives on Public Contracts – transition to e-procurement Portugal is a pioneer in what concerns mandatory e-procurement E-procurement and centralised registration of all competitive public procurement procedures in online web portals since November 2009. Centralised web portal (Portal Base) covers public contracts from 2009 onward 15

Data availability, coverage and quality Challenges Portal Base is only compulsory for competitive procedures and “framework agreements”. Direct awards do not have to be fully run in Portal Base – which limits the available info In 2013, Portal Base accounted for around 20% of the total value of public contracts Personal data protection issues have been delaying the PCA’s full access to Portal Base dataset 15

Addressing the challenges Targeting data screening Targeted screening vs. “blind screening”: hopeless search PCA issues data requests for certain procurement procedures/sectors based on information brought to it by third parties A hybrid approach – mixed use of reactive & proactive detection methods Analysis to sub-datasets has uncovered information quality issues (information gaps), Tackling these issues in the broader dataset would require considerable time and effort 15

The Role of contracting agencies – PCA’s Advocacy Initiatives PCA’s Guidelines on Fighting Collusion in Public Procurement issued in Dec 2015 PCA’s “Fighting Bid Rigging Campaign” To be launched June 2016 5 outreach sessions to contracting authorities Increase PCAs’ detection skills Promote the design of more “collusion proof” tenders Establish close communication channels with the relevant entities Engage the “Third Party” in the PCA’s policy aims 15

The Role of contracting agencies – Aligning Incentives through advocacy Procurement officials vigilant about the need to ensure a regular and timely supply Focus on allaying fears of disruption upon suspicion of a collusive scheme in a tender Making cartel detection a shared objective for the Competition Authority and procurement agencies Aligning incentives: Raising awareness Promoting accountability Performance Assessment Shift from a formalistic box-ticking to an outcome based approach 15

Policy-mix approach 15

Mulţumesc!

Nuno Rocha de Carvalho Member of the Board nuno.carvalho@concorrencia.pt 15