Corruption and Bid-rigging László Bak Vice-President, Gazdasági Versenyhivatal Transparent, accessible and competitive public procurements – International Conference Budapest 14 November 2017

I duly acknowledge the presumption of innocence of any person or undertaking. Any reference to corruption does not mean that the person or undertaking has actually committed a punishable act, unless a binding court judgment has ruled so. The views expressed in this presentation are my views and they do not necessarily reflect those of the Gazdasági Versenyhivatal.

Outline Terminology, competencies Statistics Possible corruption scenarios Signalling to the GVH Cooperation with other authorities Conclusions

Bid-rigging and/or corruption? Bid-rigging: an agreement between bidders that limits or reduces competition in a tender Bid-rigging patterns, e.g.: Cover bidding Bid suppression instruments Bid rotation Market allocation – result 2. Corruption: abuse of entrusted power for private gain 3. Two distinct, but correlating behaviours GVH Police / Public prosecutor

Statistics I fines in closed bid-rigging cases

Statistics II launched cartel cases

Statistics III In 2016, appr. 60-65% of cartel complaints related to bid-rigging activities Since 2013, the GVH filed criminal complaints in 7 cases 73% of parties under proceeding in cartel cases are SMEs GVH’s experience: a frequent way in which bid-rigging schemes are implemented is bid rotation, resulting in market allocation

Typical scenarios for bid rigging and corruption Scenarios differ Corruption serves bid rigging activities directly Bid rigging parties are tool for corruption 2. Time factor Chronological order and relationships are key issues 3. Characteristics Designation of winner among bidders Procurement official is informed of the pre existing bid rigging agreement Procurement official sets the tender or evaluation criteria with regard to the bid rigging agreement Bid rigging agreement is brokered before or during the tender

Possible corruption scenario I. Contracting Authority with 0% own contribution Bidder1 (void tender) Bidder2 (void tender) Bidder3 (winner) Intermediary 10% financial contribution Transfer of 10% financial aid Financial support 10% S u b c o n t r a c t i n g

Possible corruption scenario II. before-after consultation Announcement of tender collusion Time factor

Possible corruption scenario III. setting of technical specifications Procurement officials responsible for tender invitations were also in charge of drafting technical specifications Pre-arrangements Tender announcement Post-arrangements (evaluation)

Possible corruption scenario IV. external help External consultant helps to prepare technical specifications of the tender Consultant helps „wrong” tender announcement Collusion; with help of consultant Modified tender

Signalling to the GVH PPA Sec. 36 (2): „clear and manifest infringement” or „reasonable suspicion” Do NOT discuss concerns with bidders Contact internal legal or audit staff Contact GVH discretely

Cooperation with other authorities Criminal complaint (legal standard of proof?) Information from the police (handling and obtaining of evidence?)  Pacific Fruits C-469/15., WebMindLicenses C-419/14. 3. Cooperative relationships with other authorities

Conclusions Cooperation between authorities necessary Competition law toolbox useful against corruption OECD Guidelines for fighting bid rigging in public procurement Training of procurement officials Educating SMEs - http://kartell.gvh.hu/