1. Portuguese Competition Authority
Fighting Bid Rigging in the PCA’s Strategic Plan for Public Procurement
Nuno Rocha de Carvalho
Member of the Board
Portuguese Competition Authority
Brasília, Nov 3, 2015 15

2. Public Procurement In Numbers
Public Procurement accounts for and important share of the economic activity
Scope for Cost Savings
Public Procurement Expenditures
30% of Total Gov. Spending and 12% GDP in OECD countries
16% EU GDP
19.5% of Total Gov. Spending and 10% of GDP in Portugal
E-procurement in Portugal
Reduction of 6% - 12% of Total Government Spending
Yielded cost saving ≈ 650 Million €
Could have achieved 1.2 billion euros if full e-procurement 15

3. Cornerstones of the PCA’s Strategic Plan Broad Approach & Policy Mix
Competitive interaction among bidders delivers efficiency gains: value for taxpayers’ money
Broad Approach:
Fighting bid rigging
Promoting efficiency
Aligning incentives (sine qua non):
Awareness
Accountability
Policy Mix:
Advocacy + Strengthening enforcement
Ex-ante + Ex-post action
Promote Efficiency
Align Incentives
Fight Bid Rigging
Goals 15

4. Promoting Efficiency Tender and contract design
We need to look beyond bid-rigging
Inadequate tender design & incomplete/badly specified contracts prevent capturing the benefits from competition
Good tender design is essential to ensuring efficient public procurement
Look at the whole public procurement life-cycle
“What really matters in practical auction design is robustness against collusion and attractiveness to entry”. Klemperer (2003)
However… 15

5. Promoting Efficiency Public procurement procedures in PT15

6. Aligning Incentives Awareness and Accountability
Making cartel detection a shared objective for competition authorities and procurement agencies
Procurement officials vigilant about the need to ensure a regular and timely supply
Fear of disruption: suspicion of a collusive scheme in a tender may raise uncertainty as to the impact on tender time schedules (A. Heimler, 2012)
Training should also focus on raising awareness as to the risks and costs of bid rigging
Accountability for efficiency of outcome: Performance monitoring. 15

7. Fighting Bid-Rigging Range of tools
Deterring new cartels and breaking up existing cartels: important value gains for society
Public Procurement vulnerable to collusion: Transparency requirements; repeated and predictable nature of tenders (Stigler 1968)
Mix of ex-ante and ex-post tools
Ex-ante: Promoting the Design of more “collusion-proof” tenders
Ex-post: Strengthening detection & Vigorous enforcement. Deterrence effect (“ex-ante like”)
Mix of detection methods for bid-rigging conspiracies
Reactive Methods (Leniency, Complaints)
Proactive Methods (Screens) 15

8. Fighting Bid-Rigging Reactive detection methods
Reactive detection methods: Complaints and Leniency
Prevalent in competition agencies action towards cartels, PCA is no exception
Leniency is central in fighting bid-rigging. Often ensures “hard” evidence for the case.
But leniency may be less effective for uncovering stable bid rigging conspiracies 15

9. Fighting Bid Rigging Proactive Detection Methods
Structural and Behavioural Screens (e.g., Abrantes-Metz and Bajari, 2010) to flag suspicious events
Richness of data available on public tenders.
Portugal is the EU pioneer of mandatory e-procurement, through private platforms
PCA has ensured access to data generated by e-procurement platforms and public database
Cooperation with academics in developing screening the databases.
Role of procurement officers in detecting markers for bid-rigging (suspicions bidding patterns that are commonly found in bid rigging cases).
Guide to Fighting bid-rigging in public procurement
Out-reach sessions
Establish communication channels with the relevant entities 15

10. Lessons learned from practice “5 módulos”
Cartel on the supply of portable, pre-fabricated modular container-type structure for temporary classrooms to Parque Escolar E.P.E.
Tenders of lots divided according to geographic regions
5 firms shared the market between 2009 and 2010
Cover bidding scheme
Leniency was crucial for the cartel detection and for simplifying and speeding up the procedure
Firms abdicated from litigation in a transaction which ensured them a 10% reduction in the fine 15

11. Amusing Advocacy Pre-fabricated what? … Well, Prices15

12. Thank you! / Obrigado! Nuno Rocha de Carvalho 15

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