The Serbian Competition Commission published new Instructions for Detecting Bid Rigging in Public Procurement, a practical guide to understanding the methods generally used to unlawfully allocate contracts in public procurements.
The Instructions were modelled after the OECD Guidelines for Fighting Bid Rigging in Public Procurement (available here), once again speaking loudly in favour of Serbian legislation and practices being continuously harmonized with those of the EU, although often with significant delays.
The Instructions emphasize the importance of fair market practices and denounce bid-rigging as one of the most serious competition infringements. Although the Instructions are primarily intended to be used by the public procurement professionals to bring to light (and to justice) the bid-riggers, they are also a valuable source of know-how for companies who regularly compete in public procurements, as well as for the contracting authorities seeking bids with the best value for money ratio. The Instructions aim to provide clarity for all the relevant stakeholders, thereby preventing the potential unlawful activities that may incur high costs, both financial and reputational.
Bid rigging can take place in various forms, ranging from more evident and straightforward activities (such as tailoring tender conditions for a specific bidder) to more “sophisticated” and complex systems (such as the so-called bid-rotation schemes and market allocations). Recognizing the endless creativity of stakeholders, which results in this variety of forms, the Instructions provide practical steps for building a strong foundation for a fair bidding process. For example, the Commission guides the readers through the best practices for forming tender requirements, to ensure that the requirements hit the so-called “sweet spot” for the specific tender, being neither too wide nor too narrow.
The Instructions also outline a checklist, i.e., a set of red flags whose existence in the particular bidding may suggest coordinated and fraudulent behaviour, whereas most of them were sanctioned by the Commission in previous practice. Here are a few notable ones that should raise the attention of contracting authorities:
- The same supplier is often the lowest bidder;
- There is a significant price difference between the winning bid and other bids;
- Some companies submit bids only in certain geographic areas;
- Regular bidders fail to submit bids on a tender they would normally be expected to bid for;
- Each company seems to take a turn being the winning bidder;
- Two or more companies submit a joint bid even though at least one of them could have bid on its own;
- The winning bidder subcontracts the work to unsuccessful bidders, without reporting it;
- Bids submitted by different bidders contain identical technical errors, use identical phrases/terminology or are submitted from the same IP address.
With the Instructions in place, we can reasonably expect the continued intensified supervisory work of the Commission in its fight against bid-rigging arrangements. As a reminder, in recent years, the Commission has sanctioned bidders on several occasions. The stakes for the procurement participants are high, as bid-riggers can face civil fines and criminal liability, be ordered by the Commission to pay up to 10% of their total annual revenue generated in Serbia, as well as be prohibited from further participation in public procurements for two years. This anti-competitive practice also costs governments and taxpayers billions every year, as OECD countries spend approximately 12% of their GDP in public procurement, while this percentage is often much higher in developing countries such as Serbia.
Recognising the cancerous effects of unobstructed bid-rigging for the society as a whole, it is therefore in the interest of all the stakeholders to, at least, decrease its prevalence by a way of combined legislative, enforcement and public-awareness efforts.
The Instructions are available here, in Serbian language only.
The information in this document does not constitute legal advice on any particular matter and is provided for general informational purposes only.