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Detecting and deterring illegal bid-rigging in sourcing – tips from the Commerce Commission

Part of: Breakfast session Procurement news

Last month, Barrie Sutton, Principal Investigator from the Commerce Commission presented a procurement breakfast session on detecting and deterring bid-rigging during the sourcing process.

Effective competition is key to achieving good procurement outcomes as it helps to drive better efficiency, quality, service, innovation and pricing from suppliers.

However, it is important that bids have been independently submitted and that you can identify when this isn’t the case.

Barrie Sutton  Principal Investigator, Commerce Commission

Cartels involve competitors or potential competitors agreeing to work together to reduce competition and raise prices. Cartel agreements do not need to be formal - two or more parties just need to reach a shared expectation about how at least one of them will act or refrain from acting. This includes informal understandings and even a nod and a wink between parties may be evidence of an agreement. 

Bid-rigging involves two or more bidders agreeing who will win the bidding between them. This behaviour can take a number of forms including winning bid rotation, cover bidding, cover pricing, bid suppression and bid withdrawal.

Working together to detect and deter bid-rigging

Detecting bid-rigging involves looking for warning signs such as:

  • suspicious bidding patterns
  • suspicious bidding behaviour (eg bid similarities)
  • suspicious pricing 
  • other signs of illegitimate communication between suppliers

Deterring bid rigging includes discouraging bidders from behaving illegally such as requiring disclosure of subcontractors and using anti-collusion clauses.

What should you do if you suspect bid rigging during a tender?

In the first instance, it is important to act normally and continue the tender process. You can carefully collect further evidence without alerting the suppliers involved to help confirm your suspicions. However, it may be best to talk to the Commerce Commission at a very early stage as this will help to determine what to do going forward.

The Commission investigates and prosecutes cartels and also provides outreach and guidance to government procurers such as workshop presentations. Please visit the Commerce Commission's avoiding anti-competitive behaviour page for more information or to discuss any issues you see contact the Trade Practices team via 0800 943 600 or contact@comcom.govt.nz.