Following its investigation into bid-rigging and collusion on pricing in competitive tendering procedures, the Competition and Markets Authority has issued fines totalling nearly £60 million to ten UK-based construction firms. The contracts in question related to both public and private sector opportunities for demolition works and asbestos removal.
Following its investigation, the Competition and Markets Authority (the CMA) identified that the collusive behaviour in question took place over the course of five years, affecting 19 contracts. In particular, the CMA found that the collusive activity included instances of "cover bidding", where bidders deliberately priced their proposals to lose the tender (which can result in the price actually paid being inflated, or in a reduced quality of work and/or services).
In addition to the cover bidding, the CMA identified that several firms had colluded to ensure that the successful bidder compensated the losers of the contract.
Contracting authorities should therefore consider how they can best identify the risks of collusive behaviour, and ensure that their internal policies and procedures remain robust and up-to-date.
A useful starting point may be the Ministry of Housing, Communities and Local Government (MHCLG) 2020 report into the risks of fraud and corruption in local government procurement (the Report). Whilst the Report is aimed at local government procurement, it represents best practice that could be adopted across the wider public sector.
The Report itself is supplemented by a number of annexes and includes examples of good practice, a corruption risk matrix, and a procurement fraud review checklist. It identifies key areas of risk (for example, risks of organised crime and cartels, risks arising from the capacity of local authorities, and risks that occur throughout the life of a contract), and sets out useful steps that can be adopted to help identify and tackle the risks of corruption and collusion.
Suggested next steps for contracting authorities
The Report identifies various suggested activities for the public sector as a whole to take forward in order to mitigate against the risks of procurement fraud and corruption. As an example, contracting authorities could consider:
- Improving understanding of risks: for example, introducing mandatory fraud awareness training for all staff, and raising awareness of the risks of procurement fraud and corruption.
- Increasing capacity and capability: including developing counter fraud capacity, conducting investigations into suspected procurement fraud, conducting fraud risks assessments and reviewing capacity to manage contracts effectively from the outset.
- Developing anti-fraud and corruption culture: setting the right tone from the top within the organisation and highlighting the importance of collaborative, cross-departmental, working. Contracting authorities should also take action against all responsible for procurement fraud and corruption, and should, where possible, publicise cases and prosecutions to serve as a deterrent.
- Reporting and implementing appropriate systems and processes: including appropriate due diligence, and the transparent and systematic management of conflicts of interest and gifts and hospitality.
- Improved data quality and recordkeeping: keeping accurate and detailed records securely and readily accessible.
The risks of fraud and corruption in public procurement are not new, and this latest occurrence serves as a timely reminder of the importance for public sector buyers to put in place mechanisms for the identification and handling of collusion and bid-rigging in their procurement activity.
