The prohibition on bid rigging is under section 42 of the Competition Act 2000.
In a tendering process, all bidders are expected to independently decide whether they wish to participate in the tender or to determine the price, terms/conditions of their bid without discussing or agreeing with actual or potential bidders. Only then will suppliers genuinely compete among themselves to win a tender.
A purchaser (public/private procurer) resorts to tendering as form of procurement because the process offers a means of obtaining the desired goods/services at the best value for money by encouraging available suppliers on the market to compete among themselves and submit their best offer.
Bid rigging evades the very objective of a procurement process and deprives procurers of genuine opportunities to achieve value for money.
Whatever the form which bid rigging takes, the result is that the benefits of competitive tendering are lost, because true competition never occurred in the first place. Procurers end up paying higher prices for goods and/or obtaining lower quality goods or services. Bid rigging may also exclude potentially more efficient competitors from the bidding process or reduce suppliers’ incentives to improve quality or innovate.
The prohibition on bid rigging is in respect of all calls for bids whether by a private procurer or public procurement by Government.
The different forms of bid rigging
Bidders can employ various schemes to limit competition in a tender process. Generally, the most common forms of bid rigging are:
- Cover bidding: involves agreeing upon a pre-designated winning bidder while others deliberately bid in such a way (quoting artificially higher or with unacceptable conditions), as to create the illusion that the winning bid is competitive;
- Bid withdrawal or suppression involves one or more bidders refraining from bidding or withdrawing a previously submitted bid;
- Bid rotation occurs where participating bidders take turns in submitting the lowest bid;
- Market allocation: involves bidders dividing the market either by sharing customers or geographic regions among themselves.
However, one instance of bid rigging can involve any one or a combination of the above schemes.