In my view, organizations like the Association of Municipalities of Ontario and the Ontario Public Buyers Association can play a very important role in the information gathering and dissemination process.
Most municipalities buy very similar things, from buses to road salt, from swimming pools to playground equipment. When consumers exchange pricing information it allows them to see whether they are in fact being offered a competitive bid.
When one municipality finds the lowest bid in a tender that is conducted is far above the highest price bid to another municipality in a similar tender there are obvious reasons to suspect collusion.
If bid-rigging is difficult to detect and even harder to prove, it is obviously even more difficult to avoid.
Nevertheless, there are certain basic measures that a municipality can take to reduce its level of exposure in this area.
Some of the top 10 include the following:
Train staff to be attentive for information suggesting bid-rigging, such as unexplained refusals to deal.
Avoid providing assistance to collusion. Do not disclose the name of a business or other organization that has picked up a tender package as doing so facilitates communication among the bidders.
Improve record-keeping. Know who bids for the city contracts and who wins and who loses.
Confirm all entities submitting bids are apparently legitimate operations. Carry out random checks on business addresses and telephone numbers. Check to see if the same address and phone number is given by purportedly different companies. Make sure that “business” addresses are not located at an apartment or personal residence. Check references.
Make it clear to suppliers the municipality takes bid-rigging and similar wrongdoing very seriously.
Encourage suppliers to step forward if they are approached about joining a bid-rigging scheme.
Avoid being a passive target. Ferret out information when tipped off about possible bid-rigging.
Exchange information with other public sector buyers as to the prices bid for services and materials of any given kind.
Require bidders to submit a certificate disclosing any contact that they have with any other bidder concerning the contract.
Encourage bidders from outside the local area to bid municipal contracts. The risk of collusion is greatest when the same “usual suspects” always bid for the same or similar kinds of work.
Also, be prepared to re-tender any contract where there are suspicious circumstances.
I have in the past advised some suppliers that the municipality is always on the watch for evidence of bid-rigging and that it is prepared to impose a very long-term ban on any suppliers convicted of the practice either in relation to the municipality or with respect to any customer.
Municipalities should make inquires where prices or bids do not make sense, but they should not discuss issues with the suppliers collectively.
I have found that pooled purchasing arrangements with other municipalities discourages collusion among suppliers because there is less chance of spreading work around.
Purchasing managers should make clear to buyers they have a responsibility to their employer to bring suspected bid-rigging to the employer’s notice.
Unfortunately, very often, buyers are reluctant to do so, perhaps out of a misplaced sense of loyalty to suppliers with whom they develop a good relationship.
As the United States Department of Justice notes:
“Purchasing professionals may fear that a vendor will be debarred, publicly accused or even indicted based solely on their suspicions.
“Be assured that reported information and suspicions are just the first step in an incremental and very thoughtful process before an investigation is begun. Only if sufficient evidence develops will a criminal investigation begin, and criminal charges are never brought unless that investigation uncovers compelling evidence of price fixing, and bid rigging, or other collusion.
“Purchasing professionals value their relationships with vendors and do not want to be identified, especially because the suspicious conduct may prove to have an innocent explanation.”
Stephen Bauld is a government procurement expert and can be reached at swbauld@purchasingci.com. Some of his columns may contain excerpts from The Municipal Procurement Handbook published by Butterworths.
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