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Bid rigging: AFCA and provincial courts of audit exchange experience

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Where public or private clients put out contracts for tender, bidders will sometimes collude to rig their bids, with a negative outcome for the clients. The member countries of the Organisation for Economic Co-operation and Development (OECD) spend an average of 12% of their gross domestic product on public procurement. If collusive tendering could be avoided, public procurement costs would be reduced by one fifth, according to the OECD.

In Austria, the Austrian Federal Competition Authority (AFCA) has uncovered numerous rigged bids over the last few years. These bid rigging schemes were implemented in a variety of ways: through anti-competitive working groups and bidding consortia, illegal price fixing, market allocation and the exchange of competitively sensitive information relating, for example, to agreements on future behaviour when submitting bids.

Profiting from knowledge transfer

Such illegal practices are hard to unearth, with the AFCA being made aware of them in various different ways. The provincial courts of audit may also have to deal with bid rigging since they regularly examine the contracts being placed at the level of the provincial governments. In relation to the so-called “joiner cartel”, the AFCA initiated investigations following the receipt of information from the City of Vienna Court of Audit; several companies have meanwhile been finally sentenced (press release of 22 December 2022).

The Courts of Audit of Burgenland, Carinthia and Upper Austria discussed the methods employed in bid rigging with the AFCA in a recent workshop. The joint initiative was set up as a forum for regular knowledge transfer between the AFCA and the provincial courts of audit. Interim Director General Natalie Harsdorf-Borsch firmly believes that “the provincial courts of audit and the Austria Federal Competition Authority will benefit from this exchange of experience.”

Indicators of bid rigging

The OECD has long since fought against collusion in public procurement, defining indicators of potential irregularities in tender processes. Increased vigilance is required in instances where the same supplier is regularly the lowest bidder, certain companies always submit bids but never win or some suppliers unexpectedly withdraw from bidding.

Indicators of a bid-rigging conspiracy can also be found in the documents submitted. Tell-tale signs include different companies sharing common features in the bid documents (such as identical miscalculations or spelling errors), many identical estimates of the cost of certain items or if documents contain less detail than would be necessary or expected. In relation to pricing, warnings signs include sudden and identical increases in price or price ranges by bidders that cannot be explained by cost increases. Further indicators are if discounts or rebates disappear unexpectedly or there is a large difference between the price of a winning bid and other bids.

Bid rigging has negative consequences. We are working to raise awareness of such collusion and to uncover it even more rapidly,“ stressed Directors Günter Bauer (Court of Audit Carinthia), Rudolf Hoscher (Court of Audit Upper Austria) and René Wenk (Court of Audit Burgenland).



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