Preventing collusion in procurement

Albano, Gian Luigi; Buccirossi, Paolo; Spagnolo, Giancarlo; Zanza, Matteo

doi:10.1017/cbo9780511492556.015

Cited by 26 publications

(21 citation statements)

References 6 publications

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“…In general data on bids in public procurement are not made public, presenting a major obstacle to research on bid-rigging. This information is kept secret because it can be useful to firms engaged in collusion [4]. In fact the OECD recommends that issuers of public procurement contracts do not publish information on losing bidders and bids for this reason [18].…”

Section: Introductionmentioning

confidence: 99%

A network approach to cartel detection in public auction markets

Wachs

Kertész²

2019

Sci Rep

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Competing firms can increase profits by setting prices collectively, imposing significant costs on consumers. Such groups of firms are known as cartels and because this behavior is illegal, their operations are secretive and difficult to detect. Cartels feel a significant internal obstacle: members feel short-run incentives to cheat. Here we present a network-based framework to detect potential cartels in bidding markets based on the idea that the chance a group of firms can overcome this obstacle and sustain cooperation depends on the patterns of its interactions. We create a network of firms based on their co-bidding behavior, detect interacting groups, and measure their cohesion and exclusivity, two group-level features of their collective behavior. Applied to a market for school milk, our method detects a known cartel and calculates that it has high cohesion and exclusivity. In a comprehensive set of nearly 150,000 public contracts awarded by the Republic of Georgia from 2011 to 2016, detected groups with high cohesion and exclusivity are significantly more likely to display traditional markers of cartel behavior. We replicate this relationship between group topology and the emergence of cooperation in a simulation model. Our method presents a scalable, unsupervised method to find groups of firms in bidding markets ideally positioned to form lasting cartels.

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Section: Introductionmentioning

confidence: 99%

A network approach to cartel detection in public auction markets

Wachs

Kertész²

2019

Sci Rep

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“…It is also beyond the scope of the article to discuss the most adequate kind of procurement, whether negotiations or competitive tendering processes. Hence, in the following subsections, some features of the bidding terms are confronted with some assumptions here considered as good practices, bearing in mind the search for competitiveness as a principle since its commitment may result in hiring an inefficient company at higher prices [12,13]. In the analysis, it was considered that issues such as ownership of depots, contractual terms, size of lots and participation requirements are critical to maintaining contestability amongst incumbents [14].…”

Section: Analysis and Criticism Of Some Of The Features Adopted In Thmentioning

confidence: 99%

Competitive Aspects in the Metropolitan Region of Recife Bidding Terms for the Delegation of Its Urban Bus System

Rolim¹,

Santos²,

Meira³

2014

JTTE

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This paper discusses aspects related to competitiveness in the ITB (invitation to bid) of the public tender for the concession of the urban bus public transport services in the RMR (Metropolitan Region of Recife) in the Brazilian northeastern region. The bid was made public through a consortium formed by the two major cities of the RMR-Recife and Olinda, and the government of the State of Pernambuco. Throughout the paper, the basic features of the bidding terms are presented and some aspects of these characteristics that undermine competitiveness are pointed out and submitted to criticisms. Aspects such as the small number of lots, the lack of diversification of lot sizes and the possibility of forming consortia with unlimited number of participants were targeted. In order to prove the criticisms stated, a simulation of an arrangement amongst incumbents is presented, based on the rules of the tender, in which the allocation of incumbents ex post bidding does not differ from the ex ante scenario. Thus, the main objective of this article is to assess whether good practices that foster competition were followed by the ITB and the main conclusion is that competitiveness was put in jeopardy.

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“…However, fi rms would rather collude and raise joint profi t. 16 What does 'collusion' mean in the context of procurement? For practical purposes, collusion can be thought of as any conduct adopted by a group of fi rms that aims at reproducing or approximating the market outcome induced by single, dominant fi rm (Albano et al 2006). To achieve such an objective, fi rms need to coordinate their strategies either tacitly or explicitly.…”

Section: Collusion In Procurementmentioning

confidence: 99%

“…Cartel formation is far from being a theoretical speculation. Albano et al (2006) document some of the cartel formation that happened in Europe recently. In 2005, France fi ned 21 construction companies €17.3 million for concerted practices involved with bidding for the building of a highway.…”

Section: Collusion In Procurementmentioning

confidence: 99%

Evaluating Public Procurement

Mukhopadhyay¹

2011

Review of Market Integration

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In this article we present various issues that underline public procurement, critically evaluate some of the procurement practices and discuss the role of the regulator.1 The objective of the study is to bring forth various issues that dominate public procurement, identify the challenges and suggest framework to address them. We lay particular emphasis on public procurement regarding IT and ITES. We evaluate the literature on public procurement as well as evaluate various procurement practises that are practised globally.

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Preventing collusion in procurement

Cited by 26 publications

References 6 publications

A network approach to cartel detection in public auction markets

A network approach to cartel detection in public auction markets

Competitive Aspects in the Metropolitan Region of Recife Bidding Terms for the Delegation of Its Urban Bus System

Evaluating Public Procurement

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