‘Bid-rigging’ has been in the news this week, but what is it? And how do you as suppliers avoid doing it?

This week Suzi Ring reported that The Competition and Market’s Authority has identified the UK government as at “significant risk of bid-rigging” through its procurement process and is taking significant steps, including using AI to analyse procurement data, to prevent ‘anti-competitive conduct’. There is a particular focus on the construction sector.

In March 2023, following a year-long probe, the CMA fined 10 demolition firms a total of nearly £60m for their involvement in bid-rigging following a years-long probe, which included demolition firm, Erith that was fined £17.6m. The CMA is currently trialling an AI tool following a trend of construction being target of a number of recent bid-rigging probes.

What is bid-rigging?

Such ‘anti-competitive conduct’, or ‘collusion’ can take a number of forms.

It can take the form of a secret agreement between competing private sector companies, who would normally compete for the same contracts in a procurement process, which deliberately manipulate bids and the bidding process to guarantee the outcome of a tender or contract prices.

These so called ‘business cartels’ may participate in:

• Bid rotation: Competing companies take it in turns to submit the lowest bid, or the most attractive bid, to ensure they both have an equal share of the market.
• Bid suppression: Companies may agree not to submit a bid at all, which means other businesses face less competition to win the contract.
• Cover pricing: Companies that don’t want to win work liaise with their competitors to submit inflated ‘cover bids’ to exclude themselves from winning based on cost and that competing, often prearranged, bids look relatively better value. This gives an artificial impression of what is a competitive price but, in fact, creates inflated price and poor value for money for the public sector.

‘Anti-competitive practices’ also include where a public sector body, like a Government Department or local council, engages in behaviours that unfairly prohibit competition in a market.

This can look like:

• Favouritism: Awarding contracts to only one supplier for a prolonged period, preventing other businesses from competing for the same services.
• Unnecessary specifications: Designing procurement criteria so narrowly that only one supplier can meet the requirements, effectively excluding potential competitors.
• Bid-rigging: Colluding with suppliers to predetermine who will win a tender process, often through manipulating pricing or other factors.

This latter example is where things get murky for businesses selling to the public sector. In a market where strong relationships, and time taken to understand buyer’s challenges, are what separate the winners from the losers, hard work and diligent selling could, potentially, be misunderstood as favouritism.

The Stotles take

More often than not, suppliers who pre-engage with the market are the ones who succeed. In 2022, Stotles released a study which found that a supplier’s chances of a winning a public sector contract skyrocketed from less than 4% to over 46% when pre-engaging with active buyers (as opposed to only responding to open tenders). In our experience, the most successful suppliers actively build relationships with buyers rather than just responding to open tenders.

There’s a fine line between supplier favouritism based on unscrupulous behaviour and proactivity and relationship building by suppliers. How can businesses avoid accusations of being complicit in ‘bid-rigging’ or ‘anti-competitive practices’ in partnership with public sector buyers?

It seems a trail proving competition occurred and transparency are the answers.

The Procurement Act 2023, set to go-live on the 24th February 2025, is set to introduce the ‘Competitive Flexible Procedure (CFP)’ which gives contracting authorities the flexibility to design their own, more competitive, procurement processes.

The CFP is set to incorporate processes such as negotiation at any stage of the process (including pre-tender, open tender, or post-tender), an open risk dialogue with suppliers, or a product demo stage.

The Central Digital Platform also is set to increase transparency around procurements as all UK contracting authorities will be required to publish information relating to procurements.

All suppliers, buyers, and even members of the public will be able to have visibility of the processes, engagements and relationships that exist between the public and private sector.

Now what for suppliers?

In a market where proactive selling could be misconstrued as collusion, it would be prudent for suppliers to exercise caution and integrity in their relationship building and negotiation tactics. However, it is fair to say that not all early engagement and strong relationships buyer-supplier represent foul play, but rather are the proven methods of the top suppliers.

It’s shortsighted to assume that, because it could be considered ‘anti-competitive’ that companies will stop doing this and the CFP is supporting evidence of the market shifting to accommodate the type of fair competition that many businesses are pushing with proactive tactics.

Are you ready to compete harder with your competition? Sign up for a free Stotles account and see which of your competitor’s existing contracts are expiring/where your competitors have contracts