Late last month the Competition & Markets Authority (CMA) published an open letter to public sector procurement officials with advice on how to spot bid rigging.
Bid rigging is rightfully regarded as a very serious offence. When bidders collude to share contracts and/or make purchasers pay more, their behaviour is little more than theft.
The CMA’s advice highlights several factors that may be indicative of suspicious bidding behaviour. This includes:
- different bids with identical prices;
- the likely bidder failing to submit a bid;
- the lowest bidder not taking the contract;
- bids that drop on the entry of a new or infrequent bidder; and
- suspiciously high bids without logical cost differences.
Is bid rigging a problem in the NHS?
During my time at the former Cooperation & Competition Panel (CCP), no-one ever raised bid rigging concerns with me, and I’m not aware of Monitor (now NHS Improvement) ever investigating such a case.
This doesn’t mean bids for NHS contracts are never rigged. But, I do think that when it comes to contracts for clinical services, bid rigging is inherently unlikely.
Putting the moral dimension to one side and just focusing on the practicalities, any attempt to rig a bid for a clinical services contract would require multiple NHS Trusts and private providers to covertly agree a bid rigging strategy. It seems to me that this would involve too many organisations with too many different interests to be successful.
Joint bidding as anticompetitive behaviour
Where some providers of NHS services possibly sail closer to the wind, however, is in joint bidding.
Forming a consortia to bid for a contract is often necessary. For example, complex contracts that need services to be delivered in multiple care settings, might only be feasibly be delivered if several organisations come together to jointly offer their shared expertise.
Joint bidding becomes problematic though when the formation of a consortium is not motivated by getting the right mix of skills to deliver a service that is being tendered, but by a desire to increase the certainty of winning the contract through including as many credible potential bidders as possible in a single consortium.
Unlike bid rigging, where it seems that everyone needs to be involved for the strategy to be successful, joint bidding can reduce competition for a contract through involving many (perhaps most?), but not all, of the credible bidders.
I’ve seen several reports of bidding processes for NHS contracts in the past year or so where it seems reasonable for questions to have been asked about whether the consortium has been formed as a means of reducing competition for the contract, rather than offering the most competitive proposal.
Warning signs for commissioners in this area might include:
- a small number of bidders for a contract;
- bidding consortia involving a large number of providers;
- providers who are members of a consortia but without an obvious role in delivering the service; and
- only one or two bidders meeting technical requirements to deliver the contract.
Providers need to take care that they do not get caught up in joint bids that are formed as a way of reducing competition for a contract.
Such behaviour would breach the prohibition on anticompetitive agreeements in the Competition Act 1998 as well as the relevant provisions of their NHS Improvement provider license. The consequences at both the organisation and individual level for the managers that are involved have the potential to be quite severe.