Procurement in a nutshell – CMA launches cartel screening tool
15th August, 2017
In conjunction with the Spend Network, the Competition and Markets Authority (CMA) has developed a free "Screening for Cartels" tool for procurers, to help screen tender data for cartel activity.
In this update we have summarised how the tool works and how contracting authorities (CAs) can make use of the findings as a measure of risk in procurement exercises.
What is a cartel?
Cartels are arrangements between businesses whereby they agree not to compete with each other. Typical examples of cartel agreements include price fixing, bid-rigging, output quotas or restrictions and market-sharing. Bid-rigging is a particular risk in the context of public procurement.
In a previous update we outlined examples of bid-rigging and the potential harmful effects of the practice. The CMA’s tool has been specifically designed to help identify business conduct or practices which might be classed as cartel behaviour.
Where to find the tool
The tool is available for download on GitHub, a software development platform. Log-in details for the platform can be obtained by emailing screeningforcartels@cma.gsi.gov.uk The log-in details will be sent along with a user guide.
How the tool works
Following a research exercise, the Spend Network and the CMA devised algorithmic tests which check for indicators of cartel behaviour. The algorithms enable the tool to test for indicators in the following areas:
- number and pattern of bidders;
- pricing patterns; and
- document origin and low endeavour submissions.
The tool allows for adjustment of the pass/fail threshold and weighting of each test according to the specific requirements of different regions and industries.
Using the tool
Users must provide certain data for analysis. The following information will need to be uploaded to the software for each tender:
- invitation to tender document;
- bid submissions from all bidders;
- the identity of the winning bidder; and
- pricing information contained in each bid.
The above data is tested using the algorithms and a “suspicion score” is calculated for each tender exercise.
What to do with the suspicion score
The suspicion score is an indication of which tenders are more likely than others to be suspect. A low score can provide reassurance to CAs that the tender is likely to be free from collusion.
A high score does not necessarily indicate the presence of a cartel. It may serve as a trigger for CAs to critically review the bid documents again and ask questions.
Any suspicion or evidence of cartel activity, including bid-rigging, market-sharing or sharing of sensitive information should be disclosed to the CMA.
Why is this important?
It has been estimated that cartel activity can increase the prices in a supply chain by 30% or more. At a time of increased pressure on the finance of CAs, the risk of inflated prices underlines the need for vigilance to combat illegal practices which jeopardise taxpayers’ money.
How can I find out more?
If you have any queries on the issues raised or on any aspect of procurement, please contact us via our procurement hotline on 0191 204 4464.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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