Insight - Combating acts of bid rigging

Lee Heng Guie: The large market value and volume of goods and services purchased yearly by the ministries and agencies through public procurement are vulnerable to high risks of unlawful manipulations such as price bidding, cartels or collusion of contractors and companies, as well as abuse of power and corruption.Hence, it is important to combat bid rigging in the context of fostering competition in public procurement.

BID rigging is widely acknowledged as one of the commonly used anti-competitive practices in securing contracts in public procurement. Government procurement authorities are often victimised by private sector companies through bid rigging and other price-fixing activities.

The large market value and volume of goods and services purchased yearly by the ministries and agencies through public procurement are vulnerable to high risks of unlawful manipulations such as price bidding, cartels or collusion of contractors and companies, as well as abuse of power and corruption.

Hence, it is important to combat bid rigging in the context of fostering competition in public procurement.

Bid rigging in public procurement involves contractors and firms conspiring to increase the prices or lower the quality of goods and services in a bidding process, instead of genuinely competing against each other to win a tender.

It unlawfully prevents or reduces competition in a marketplace, resulting in wastage of public resources and erodes public confidence. For example, because of bid rigging, the government had to pay RM150mil for a RM100mil contract, thus incurring a loss of RM50mil.

In Malaysia, bid rigging is prohibited by section 4(2)(d) of the Competition Act 2010 (CA 2010). It is commendable that the Malaysia Competition Commission (MyCC), which has been given wide-ranging investigation powers to curb these practices, has been working with several government bodies such as the Finance Ministry (MoF) and the MACC to weed out such malpractices.

Malaysia’s first bid-rigging case penalised eight companies, which were fined a total of RM1.94mil for their involvement in bid-rigging offences related to an information technology (IT) procurement by Akademi Seni Budaya dan Warisan Kebangsaan (Aswara), a public higher learning institution.

Given that the government spends more than RM150bil (equivalent to almost one-fifth of total GDP) each year in procuring goods, works and services, it is critical that the MoF, the various ministries and agencies, plus MyCC, must work together to combat this anti-competitive activity that cost public funds. The taxpayers’ money could have been used for socio-economic projects such as infrastructure, healthcare and education, among others.

Therefore, it is essential that public procurement agencies put in place appropriate laws and regulations as well as clear and sensible procurement practices to deal with rig bidding and collusion activities.

Professional procurement officials must be trained to track all forms of bid rigging and know how to detect and deter the practice of bid-rigging.

A deterrence is to set pre-qualifications for potential companies or contractors by requiring them to submit the audited financial statements of their companies of recent years. Procurement officials can consider non-price factors such as quality, service, delivery terms, payment terms and warranties in the evaluation and selection processes to deter bid-rigging practices.

MyCC, the country’s first enforcement authority that acts as a quasi-judicial body with powers to investigate and prosecute, must be given sufficient autonomy and resources to deter these anti-competitive actions.

We see the need to establish collaboration between the MoF, MyCC and MACC through the setting up of a mechanism for communication and sharing of market intelligence and information.

Media and private companies are also encouraged to furnish information and evidence of anti-competitive practices in public procurement to the competition authority.

Lee Heng Guie is Socio Economic Research Centre executive director. Views expressed here are his own.