Procurement professionals in the government sector should be alert to the potential for cartel conduct in relation to tenders after the Australian Competition and Consumer Commission (ACCC) issued a warning to public sector agencies. The ACCC highlighted the issue following a recent investigation in which it identified departmental processes that contemplated cooperation by competing businesses on government tenders.
“Cartel conduct by businesses tendering in a public sector procurement process is illegal, just as such conduct is illegal in the context of a private sector tender,” ACCC Chair Rod Sims said.
“Encouraging businesses to discuss their bids with each other, or to make arrangements about who will bid for a particular tender, is likely to amount to cartel conduct which is against the law.”
Cartel conduct occurs when businesses agree to act together rather than competitively. Such conduct may involve price fixing, bid rigging, market sharing, or controlling the amount of goods or services available.
Collusion between bidders in public sector procurement processes can cause significant negative impacts on government organisations and the public generally. Where bids are sought from multiple suppliers, an effective procurement process relies on firms competing for business so that prices are determined through the market and successful bids provide the best value for money.
Cartel behaviour can have the effect of increasing the price paid by government when procuring goods and services, with the potential for substantial detriment to taxpayers.
Public sector procurement is a multi-billion dollar sector. In 2019-20, the Australian Government published contracts on AusTender with a combined value of $53.9 billion. Therefore, it is essential that all Australian Government tender processes are not affected by cartel conduct to obtain value for money when engaging in public expenditure.
The ACCC has instituted civil proceedings in the Federal Court of Australia against a company and its sole director in relation to a tender process conducted by the National Gallery of Australia. The ACCC alleges that the company and its director attempted to fix the price of bids on a tender for a replacement building management system by approaching a competitor. The ACCC is seeking pecuniary penalties, injunctions and declarations. It has also sought that the director be disqualified from managing a company. The matter remains before the Court.
The ACCC’s warning is a reminder that public sector agencies should be aware of the risks of cartel conduct and take steps to guard against the issue. The ACCC recommends designing procurement processes to deter businesses from breaching cartel laws during the procurement process. Procurement professionals should also review their processes to ensure they minimise the potential for collusion between businesses.
Important steps which procurement professionals can take include:
If you have any queries about designing procurement processes to deter cartel conduct, please speak to us or contact us here.
Author: Elizabeth Carroll
The information in this publication is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, we do not guarantee that the information in this article is accurate at the date it is received or that it will continue to be accurate in the future.