Prince Charles has delivered the Queens’ speech on 10th May, highlighting the government’s objectives for the following months. As part of his speech, he confirmed a Procurement Bill which responds to the change in regulations post-Brexit. This article discusses how the new measures could impact industries, and in particular, the fairness and equality of opportunity in relation to tendering and bid-rigging.
Often seen as a key component in procurement activities, tendering is an efficient way of sourcing the exchange for goods and services while maintaining the level of competition in the market. A key factor that determines the nature of a tender is usually the industry that the company operates in. The specification, flexibility and common practices are often sector specific. The Public sector has strict regulations on contract publication, whereas the Food and Beverage sector has more specific regulations on quality control to name a couple of examples.
According to Competition and Markets Authority, bid rigging occurs when suppliers agree to limit competition in the procurement process, thereby denying the customer a fair price. Due to the unethical and unfair nature of the practice, bid rigging is illegal and it is procurement’s priority to keep an eye out on spotting suspicious tendering activities. Common examples of bid rigging include collusion and cover pricing: Cover pricing occurs when firms intentionally lose the bid but provide a rate which appears to be competitive. This might be because the firm would like to remain considered in future contracts, but is currently not interested, or lack the current availability and resources. Although it does not affect the outcome of the bid, cover pricing deceives the clients’ impression of the competitiveness of the market and distorts the tendering process. Other forms of bid rigging include bid rotation where suppliers decide within themselves that they would take turn in submitting the lowest bid, and bid suppression where suppliers agree amongst themselves to withdraw from bidding.
All these rigging practices mentioned above are measures that prevents tendering to be a fair, effective procurement tool to sourcing goods and services. The consequences of such activities are significant additional costs to the client as competition in the market is deterred. More importantly, the impact goes further than monetary costs: Ensuring equality of opportunity is the social responsibility of a company, taking part in rigging activity would damage the company’s public image.
During the Queen’s speech, Prince Charles announced that procurement would be simplified in the Bill. The UK government has also promised to deliver a step change in transparency. Although the announced transformations focus mainly on Public sector procurement, there are also new procedures that apply to private and charity sectors, with a possibility that they have a rippling effect that extends to other sectors and their suppliers.
According to the speech, one of the main elements outlined in the Procurement Bill as “tackling unacceptable behaviour and poor performance through new exclusion rules and giving buyers the tools they need to properly take account of a bidder’s past performance” and a main benefit of “helping buyers to disqualify suppliers who are unfit to bid for public contracts because of past misconduct, corruption or poor performance”. The main element enables buyers to track a bidder’s past performance, helping the buyer identify and avoid suspicious patterns associated to bid rotation and collusion. Tenderers can be reported and disqualified if such activities are identified. This also introduces extra consequences to rigging, acting as a deterrent for unfair tendering.
However, the new bill also indicates “Taking back control of the rules that govern how public money is spent and cutting red tape. Now that we no longer have to abide by bureaucratic EU rules and regulations, our intention is to create a simpler regime that works better for the UK, reducing costs and improving productivity.” By removing existing red tape and bureaucratic rules, it may lead to an opportunity for suppliers to ‘rig’ by bypassing regulatory processes. As the government risks losing visibility without a structured protocol in place, it is important to cut down red tape without compromising competency and due diligence.
I am optimistic for the changes to be implemented, hoping to attract a variety of opportunities and improvements. At 4C Associates, we ensure the best practice is observed and applied to all projects across all industries and subject matter. It is not enough to be aware and avoid any rigging activity in the best interest of the client, we also strive to adapt and make the most out of the upcoming changes, allowing us to drive value in a fair and competitive environment. If you would like to learn more about our Service Offering on Cost Optimisation and beyond, please feel free to get in touch. We’re always happy to share thoughts, and learn from you as well. Contact myself Patrick.Li@4cassociates.com or Allison Ford-Langstaff, 4C Services Managing Partner at email@example.com