How purchasing officers can protect against cartels?
Cartels need to be able to monitor bids to ensure that members are sticking to their agreements.Follow these tips to ensure you don’t give cartels the opportunity to rip you off.
Keep confidentiality
Keep your decision-making processes and policies confidential. Do not disclose the:
identity of bidders
value of bids, at least until after a contract has been awarded
details of new potential suppliers
prices quoted in unsuccessful bids.
Use prominent anti-collusion clauses
Require bidders to certify that they have not discussed pricing with another tenderer.Make sure these clauses are clear and prominent, for example right next to where the person signs.
Deliver staff training
Conduct regular training to ensure:
purchasers understand their market and obtain independent estimates of value before seeking quotes or tenders
staff are trained in reducing risk and detecting warning signs
purchasers understand how to analyse tenders for trends and irregularities.
Use effective tendering
Effective tendering can improve your outcomes and deter and disrupt cartels.
Use regular open tendering.
Make a deliberate strategic choice to occasionally alter your tender schedule and processes.
Vary the size and scope of purchases and change your list frequently.
Choose another method of solving tied bids, such as random choice, rather than splitting contracts.
Change your tender processes so you can reduce the size of certain supply contracts to attract alternative suppliers.
Actively encourage joint ventures by smaller suppliers so that they may better compete with market heavyweights for your tenders.
Extend the term of a supply contract so the arrangement will not lend itself to tender rotation.
Check that your procurement systems do not favour incumbents through a:
prolonged cycle of ‘select tenders’ that may lead to complacency
preference to deal with local operators
Centralise your procurement function.
Make it clear that you will not penalise companies for failing to tender, as this may lead to suppliers submitting ‘cover prices’ simply to be considered for future jobs.
Monitor your outcomes
There is no substitute for being alert to possible collusion when conducting a tender. Keep track of past tenders and pricing movements so you can analyse them over time. This will:
help you to understand your market
assist you in estimating and budgeting
help you to detect irregularities such as tender rotation
Insiders who have knowledge of or have been involved in cartel arrangements are often the people who expose illegal cartel activity.
If an employee, ex-employee or supplier’s employee or agent suggests that they are aware of collusion among your competitors, do not ignore it. Note the details and report the incident to the ACCC.
Encourage whistleblowers to confidentially reveal what they know to you and provide information directly to ACCC investigators.
Tell informants that cartel members who break ranks and are the first to report their involvement can apply to the ACCC for immunity from prosecution in return for ceasing their involvement and providing ongoing cooperation.
