New ACCO guide lines for detecting collusion in public procurement

The Catalan Competition Authority (ACCO) has recently published new Guidelines for the detection of collusion in public procurement (“Guide[PGV1] lines”), updating and developing the guidelines for public authorities to identify and react to collusive behavior.

Collusion in public procurement

In recent years, both the ACCO and other competition authorities in Spain have focused on the prosecution of anticompetitive practices in public procurement. In fact, most of the recent investigations into cartels and collusive conducts have involved agreements in public procurement procedures.

Collusion in public procurement comprises any agreement or coordination between independent undertakings that affects prices or other bidding conditions, seeking to alter the outcome of the tender. According to the Guidelines, collusive agreements can take many forms, including “cover bids,” the suppression of bids to reduce the number of participants, subcontracting and bid rotation.    

One of the tools for detecting collusive practices is the reporting of indications by the contracting entities. Frequently, the investigation is initiated when they communicate their suspicions to the authorities, in accordance with article 150(1) of Public Procurement Act 9/2017. For this reason, the Guidelines highlight that contracting authorities are best positioned to discover public procurement infringements at an early stage.

As for the legal consequences of collusive agreements, the Guidelines recall that these infringements can give rise to fines of up to 10% of the company’s total turnover, in addition to up to three-year public procurement bans.

Also, as analyzed in the ACCO report published in February 2023, the offending companies must compensate the damages caused—which can be claimed by the public authorities. 

Guidelines for public authorities

The Guidelines update the list of warning indicators to detect collusion in bidding processes. The new Guidelines focus on detection practices rather than prevention techniques—which were developed in the 2010 version, including guidelines to identify public procurement markets and to design procurement procedures.

The analysis should focus on the following elements:

(i)          Search for irregular patterns in bidding strategies and in the elements of the bids submitted.

As the main novelty with respect to the 2010 version, the new Guidelines point to indications such as the absence of companies that regularly participate in the bidding process, the geographical distribution of the winning companies, inconsistencies in the proposals of the same bidder in similar processes, the presence of systematically winning and/or losing bids, and rotation of winning companies.

(ii)         Review of the contractual documentation submitted by the bidders.

Similarities in formal aspects of the bids, such as errors, similar format and typography, coincidence in the cost estimation methodology, and bids submitted with minimal time differences are considered particularly significant.

(iii)       Price analysis.

Possible warning indicators include uniform or near-uniform pricing among bidders, price matching with the bidding budget or conditions that disproportionately hinder the awarding of the contract to some bidders. Also, higher prices by local bidders in on-site tenders compared to their prices outside their usual operating area.

(iv)       Behavioral analysis.

Interaction and communication between bidders should be monitored, with particular attention to their statements and behavior during meetings throughout the bidding process.

The Guidelines also include numerous recommendations addressed to contracting authorities and boards on how to proceed in the event of suspicions of collusion, including the following:

• Not to make public or communicate the suspicions to bid participants.
• Keep and collect all related evidence.
• Keep a detailed record of all suspicious behavior and statements.
• Communicate indications of collusion to the ACCO, without warning the bidders, in accordance with articles 132 and 150(1) of Public Procurement Act. The ACCO published a specific guide on the communication of indications in April 2023.
• Check the (structural and/or personal) links between companies to rule out the application of the “group privilege.”

Finally, the Guidelines contain best practice recommendations for contracting authorities to prevent collusion in public procurement. These recommendations include periodic evaluation of bidding processes to identify possible contractual and regulatory distortions, awareness raising and training of staff in competition law, and economic or labor incentives for staff to report suspicious behavior in public procurement processes.

These new Guidelines seek to strengthen the capacity of contracting authorities to contribute effectively to the detection of collusive practices. Along with other ACCO initiatives, such as the implementation of the ERICCA tool (Eina de Recerca Intel·ligent de la Col·lusió de la Contractació Administrativa), which uses machine learning to identify signs of collusion in public procurement, this should increase ACCO’s investigative activity and its capacity to monitor competition.