The complementary roles of
international trade rules and
competition policy: public
procurement
Robert Anderson
Counsellor, WTO Secretariat (Team leader for government
procurement and competition policy)
CUTS Policy Roundtable on "Competition Issues in Public
Procurement
UNCTAD Room XXII
Geneva, 5 December 2014
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Matters to be addressed
Collusive
tendering why should
we care?
What can we
do about
collusive
tendering?
The role of
international
trade opening
in preventing
collusive
practices
Transparency
and its impact
on
competition
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What is collusive tendering?
o Cartelization in regard to public procurement
processes. Also known as “bid rigging”.
o Essence of the offense is an agreement between
competitors (e.g., to bid high, to not bid, to submit
“cover” bids, etc.)
o Competitor may agree not to bid in return for
promise of a sub-contract
o Often also involves side payments to competitors
who “lose” and/or rotation of who wins
o As with other cartels, normally carried on in
secret
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Suspicious signs
o The same group of suppliers always submit bids
and each wins in a regular pattern.
o All bids are consistently higher than the procuring
entity’s internal estimate.
o A company always bids high and then gets a subcontract from the wining bidder.
o A competitor submits its own and another
competitor’s bid or the competitor’s bid looks the
same but with a few specific changes.
o A company official states that he does not expect
his firm to win or that a bid (“is only a courtesy”).
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Why should we care about collusive
tendering and what can we do about it?
o Collusive tendering imposes heavy costs on public treasuries and
therefore on taxpayers (can raise the costs of goods and services
procured by 20-30 %, sometimes more)
o Undermines confidence in governments
o Particularly detrimental due to the economic importance and
essential role public procurement plays:
o A large proportion of Gross Domestic Product (15-20 % in most
countries, more in some cases)
o Supports essential functions of government, vital for
development and social policy purposes:
o Provision of transportation and other vital infrastructure
(airports, highways, ports)
o Public health (hospitals, medicines, water and sewer
systems)
o Schools and universities
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Tools for deterring collusive
tendering
The obvious:
oEffective competition law enforcement, reinforced by tools
such as leniency measures for cartel breakers.
oEducation of the supplier community: certificates of
independent bid preparation/similar measures.
oEducation of procurement officials (suspicious signs,
internal estimates),
oInter-agency collaboration
And the perhaps not-so-obvious:
oPro-active measures to expand the pool of potential
competitors and introduce enhanced supplier diversity, e.g.
through competition advocacy and trade liberalization
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Implementing procurement policies that
maximize competition: opening up to
international trade
International
Trade
Enhanced
competition
Less
collusion,
lower prices
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The WTO Agreement on Government
Procurement (GPA) as a competition
enabler
o Agreement covers 43 WTO Member jurisdictions (soon to
be 45): ensures non-discriminatory conditions of
competition in procurements “covered by the Agreement”.
o Procedural and institutional requirements to reinforce
competition on the merits (e.g. technical standards to be
based on objective and (where possible) international
standards; independent bid challenge procedures).
o Main limitation as a competition enabler: gaps in the
Agreement’s coverage.
o But: prospects for deepening/broadening of coverage
over time.
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Factors currently enhancing the
significance of the GPA (1): increasing
membership of the Agreement worldwide
o Currently, the GPA covers 43 WTO Members including the EU and
its 28 member States; most other developed countries (i.e. US,
Canada, Japan; Liechtenstein, Iceland, Norway and Switzerland);
plus Hong Kong, China; Israel; Korea; Singapore; Chinese Taipei;
Aruba and Armenia.
o Two more Members (Moldova and New Zealand) approved to join in
October 2014.
o Eight more WTO Members currently seeking accession (Albania,
China, Georgia, Jordan, the Kyrgyz Republic, Moldova, Oman, and
Ukraine).
o Five additional WTO Members have commitments eventually to seek
GPA accession : the former Yugoslav Republic of Macedonia,
Mongolia, the Russian Federation, Saudi Arabia and Tajikistan.
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Factors currently enhancing the
significance of the GPA (2): the policy
context
o Enhanced importance of the procurement sector in light of: (i) the
global economic crisis; and (ii) emerging economies’ infrastructure
needs.
o Also greater emphasis on procurement and good governance as an
underpinning of development.
o Increased pressures for policies potentially limiting access to
important procurement markets.
o GPA and/or bilateral/regional agreements embodying similar
disciplines are the main tool of exporting economies to preserve
market access rights in this crucial sector.
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The potential role of “buy local”
requirements as a factor facilitating
collusion
o US: Erie County v. Morton Salt (6th Circuit;
2012).
o Canada: Quebec infrastructure markets.
o The Swiss experience.
o OECD Global Forum on Competition (February
2013): relevance of buy local requirements AND
confluence of collusion and corruption concerns
in specific cases.
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Some remarks on transparency
and competition (1)
o Necessity of minimum transparency measures in light of:
o Public accountability and good governance (anti-corruption)
concerns;
o Sheer need to generate responsive tenders and good results
(customer satisfaction) -- only possible if we share (some)
information on desired characteristics of the goods/services being
sought.
o Also, some transparency measures (e.g. basic requirement to
advertise; availability of information on how to be listed, etc.) are
fundamentally pro-competitive:
o they facilitate participation by suppliers from “outside the club”
 Generally, transparency reinforces and is complementary to
competition-enhancing measures.
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Some remarks on transparency
and competition (2)
o Word of caution: too much transparency can facilitate
collusion under certain circumstances (!), e.g.
o information on mid- to longer term procurement
planning (may facilitate agreements, bid rotation),
o public bid opening, post-award publications (may
facilitate policing, cartel stability).
o Balancing of interests needed.
o Need for agency vigilance/public education.
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Concluding remarks
o The duality of trade and competition concerns in
regard to public procurement.
o Growing importance of the GPA in the present
global environment.
o Significance of collusive tendering for GPA
objectives, and vice versa.
o Complementary roles and interests of
international trade rules, national competition
policies and procurement officials.
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For further information:
 Anderson, Robert D. (2010). "The WTO Agreement on Government
Procurement (GPA): An Emerging Tool of Global Integration and Good
Governance," Law in Transition, Autumn 2010, pp. 1-8 to 8-8; available
at: http://www.ebrd.com/downloads/research/news/lit102.pdf.
 Anderson, Robert D., Philippe Pelletier, Kodjo Osei-Lah and Anna
Caroline Müller (2011). “Assessing the Value of Future Accessions to
the WTO Agreement on Government Procurement (GPA): some New
Data Sources, Provisional Estimates, Suggested Approaches and
Related Observations” (Working Paper).
 Anderson, Robert D., William E. Kovacic and Anna Caroline Müller,
“Ensuring integrity and competition in public procurement markets: a
dual challenge for good governance,” in Arrowsmith and Anderson,
eds. (2011).
 Arrowsmith, Sue and Robert D. Anderson, eds. (2011). The WTO
Regime on Government Procurement: Challenge and Reform
(Cambridge University Press: 2011).
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