1. Corruption and Bid-rigging
László Bak
Vice-President, Gazdasági Versenyhivatal
Transparent, accessible and competitive public procurements – International Conference Budapest
14 November 2017

2. I duly acknowledge the presumption of innocence of any person or undertaking. Any reference to corruption does not mean that the person or undertaking has actually committed a punishable act, unless a binding court judgment has ruled so. The views expressed in this presentation are my views and they do not necessarily reflect those of the Gazdasági Versenyhivatal.

3. Outline Terminology, competencies Statistics
Possible corruption scenarios
Signalling to the GVH
Cooperation with other authorities
Conclusions

4. Bid-rigging and/or corruption?
Bid-rigging: an agreement between bidders that limits or reduces competition in a tender
Bid-rigging patterns, e.g.:
Cover bidding
Bid suppression instruments
Bid rotation
Market allocation – result
2. Corruption: abuse of entrusted power for private gain
3. Two distinct, but correlating behaviours
GVH
Police / Public prosecutor

5. Statistics I fines in closed bid-rigging cases

6. Statistics II launched cartel cases

7. Statistics III
In 2016, appr % of cartel complaints related to bid-rigging activities
Since 2013, the GVH filed criminal complaints in 7 cases
73% of parties under proceeding in cartel cases are SMEs
GVH’s experience: a frequent way in which bid-rigging schemes are implemented is bid rotation, resulting in market allocation

8. Typical scenarios for bid rigging and corruption
Scenarios differ
Corruption serves bid rigging activities directly
Bid rigging parties are tool for corruption
2. Time factor
Chronological order and relationships are key issues
3. Characteristics
Designation of winner among bidders
Procurement official is informed of the pre existing bid rigging agreement
Procurement official sets the tender or evaluation criteria with regard to the bid rigging agreement
Bid rigging agreement is brokered before or during the tender

9. Possible corruption scenario I.
Contracting Authority with 0% own contribution
Bidder1 (void tender)
Bidder2 (void tender)
Bidder3 (winner)
Intermediary
10% financial contribution
Transfer of 10% financial aid
Financial support 10%
S u b c o n t r a c t i n g

10. Possible corruption scenario II. before-after consultation
Announcement of tender
collusion
Time factor

11. Possible corruption scenario III. setting of technical specifications
Procurement officials responsible for tender invitations were also in charge of drafting technical specifications
Pre-arrangements
Tender announcement
Post-arrangements (evaluation)

12. Possible corruption scenario IV. external help
External consultant helps to prepare technical specifications of the tender
Consultant helps
„wrong” tender announcement
Collusion; with help of consultant
Modified tender

13. Signalling to the GVH
PPA Sec. 36 (2): „clear and manifest infringement” or „reasonable suspicion”
Do NOT discuss concerns with bidders
Contact internal legal or audit staff
Contact GVH discretely

14. Cooperation with other authorities
Criminal complaint (legal standard of proof?)
Information from the police (handling and obtaining of evidence?)
 Pacific Fruits C-469/15., WebMindLicenses C-419/14.
3. Cooperative relationships with other authorities

15. Conclusions Cooperation between authorities necessary
Competition law toolbox useful against corruption
OECD Guidelines for fighting bid rigging in public procurement
Training of procurement officials
Educating SMEs -