In a recent meeting, the Chief Adviser Dr Mohammad Yunus emphasised on transparency and accountability of public procurements. The public procurements practice and some of the rule should be revisited. Public procurement is supposed to be carried out through competitive bidding with the objective of achieving maximum economic efficiency by getting the best value for taxpayer's money.
Bid rotation is a specific type of bid rigging in a pre-planned arrangement, where competitors take turns being the winning bidder for contracts. Bid rotation is anti-competitive as it disrupts the natural market forces, preventing fair pricing and preventing new entrants from competing on a level playing field.
In road construction tendersin Bangladesh, participants in a bid rigging scheme often rotate winning bidders by geographic areas (e.g., one road contractor gets all the work in one region, another company all the work in the others. The distribution may be on the basis of type of jobs. Some may have expertise or competitive advantages. The "losing" bidders might receive a percentage of the winning company's profits or be hired as sub-contractors to improve their cash flow as they await their turn to win.
In an Executive Committee of National Economic Council (ECNEC) meeting in November 2020, PM highlighted the delay in project implementation due to a single contractor receiving an excessive number of projects. She directed the officials concerned not to consider a contractor until it finishes the previous project. Later, the offices concerned were formally instructed in this regard.
The parliamentary committee of the last Parliament on road transport and bridges ministry, in a meeting in October 2022, recommended to break the 'syndicate' and facilitate price biddings by an increased number of contractors.
In another meeting on 17 September 2023, The Chairperson of the Parliamentary Standing committee, noted that the projects are concentrated among five contractors, which is mysterious and falls under the level of corruption.
Some 1,100 companies do the work of the Roads and Highways Department on contractual basis. According to the just defuncts parliamentary standing committee on the ministry of road transport and bridges and Central Procurement Technical Unit (CPTU), Ministry of Planning, around 5,200 tenders were called under the Roads and Highways Department in the 2022-23 fiscal.
A daily newspaper reported on 15th October 2023 that five companies have got 51 per cent of the contracts of the Roads and Highways Department (RHD) in the 2022-23 fiscal. These companies mainly do minor works of road construction, repair and maintenance.However, the total amount of money for these small works is big - around Tk 48 billion in the 2022-23 fiscal. They got some of these contracts jointly.
The process of examination, clarification, evaluation and comparison of tenders, to obtain information for a decision concerning the award of the contract is a staged drama.A TIB study report claimed that a project is sometimes divided into several packages. For example, a project costing Tk10 crore is distributed to five contractors after dividing it into five packages. But the project is taken and completed under one license.However, these companies awarded with the biggest number of contracts claim that they got more contracts for experience and competence.
A syndicate of contractors, government officials and politicians control the tender process and award contracts to the limited numbers of bidders. The eligibility/ qualification of contractors for joining the syndicate is also challenging. They are usually bureaucrat's-man, Engineer's-man, Minister's man, MP's man or against payment of bribe. The syndicate fixes which contractor will get which project in advance.
Collusive bidding or bid rigging may occur in various ways of anticompetitive agreements among the illegible bidders in collaboration of politician and government officials, such as:
Agreements to submit identical bids to supplement bids of each contractor's; Agreements as to who shall submit the lowest bid,agreements for the submission of cover bids; Agreements not to bid against each other among the contractors; Agreements on common norms to calculate prices or terms of bids; Agreements to squeeze out outside bidders, who are not in syndicate; Agreements designating bid winners in advance on a rotational basis, or on a geographical or customer allocation basis; Agreements as to the bids which any of the parties may offer at an auction for the sale of goods or any agreementthrough which any party agrees to abstain from bidding for any auction for the sale of goods, which eliminates or distorts competition; Collusive bidders submit complementary bids from fictitious shell companies or affiliates to give the appearance of competition. In some cases, an unqualified bidder can "hire" eligible bidders to submit a bid on its behalf. When selected, the qualified bidder might subcontract most of the work to the unqualified firm.
For bid rigging schemes some time prevent certain qualified bidders from participation in the bidding process by way of coercion such as threats or violence. Corrupt procurement officials can facilitate the bid suppression efforts (e.g., by disqualifying other legitimate bidders during the bidding process) in exchange for bribes from the conspirators.
Collusion can occur in almost any industry and has been observed in development projects in the following sectors: Road/bridge construction, repair and maintenance, Medicalsupplies, Major building construction, Land development projects, Defense supplies, Major Utilities projects.
Collusion is more is more likely to occur if there are few qualified competitors in the area, and where access to the market is difficult because of high entry costs, restrictive legislation or other reasons.
The joint-venture among the local and overseas bidders is very common and legal as per procurement law. Often prospective bidders enter into agreements for establishing a consortium or a joint venture and participate together in public procurement procedures with a view to achieving compliance with some of the requirements of experiences, manpower, logistics, technology etc set by the purchasing authority.
Bid-rigging agreements in a particular trade to cooperate to defeat the competitive bidding process in order to artificially assign winners and inflate prices. Any anticompetitive practices in a procurement process, such as collusion, bid rigging, or corruption, could lead to artificially raise prices and consequently adversely impact public expenditure and the precious national resources.Such collusive bidding is well established, prices can rise substantially, in some cases by as much as several hundred percent. Large infrastructure projects under local or international projects often involves corruption, in which politicians and government officials facilitate the schemes in exchange for bribes. The contractors are junior partners of these agreements. It has been well established co-operation among the politicians, government officials and contractors to organize collusive bidding schemes.
The bid collusionpromoted primarily due to the loopholes in the procurement policy and implementation. Apart from weakness in the procurement administration, the market structure and lack of competitive atmosphere also facilitate bid rigging. Bangladesh is heaven of bid collusion and bid rigging.
The writer is Former Non-Government Adviser, Bangladesh Competition Commission, Legal Economist & CEO, Bangla Chemical
