Bid-rigging sweep finds illegal activities
The Competition Bureau of Canada says its efforts to identify and prevent bidrigging in construction contracts this year has already turned up potential criminal activity — just as new federal infrastructure money begins to flow.
Pierre-Yves Guay, the bureau’s assistant deputy commissioner, said some of the educational outreach the bureau has delivered since April has resulted in illegal activities being uncovered and inquiries being launched. Guay couldn’t say if any of the situations were related to projects funded from the new infrastructure program.
“I cannot confirm that for now, but … I’m sure you’re going to be able to see some developments in the coming months,” he said.
Those projects are overseen by provincial and municipal governments, which own the majority of infrastructure and are responsible for tendering contracts. The federal government’s role is to provide cash once receipts are submitted.
The Competition Bureau warned the government months ago that the Liberals’ infrastructure commitment, originally slated at $60 billion in extra spending over 10 years, but now upped to a commitment of more than $90 billion over an additional two years, would prove very tempting for companies looking to illegally boost their bottom lines.
Typically, bid-rigging occurs when firms vying for a contract agree to artificially increase their prices, or restrict the supply of goods and services, to drive up the value of a job. Officials at Infrastructure Canada, in a May briefing note to the department’s deputy minister, noted that the increased costs are “ultimately passed on to the public.” The briefing note said an international agency estimates that bidrigging can increase the cost of public infrastructure by 30 per cent and decrease the quality of construction.
“It is uncertain if this estimate is directly applicable to the Canadian context, but it does demonstrate the potential damage these practices can do to public procurement processes,” reads the briefing note, obtained by The Canadian Press.
Guay said it’s a matter of supply and demand: There is a whack of cash available, but only so many companies available to do the work.
“When you get into conditions like that, it’s very conducive for companies to just try to split the contracts between themselves,” he said. “This is why we are on the lookout at this point and trying to take action with the public procurement community to help decisionmakers to acquire the knowledge and tools to prevent, detect, bid-rigging and other egregious cartel activities.”
Bureau commissioner John Pecman delivered that message in a written strategy at budget time, outlined in a briefing note marked “secret.”
Pecman called for a “cross government, cross-jurisdictional team” to craft and run a strategy to deter and detect potential bid-rigging related to federal infrastructure funds and approved projects. Among the strategies Pecman suggested: increased educational activities and using economic algorithms to screen procurement data to identify problem bids.
“There is an opportunity to address a potential threat to public procurement proactively to promote specific and general deterrence, implement best practices in tender design and processing for prevention and provide procurement authorities with the tools to detect bid-rigging if it occurs,” the briefing note reads.
Normally, the bureau holds about 20 to 30 presentations a year for public procurement professionals, trade associations and law enforcement groups, but this year it is trying to do 35 or even 40, Guay said. Since April 1, the start of the fiscal year, the bureau has run 24 presentations.