Competition Policy and Procurement Markets

Public and private procurement, which constitutes a substantial fraction of economic activity, suffers from collusion, bid-rigging, fraud and corruption. Public procurement may be constrained by regulatory requirements, and it may also be used to address other public policy objectives. Some procurement markets exhibit features favouring collusion: there are relatively few potential sellers who encounter each other regularly, with relatively high barriers to entry and a high degree of transparency. Collusion can be discouraged by lowering barriers to entry, which has the added advantage of improving the efficiency of the bidding process. Thus barriers to foreign participation in procurement should be eliminated. Making it harder for bidding cartels to detect and punish defection also discourages collusion. Thus reducing the amount of information available about bidding outcomes may hinder bidding cartels. It may be possible to control corruption and favouritism without full transparency by limiting disclosure to designated procurement – oversight agencies. This document comprises proceedings in the original languages of a Roundtable on Procurement Markets which was held by the Committee on Competition Law and Policy in June 1998.