This document summarizes Graciela Miralles' presentation on connecting competition and public procurement policies. Effective public procurement is critical for economic development, especially in developing countries where it represents a large share of GDP. Embedding competition in procurement requires a multi-layered approach at the regulatory, institutional, and individual levels. Challenges remain in implementation, such as detecting and prosecuting bid rigging cartels due to lack of resources and deterrent sanctions. The World Bank Group supports clients through knowledge generation, targeted analysis, policy reforms, capacity building and fostering cooperation between competition and procurement authorities.

1. Connecting competition and public
procurement policies:
the challenge of implementation
Graciela Miralles
Senior Economist
Competition Policy Team
WBG Trade and Competitiveness Global Practice
OECD Global Forum on Competition
Paris, December 8th 2017

2. Effective public procurement is critical for economic development
Governments in developing countries are significant purchasers of good and services, and these
markets represent huge opportunities to enhance competition and development.
• Low-income countries have the highest share of public procurement in their economies, at 14.5 percent of
GDP.
• Upper-middle income countries follow at 13.6 percent.
PPP procurement, score by region and income group (score 1–100)

3. Embedding competition in public procurement requires…
• (1) to select the most pro-competitive
procurement procedure;
• (2) to design the terms of the tender in order to
favour competition;
• (3) to prevent anticompetitive decisions during
the tendering process;
• (4) to avoid anticompetitive decisions after the
tendering process.
• (5) to detect, prosecute and sanction cases of
bid rigging and related anticompetitive
practices.
Regulatory
level
• Connect public procurement policy/reform with
broader policy objectives
• Competition as a tool to help achieve public
procurement goals
• Cost efficient public procurement procedures need
not reduce competition (E.g. negotiated
procurement, outsourcing procurement)
• Importance of governance framework
• Encourage pro-competitive design of tenders
through capacity building
• Punish unlawful/anticompetitive behavior
Institutional
level
PP officials
Competition
authorities
• Effectively prosecute bid rigging cases
(enforcement)
• Collaborate with public procurement authorities to
prevent and flag bid rigging (advocacy)
… to be implemented throughout the different
stages of the public procurement process
…a multi-layered approach …

4. …challenges remain at the core of the interaction between both policies…
Source: Curbing Fraud, collusion and corruption in the road sector (WBG
2011)
Trade off between Transparency & Collusion

5. …as well as regarding effective enforcement against bid rigging cartels
 In the road sector, evidence shows that that
collusion can increase the per-kilometer cost for
building a road by as much as 40 percent.
 Bid-rigging cartels represent approximately one
third of cartelized markets: estimations of a
sample of cartels operating in 532 markets
indicate that one-third (34 percent) are affected
by bid-rigging cartels, while the remaining 66
percent of the cartelized markets are “classic”
price-fixing cartels. (Connor J, 2014).
Source: Curbing Fraud, collusion and corruption in the road
sector (WBG 2011)
Estimated cartel overcharges in the road sector

6. Sanction
Prosecution
Detection
Key challenges addressing bid rigging in less developed economies
 Lack of mandate/implementation to request information
 Lack of access to direct evidence
• Lack of tools to collect in situ evidence:
- Competition Authority (CA) does not have mandate to conduct
dawn raids
- CA has mandate to conduct dawn raids, but cannot effectively
implement them (i.e. only available in criminal cases, court
warrants are not granted, lack of access to premises)
• Lack of key tools to conduct investigations/access direct evidence (e.g.
leniency)
 Limited role of indirect evidence
• Indirect evidence does not count (enough)
• Lack of access to data held by public procurement authorities.
 Lack of institutional resources to build solid cases
• Limited resources to conduct investigations/ lack of trained staff
• Inadequate institutional setup (e.g. no cartel unit)
• Lack of procedural framework/secondary legislation
 Sanctions are not deterrent/lack of incentives to comply
• Fines are too low or non-existent (e.g. “Cease and desist” only)
• Fines are not accorded by the competition authority (e.g.
specialized/non-specialized courts)
• Fines are not cashed
 Multiple/too broad information requests
 Concerns in collecting direct evidence:
• The competition authority conducts searches with purposes
beyond its mandate/investigation (e.g. violations of
constitutional rights)
• The competition authority disrespects leniency
conditions/misuses the information obtained in the context of
the leniency application. (e.g. confidentiality)
 Concerns in using indirect evidence:
• Indirect/circumstantial evidence is enough to substantiate
violation (regardless of justification)
 Concerns related to (lack of) procedural fairness
• Communication with CA
• Access to file/Knowledge on the grounds of the accusation
• Timely defence
 Sanctions are excessive
• Dissolution of the company
• Termination of the operating license
• Excessive fines (i.e. over 50 percent of annual turnover)
• Lack of immunity/reduction for cooperation (e.g. leniency,
settlements)
…for Competition Authorities …for the Private Sector

7. The role of the World Bank Group
Public Governance Global Practice
• The WBG Governance Global Practice (GGP) supports client countries to help them build capable,
efficient, open, inclusive, and accountable institutions.
• GGP engages with counterparts to design and implement effective public procurement policies that
ensure sustainable public resource management
Trade and Competitiveness Global Practice
• The WBG Trade and Competitiveness Global Practice fosters rapid and broad-based economic
growth, centered on strong contributions from the private sector.
• The Competition Policy team works in more than 60 countries across the world to promote and
implement pro-competition rules in key sectors, deterring anticompetitive business practices, and
minimizing distortive government interventions in markets.
Integrity Vice-presidency
• The WBG Integrity Vice-Presidency investigates misconduct in Bank-funded projects and advises
World Bank staff and borrowing country personnel on corruption prevention measures. When INT
finds misconduct in a World Bank-funded project, the Bank can bar the firms or individuals involved
from bidding on future World Bank-financed contracts.

8. I. Generating knowledge: WBG Anticartel Enforcement Database
 More than 300 cartels from 1980 and 2015
 10 economies in Latin America
 9 economies in Africa, including South
Africa
 Source of data: first instance decision
documents of authorities

9. Systematizing bid rigging data: bid rigging versus other types of cartels
• Bid rigging cases account for 21% of all cartel cases
Proportion of Bid Rigging cases
Bid Rigging,
21%
Other types of
cartels, 79%
Source: World Bank Latin American Cartel Database. It considers 184 cases from 9 countries: Argentina, Brazil,
Chile, Colombia, Costa Rica, El Salvador, Honduras, Panama and Peru.

10. Systematizing bid rigging data: bid rigging by sector
Sectors affected by non-bid rigging cartelsSectors affected by Bid Rigging
Source: World Bank Latin American Cartel Database. It considers 38 cases from 9 countries: Argentina,
Brazil, Chile, Colombia, Costa Rica, El Salvador, Honduras, Panama and Peru.
Other: E - Water supply; sewerage, waste management and remediation activities, I - Accommodation and
food service activities, K - Financial and insurance activities, D - Electricity, gas, steam and air conditioning
supply, P - Education
Source: World Bank Latin American Cartel Database. It considers 143 cases from 9 countries: Argentina, Brazil,
Chile, Colombia, Costa Rica, El Salvador, Honduras, Panama and Peru.
Others: K - Financial and insurance activities, J - Information and communication, L - Real estate activities, N -
administrative and support service activities, P – Education, E - Water supply; sewerage, waste management and
remediation activities, I - Accommodation and food service activities, S - Other service activities

11. Systematizing bid rigging data: bid rigging fines vs excess profits
• Level of fines seems insufficient to deter/punish cartel activity yet the gap is smaller than for other cartels
• Considering affected sales and fines for a sample of bid rigging and non-bid rigging cartels, bid rigging
cases are estimated to fine at 10% rate while other cartels at 20% rate
1. Estimated illicit profits and Fines imposed in Bid Rigging
cases
2. Estimated illicit profits and Fines imposed in other types
of cartels
Source: World Bank Latin American Cartel Database. It considers estimated illicit profits and fines
imposed in 22 bid rigging cases from 5 countries: Brazil, Chile, Colombia, El Salvador and Peru.
Source: World Bank Latin American Cartel Database. It considers estimated illicit profits and fines
imposed in 29 non-bid rigging cartels cases from 8 countries: Brazil, Chile, Colombia, Costa Rica, El
Salvador, Honduras, Panama and Peru
553,198,495
57,176,238
-
1,000,000,000
2,000,000,000
3,000,000,000
4,000,000,000
5,000,000,000
6,000,000,000
7,000,000,000
8,000,000,000
9,000,000,000
Estimated excess Profit (2014 USD) Fines (2014 USD)
10.3%
8,436,681,242
1,745,758,548
-
1,000,000,000
2,000,000,000
3,000,000,000
4,000,000,000
5,000,000,000
6,000,000,000
7,000,000,000
8,000,000,000
9,000,000,000
Estimated excess Profit (2014 USD) Fines (2014 USD)
20.7%

12. Systematizing bid rigging data: complaints versus ex-officio investigations
• Bid rigging cases rely more on complaints (62%) than in ex-officio investigations
• Other types of cartel cases are mostly initiated ex officio (50%)
How Cartel cases are initiated
Source: World Bank Latin American Cartel Database. It considers 173 cases from 9 countries:
Argentina, Brazil, Chile, Colombia, Costa Rica, El Salvador, Honduras, Panama and Peru.
62%
50%
38%
50%
0%
10%
20%
30%
40%
50%
60%
70%
Bid Rigging Other Conducts
Complaint Ex officio

13. II. Helping clients tackle procurement challenges
 Promoting better Competition and
procurement regulatory frameworks
 Providing targeted analytics
 Supporting reforms
 Promoting effective implementation of
Competition and procurement policies
 Fostering cooperation among
relevant authorities
 Building capacity

14. Indonesia: embedding competition through regulatory and behavioral
changes in public procurement
 Key changes in regulatory and behavioral terms
Procurement notices were widely publicized in both national and provincial papers in prominent place and in
large typefaces.
Local authorities’ attempts to limit eligible bidders to local firms were rebuffed.
Bidders’ qualifications were evaluated after, rather than before, the tender.
Mandatory participation in pre-bid meetings, which had given colluders an opportunity to agree on prices and
intimidate firms not part of the ring, was ended.
A complaint handling mechanism was introduced that allowed contractors and community members to
anonymously report fraud, collusion, corruption, and intimidation.
Estimated savings of 15–30 percent on contracts post-changes
• Indonesian
Competition law
(art. 22): bid-rigging
as conspiracy with
public authorities.
• Approximately 61% of
complaints received
by KPPU are qualified
as bid-rigging.
World Bank supported Bali Urban Infrastructure Project:
 Three bids submitted
 Prices in all three within 0.02 percent of the engineer’s estimate
 Investigation confirmed existence of a bid-rigging cartel

15.  Supporting pro-competition amendments to the
Public Procurement Rules.
 Promoting cooperation among relevant authorities:
The Competition Commission of Pakistan (CCP)
has entered into a Memorandum of Understanding
(MoU) with the Public Procurement Regulatory
Authority of Pakistan (PPRA) for strengthening
public procurement and combating anti-competitive
practices.
 To share information, including possible cases of
anti-competitive practices.
 To strengthen their own capacities in detecting
anti-competitive practices in public procurement
 To build the capacity of the public procurement
agencies to identify and report the instances of
bid rigging. (Source: Competition Commission of
Pakistan)
Pakistan: embedding competition through interinstitutional cooperation

16. Ukraine: embedding competition through innovative tools
 The Antimonopoly Committee of Ukraine (AMCU)
is the appellate body of first instance on public
procurement matters (AMCU Law, art. 3).
 Mechanism for the publication of a list of
undertakings that engaged in bid rigging.
AMCU Staff breakdown by area of activity
Source: “OECD Reviews of Competition Law and Policy: Ukraine 2016”

17. III. Showcasing successful competition advocacy initiatives in public
procurement
• ICN-WBG Competition Advocacy Contest awards impactful result-
driven initiatives. With string presence of procurement/bid rigging:
 Mexico: Saving public resources through a comprehensive
advocacy strategy to fight bid rigging (3.7 billion pesos in
savings that will be used to improve hospital infrastructure and
equipment purchases)
 South Africa: educating, training and empowering government
officials to detect and take action against bid rigging and other
collusive practices in public procurement.
 Pakistan: recommendations to enhance the procurement
process for electrical equipment, which were adopted by the
Water and Power Development Authority.
 Hong Kong led a multifaceted campaign to increase detection
and reporting of bid rigging.
 Portugal launched the first national campaign to fight bid rigging:
“Playing Fair Isn’t a Secret.”

18. ANNEX:
Awarded Public Procurement Initiatives
ICN-WBG Competition Advocacy Contest

19. Mexico
• Mexico’s Federal Economic Competition Commission (COFECE) implemented a
comprehensive advocacy strategy in the procurement of pharmaceuticals.
• COFECE worked with IMSS (Mexican Institute of Social Security) on its tender
design and procurement processes to reduce the risk of bidders secretly agreeing to
eliminate competition.
• The Competition Commission’s approach combined enforcement actions with
advocacy.
• Results amounted to USD 4.5 billion in consumer savings.
• Got the attention of other government agencies that saw the solid gains from a more
open and competitive procurement process.

20. Educating, training and empowering government officials to detect and take action
against bid rigging and other collusive practices in public procurement.
 The Competition Commission of South Africa holds an annual Public Sector
Forum that serves as a platform for debating key competition concerns and
addressing issues such as bid rigging in procurement spending.
The National Treasury amended the procurement policy to include bid rigging
detection. State-run service providers and enterprises (ESKOM, TRANSNET
and DENEL) committed to using a Certificate of Independent Bid
Determination as part of their standard bid documentation.
 Special procedure is offered by the Commission to construction firms
involved in bid rigging in exchange for voluntary disclosure of implicated
projects. This procedure enables the Commission to expedite the prosecution
of cases involving a large number of projects that otherwise would take several
years to prosecute.
South Africa

21. The Water and Power Development Authority adopted recommendations to
enhance the procurement process for electrical equipment
 Privatization of the power sector
 Alleged unfair practices in the
bidding process by the buyers
of power sector equipment in
particular
 The Competition Commission of Pakistan invited all
stakeholders, buyers and sellers, involved in the process
of procurement of electrical equipment to participate in an
open hearing.
 The Commission received feedback and issued a public
opinion recommending enhancements to the procurement
process.
Pakistan

22. Many Thanks!
gmiralles@worldbank.org