Competition issues in public procurements

By Appiah Kusi Adomako

Competition is a fundamental tenet of well-functioning markets and encourages companies to provide consumers with the products and services that they want. It results in lowering prices for goods and services, better service quality, wider choices for consumers, stimulation of innovation and more importantly, efficiency in allocation of resources.

Competition cannot be achieved automatically and needs to be nurtured – by the introduction and propagation of a competition regime. A functional competition regime consists of a national competition policy and a competition law.

The objective of a functional competition regime is to promote competition, and contribute towards increased efficiency and curb anti-competitive practices in the market. Anti-competitive practices, including cartels, abusive monopolies, predatory pricing, collusive tendering, exclusive market sharing agreements, bid rigging etc., have negative effects on both consumers and producers.

Public Procurements

Governments in most countries are the largest spenders. Government spending comes largely through procurement and other forms of recurrent expenditure. In securing goods, the fundamental objective for any government is to get value for money at a very competitive rate from a wide supply base while promoting domestic capacity and innovation among sellers. The benefits derived from public procurement are, however, not realised by most governments worldwide, due to the plethora of anti-competitive practices in public procurement and the lack of effective institutions to monitor public funds used in making purchases of goods and services.

The purpose of the Public Procurement Act 663, among others, is to harmonise the processes of public procurement in the public service and to secure a judicious, economic and efficient use of state resources in public procurement and ensure that public procurement is carried out in a fair, transparent and non-discriminatory manner.

Through competitive tendering process, the buyer is able to make an intelligent decision based on both qualitative and quantitative decision- making tools. More than a decade down the line since the Act was passed, some public entities are still able to bypass the law without recourse to the due process.

In recent times, a lot of state procurements have gone on without competitive tendering process. There are times when it has been alleged that a contract was awarded before the tender was opened, making mockery of due of justice.

A study commissioned by the OECD in 2003 on the benefits of transparent and competitive procurement processes found out that a saving of 47 per cent was made in the procurement of certain military goods in Columbia through the improvement of transparency and procurement procedures. In Guatamala, 43 per cent savings in the cost of purchasing medicines was made due to the introduction of more transparent and competitive procurement procedures and the elimination of any tender specifications that favour a particular tender.

Anti-competitive Issues in Public Procurement

There are legions of anti-competitive practices in public procurement, ranging from collusive tendering to bid suppression. In bid suppression schemes, one or more competitors who otherwise would be expected to bid, or who have previously bid, agree to refrain from bidding or withdraw a previously submitted bid so that the designated winning competitor’s bid will be accepted.

Complementary bidding (also known as ‘‘cover’’ or ‘‘courtesy’’ bidding) occurs when some competitors agree to submit bids that either are too high to be accepted or contain special terms that will not be acceptable to the buyer. On the other hand, in bid rotation schemes, all conspirators submit bids but take turns being the low bidder. The terms of the rotation may vary; for example, competitors may take turns on contracts according to the size of the contract, allocating equal amounts to each conspirator or allocating volumes that correspond to the size of each conspirator company.

Economic cost of anti-competitive tendering

A study commissioned by the EU found out that the total direct losses in 2010 as a result of corruption associated with contract tendering in the eight European countries and five sectors covered was between €1.4 and € 2.7 billion.

It has been estimated that about $400 billion per annum changes hands through corruption in public procurement around the world. In Sub-Saharan Africa, it is reported that corruption exists in about 70 per cent of public contracts, which inevitably lead to a rise in 20-30 per cent of contracts sums.

Coming home to Ghana, data concerning how taxpayers are being fleeced through uncompetitive tendering process is difficult to come by. However, if anecdotal tales and media stories are safe to go by, one can posit that the Government of Ghana remains largely uncompetitive when it comes to the procurement of goods and services. The flagrant abuse of sole or single sourcing has become an economic burden to taxpayers. The stories of SUBAH, SADA, GYEEDA and other government procurements are obvious testimony of this claim.

Why World Competition Day?

On December 5, 1980, the UN adopted the international standard for competition laws under what is called the UN Set on Competition Policy – hence the call by INCSOC to recognise this date as World Competition Day. Currently, 24 countries worldwide, including the United Kingdom, Russia, Sweden, Austria, Afghanistan, Tanzania, Spain and the Gambia have supported the call to have December 5 declared as World Competition Day by the UN General Assembly.

The theme for this year’s celebration is ‘’Competition in Public Procurement.’’ CUTS International Ghana is implementing “Advocating for a Functional Competition Regime for Ghana (COMPAD)” with support from the BUSAC Fund. The main goal of this project is to complement Ghna Government ‘s efforts towards evolving a functional national competition policy and law in Ghana, through an informed process, incorporating the views of key actors and with public support.

This article can also be viewed at: