The Competition Council of Latvia (the CC) in a seminar educates representatives of the Ministry of Defence and the State Centre for Defence Military Objects and Procurement (VAMOIC) about alleged prohibited agreements or bid-rigging in public procurements, which is one of the most severe infringements of the competition law.
The defence sector has been under supervision of the CC several times due to non-compliance with the principles of fair competition. Since 2006, the CC has investigated several cases in relation to alleged prohibited agreements among applicants in procurements organised by VAMOIC. In one case two construction companies had raised the cost of the procurement by 43 per cent through coordinating their tenders. The CC imposed fines equal to almost 92 thousand euros on both participants of the public tender.
The markets, where the defence department acquires goods and services, are very narrow due to the specific requirements, and this aspect causes a high risk of prohibited agreements. Already in 2015, the CC called VAMOIC to promote free competition among suppliers and participation of more applicants in procurements, competing with the price and quality of supplied goods, because only by doing so it is possible to ensure rational use of public funding.
Although significant increase of funding has been observed in the defence sector in the recent years, it is still significant to ensure, that finances are used as usefully as possible and without groundlessly raised cost of procurements resulting from bid-rigging. To preventively mitigate the bid-rigging risk in the future, organizers of procurements were trained at the seminar, how to identify signs of prohibited agreement, because exactly procurement organizers can be the first to detect suspicious coincidences in tenders submitted by applicants.
Prohibited agreements result in the public not receiving benefits ensured by mutual competition among companies – lower prices and better quality. Participants in infringements, who are acting without the pressure of competition on permanent basis, lose their competitiveness as they lack motivation to improve their efficiency or to invest in innovation, also being unable to compete on export markets and in the course of time being replaced by stronger foreign companies also on the local market.