The topic of this post is the interplay between public procurement and competition regulations. The recently adopted Serbian Law on Public Procurement (“LPP”), to become applicable on 1 April 2013, contains a few provisions on the matter.
The LPP requires that each bidder produce a statement certifying that its bid is being submitted without collusion with other bidders. If the contracting authority has reasons to believe that the statement is false, it must notify the Serbian Commission for the Protection of Competition (“Competition Commission”) of its suspicion. The notification obligation also exists if the contracting authority finds out that the successful bidder has hired a sub-contractor not named in the bid.
Tips for detecting bid rigging may be found in the Competition Commission’s Guidance for the Detection of Bid Rigging in Public Procurement, published in June 2011. The Guidance is essentially a translation of the 2009 OECD Guidelines for Fighting Bid Rigging in Public Procurement. It describes the most common forms of bid rigging, identifies industries and products where collusion in the public procurement process is most likely to occur and contains a check list of items leading to bid rigging detection in public procurement.
The LPP allows joint bids and does not deny this option to bidders who are competitors. However, in its opinion dated 17 October 2012, the Competition Commission said that a joint bid by competitors submitted in a public procurement procedure is an illegal horizontal agreement under Article 10 of the Law on Protection of Competition (“LPC”). The competition authority noted that such agreement would not be able to benefit from de minimis exception laid down in Article 14 LPC, irrespective of the market shares involved, since it contains a hardcore restriction on competition. However, the authority confirmed that an agreement on joint bidding could qualify for an individual exemption if the parties show that they cannot meet the tender conditions individually but only by acting jointly.This hardly attenuates the difficulties created by the Competition Commission’s harsh stance on joint bids, since the Serbian system of individual exemption requiresa decision ofthe competition authority (similar to the system that existed in the EU under Regulation 17/62).
Pursuant to Article 60(1) of the LPC, the Competition Commission should decide on a request for individual exemption within 60 days as of the submission. However, this is an instructive deadline and there is no presumption that exemption is granted if the Competition Commission remains silent after the expiry of the 60-day period. Moreover, the deadline for bid submission in a public procurement process can be less than 60 days from the date of the publication of the invitation to bid (the actual minimum deadlines for bid submission depend on the type of public procurement procedure involved). This means that bidders may easily miss the bid submission deadline in the public procurement procedure while awaiting the exemption from the Competition Commission.
The Competition Commission’s stance on joint bidding departs from the current position of the European Commission as expressed in its Guidelines on the applicability of Article 101 of the Treaty on the Functioning of the European Union to horizontal co-operation agreements, paragraph 237, where it is stated that the consortia agreements for joint participation in projects where the consortium member would not be able to participate individually, do not represent a restriction of competition within the meaning of Article 101(1) TFEU. Therefore, in the EU, there is no need for assessing whether the conditions for exemption laid down in Article 101(3) TFEU are satisfied.
A further problem under the current Serbian procurement regulations lies in an obvious contradiction within the LPP itself with respect to the duration of a ban on the participation in public procurement proceedings as a result of a finding of competition law infringement. The LPP provides that the contracting authority must refuse a bid if it has evidence that the bidder committed an infringement of competition in the course of the “previous three years” (it is not specified when the three-year reference period ends). On the other hand, the same law vests the Commission with the power to ban an infringer from participating in the public procurement procedure for a period of “up to two years” (it is not specified when the prohibition period commences, but presumably, this is the moment when the decision on the infringement is rendered). It is to be hoped that this incongruity will be picked up in future amendments by the LPP.
