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Confess Your Cartel

Friday, April 18th, 2008 at 10:07 am Written by:

The Office of Corrupt Trading has made a press release about its Statement of Objections against 112 construction firms who are suspected of rigging their bids when applying for contracts from the government.

Several key political know-nothing ideologues in the government have had their ignorant intuition of “competition” and “free markets” exploited by rich private sector con-men to set up a bogus template for public sector procurement all over the country.

Step 1 of this confidence trick is to cordon off a section of the public sector economy like, say, supplying computer equipment to schools. This is pushed to the limit of the law by using the EU procurement procedures to exclude competition rather than promote it.

Step 2 is to establish a closed list of qualified suppliers. For computers in schools this has been done with a list of 16 such suppliers. It doesn’t matter who is on the list, as long as it’s closed and no one can come in from the outside once it’s established. It also doesn’t matter that there is no justification whatsoever for establishing such a system; it’s simply the way it’s done everywhere, so don’t question it.

Step 3 is to allow the government body (school, council, whatever) to purchase only from this list on the basis of a “Mini-Competition Evaluation Process” (see page 35 of this Framework Contract). This is where the order is put out by the school or other body, and several contractors from this list supply their quotes, and the cheapest one is chosen.

And that’s where the magic happens.

The genius of this story for brain-dead or conflict-of-interest political operatives is that it contains the key words “competition” and “cheapest”, and allows the power of the market to set the correct price for something quite big and complex that a self-proclaimed “gifted amateur” with a posh college degree doesn’t want to bore himself to tears over.

And it just might work if the following story didn’t obviously happen owing to the closed list system among a bunch of companies known to one another and are probably staffed by the same expert con-sultants.

The OFT formally alleges that the construction companies named in the Statement of Objections have engaged in bid rigging activities, and in particular cover pricing. Cover pricing describes a situation where one or more bidders collude with a competitor during a tender process to obtain a price or prices which are intended to be too high to win the contract. The tendering authority, for example a local council or other customer, is not made aware of the contacts between bidders, leaving it with a false impression of the level of competition and this may result in it paying inflated prices.

Legally, it has been established that once a private company has gained the rights to an unceasing revenue stream of public funds, it cannot be turned off — unless there is an Act of Parliament.

At the very least we should have the right to know about it. Unfortunately, the companies, the civil servants, and the politicians all know that there would be a situation if taxpayers — some of whom know a lot more about the costs of materials than our official officials — were permitted to inspect the books and compare the services supplied against the money paid, so we can’t have that. The private bidding process, which was rigged, set the appropriate price by definition, and don’t you go doubting that. The people who have the power over whether the public gets to see the details of the contracts are the same ones whose jobs depend on the contracts being good.

It’ll take years to get anything out using the Freedom of Information Act.

And don’t you go thinking that Parliament is going to do anything about it. When the Government Spending (Website) Bill was brought to the floor last summer only 18 MPs turned up to vote, falling well short of Quorum.

A month earlier, also on a Friday afternoon, 121 MPs including dozens of ministers found the time to show up for a vote to change the Freedom of Information Act so that it did not apply to Parliament.

Reform does not depend on elections. It does not depend on power. It does not depend on integrity. It does not even depend on external consultants. It depends on outrage that is sustained and does not get misdirected by some piece of PR manipulation.

We should have the right to see every penny of our money that is spent, and every contract that is signed in our name — especially as we have absolutely no statutory powers to affect it. If they have nothing to hide they have nothing to fear.

1 Comment

  • 1. Francis Irving replies at 18th April 2008, 12:33 pm :

    Lovely post!

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