Screening for bid rigging in rural road procurement of Thailand

Abstract

The fundamental objective of public procurement is to promote efficiency in the procurement process especially to ensure that the supplier offers the lowest price given the acceptable quality of goods and services through a bidding process. However, the collusion among bidders is still a critical problem of public procurement especially the main form of collusion is bid rigging behavior. In Thailand, the government has enacted “Anti-Collusion Law” since 1999; however, bid rigging behavior is still a pervasive problem in public procurement auctions. It reflects the difficulties in detecting or screening bid rigging behavior. This study examines the screening test which focuses on determining whether the fundamental conduct is anomalous or inconsistent with competitive behavior. The research proposes the economic concept of collusion, the industrial organization paradigm, and the econometric method will be used to uncover the screening method for the rural road procurement of Thailand during 2006-2009. The main research question is how to detect bid rigging in the rural road procurement market and to analyze the factors facilitating collusive bidding. The analyses consisted of two models for screening bid rigging behavior in the rural road projects and characteristics of bidding firms. The first model suggested the screening method from project level by using the engineers’ estimated cost. The result showed that if the winning bid is close to the engineers’ estimated cost; it has a tendency of bid rigging in the procurement process. The second model proposed the screening method from firm level which a firm has a chance to win the large project and its area as a local winner. The results showed that a firm had a chance to be the winner when it bid increasingly. However, the interesting result found that a firm which related with the local politicians had a chance to be the winner firm on the large project. Findings in this study are useful for those in the anti-collusive practices especially the National Anti-Corruption Commission and Office of the Auditor General. They could utilize these findings to review the bid rigging behavior and the loopholes in the Anti-Collusion Law also to develop guidelines for audit of bid rigging in the public procurement process.