Collusion identification in the English auction with a small price reduction: The case of St. Petersburg public hospitals’ procurement

Abstract

In the Russian Federation, the topicality of the problem of collusion between suppliers at public auctions is caused by the fact that since 2006 the Russian public procurement legislation has been aimed at limiting the discretionary power of the public buyer to a much greater extent as compared to the modern international procurement practice. Such limitation was set, basically, by selecting the English auction (least suitable for effective collusion counteraction) as the main public procurement procedure. This paper studies the collusion problem as related to the purchases of St. Petersburg public hospitals over the period of 2014–2020. An important attribute of these purchases is that most of them use the English auction as the procurement method. The collected empirical evidence on 91 999 public purchases of the medical organizations in St. Petersburg demonstrated that almost half of them resulted in a slight (no more than 1,5%) decrease of the initial contract price. The paper identifies the main issues of the Russian procurement legislation in general and those related to the healthcare sector, in particular, that increase incentives for collusion. Recommendations on how to deal with these issues are provided. For the auctions with a slight initial contract price decrease, the paper formulates sufficient conditions for identification of collusion between suppliers. The conditions are based on the information of suppliers’ behavior during the auction. As demonstrated in the paper, the application of these conditions to the results of conducted auctions can significantly help the Russian Federal Antitrust Service in its activities to identify the public purchases suspected of collusion between suppliers.