Public Infrastructure Procurement: Detecting Collusion in Capped First-Priced Auctions
Publication: Journal of Infrastructure Systems
Volume 26, Issue 2
Abstract
Worldwide, numerous economies have been subjected to the unnecessary economic and social impacts that materialize from the collusion that has taken place when public infrastructure has been procured. In an attempt to mitigate this collusion, the Brazilian government introduced laws (e.g., Law 8666/93) that require the procurement of public goods and services to be subjected to capped first-price auctions. For public infrastructure projects, bids are limited by median market prices that are recorded in specific databases and relied on during the selection of bidders. We examine 187 capped first-price auctions with eight or more bids. We reveal that full collusion can be detected if the collective behavior of any auction’s bidders is compared to a “but for” scenario that expresses the expected behavior of a group of honest competitors bidding randomly. This comparison makes it possible to flag, using different confidence levels, whether participants in a particular auction fully colluded at the time the bids are known. The contribution of our approach is twofold. It can be used independently or in conjunction with other existing methods to detect the presence of collusive behavior in a capped first-price auction.
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Data Availability Statement
Some or all of the data, models, or code generated or used during this study are available from the corresponding author by request. Data will be provided in Excel format.
Acknowledgments
The authors acknowledge the Brazilian Federal Police and Curtin University for supporting the fight against collusion in public procurement.
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Journal of Infrastructure Systems
Volume 26 • Issue 2 • June 2020
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©2020 American Society of Civil Engineers.
History
Received: Feb 16, 2019
Accepted: Dec 9, 2019
Published online: Mar 27, 2020
Published in print: Jun 1, 2020
Discussion open until: Aug 27, 2020
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