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The latest reform of the Law on public sector contracts regulates a summary procedure to enable contracting authorities and competition authorities to detect collusive practices in public procurement procedures.

The General State Budget Law for the year 2023, which has recently come into force, has introduced a modification in Law 9/2017, of 8 November, on Public Sector Contracts (LCSP) that regulates the procedure by which, in public procurement procedures, the contracting body has to transfer to the competition authorities any well-founded indication of collusive conduct by the bidding companies.

Prior to this reform, article 150.1 LCSP already established this obligation for the contracting body, but the new wording of this precept establishes the summary procedure to be followed (which was pending regulatory development), although it limits it to contracts subject to harmonized regulation.

Compulsory summary procedure to be followed by contracting authorities

New Article 150.1 LCSP establishes that if the contracting body appreciates well-founded evidence of collusive conduct in public procurement procedures subject to harmonized regulation, prior to awarding the contract, it must notify the National Commission on Markets and Competition (CNMC) or, where appropriate, the corresponding competition regional authority (the Catalan Competition Authority or ACCO, in Catalonia), so that, within 20 working days, the latter may issue a report on the well-founded nature of such evidence. The contracting body must explain in detail the evidence and the reasons for considering its presumed collusive nature.

The submission of this documentation shall entail the immediate suspension of the public procurement procedure, which shall not be notified to the bidders, nor shall it be published, in order to maintain confidentiality.

In the event that the report concludes that there is well-founded evidence of collusive conduct, the contracting authority shall notify and publish the suspension of the procedure and shall send the bidders concerned the necessary documentation so that they may, within a period of 10 working days, present any arguments they deem appropriate in defense of their rights.

The contracting body shall issue a reasoned decision within 10 working days based on the reports, the arguments and evidence brought by the affected bidders. If it decides that there is well-founded evidence of collusive conduct, it must exclude the tenderers responsible for such conduct from the procedure. If it finds no evidence of collusive conduct, it shall lift the suspension and continue the procurement procedure without the exclusion of any bidder on this ground.

The increasing responsibility of contracting authorities in the detection of collusive practices

Article 150.1 LCSP is not the only rule that ensures compliance with competition regulations in the framework of public procurement. Article 132 LCSP imposes a general obligation on the contracting bodies to ensure the safeguarding of free competition throughout the public procurement procedure. Under this general obligation, contracting bodies, the State Public Procurement Advisory Board or the equivalent regional bodies as well as the bodies competent to resolve the special appeal referred to in article 44 LCSP, shall notify the CNMC or, where appropriate, the regional competition authorities, of any facts of which they become aware in the exercise of their functions that may constitute an infringement of competition. In particular, it stipulates that they must report any indication of any collective agreement, decision or recommendation, or concerted or consciously parallel practice among bidders, which has the purpose, produces or may produce the effect of preventing, restricting or distorting competition in the public procurement process.

Similarly, article 69 LCSP, which regulates the conditions under which companies can jointly bid in public procurement procedures, provides that when the contracting body appreciates indications of collusion between companies bidding under a joint venture, it will require them to expressly justify the reasons for it in a reasoned manner. If the contracting body finds well-founded indications of collusion between them, it shall notify the corresponding competition authority so that it may rule on the matter, following the summary procedure of article 150.1 LCSP.

The CNMC and the ACCO have published guidelines for the detection of collusive conduct in tender procedures, which are generally price fixing or market sharing agreements. The following behaviors are considered to be the main indications of collusion:

  • The existence of a small number of bidders or bids, taking into account the track record and the companies active in a specific market;
  • The submission of bids by the same bidder with substantial differences in prices or technical conditions compared to previous similar tenders, without apparent justification by changes in market conditions, production, distribution…;
  • The submission of bids by different tenderers with identical or very similar prices without apparent justification;
  • Conduct by one or more tenderers indicating a lack of interest in being awarded the contract, such as the refusal to correct formal defects, to complete the documentation submitted, to justify bids with abnormal or disproportionate values, or the submission of economic or technical bids under conditions that are substantially worse than those customary in the market;
  • The repetition over time of the same company as successful bidder for the same tender or the same lots, despite the existence of potential competitors with the capacity to bid in the tender, in the same territories, or with an appreciable rotation among the successful bidders;
  • The subcontracting of part of the contract by the company awarded the contract to a competing company, without there being technical justifications;
  • A joint offer between competing undertakings grouped in a temporary joint venture without there being, in the light of the background, adequate justification of the technical and economic characteristics of the tender, the economic or technical solvency of the undertakings concerned or the market in question.

Investigation and sanctioning of collusive conduct in public procurement procedures by competition authorities. Prohibition to bid in future public tenders.

Without prejudice to the procedure provided for in article 150.1 LCSP, competition authorities are competent to investigate and sanction possible collusive conduct in public procurement procedures. Therefore, in the event that indications of collusive conduct have been identified in the procurement procedure, it is likely that the competent competition authority will initiate proceedings for infringement of article 1 of Law 15/2007 on the Defence of Competition, within the framework of the powers attributed to it.

In these cases, in addition to the financial penalty, article 71.1.b) LCSP provides for the imposition of a prohibition on contracting in future public tenders. This is a prohibition that operates ope legis, that is to say, as a direct result of the finding of anticompetitive conduct.

The competition authorities regularly investigate collusive behaviour in public procurement procedures. For example, in July 2022, the CNMC fined the 6 main construction companies in Spain more than 200 million euros for distorting for more than 15 years the competitive process in public tenders for the construction of infrastructures such as airports, ports, hospitals or roads. In addition to the financial fine, the CNMC imposed a ban to participate in future public tenders. However, the determination of the duration and scope of this prohibition is not set by the CNMC, but by the State Public Procurement Advisory Board. However, this sanction is currently suspended by the courts (Audiencia Nacional) as a result of the interim measures requested by the companies inthe  appeal.

Likewise, the Catalan High Court (Tribunal Superior de Justícia de Catalunya – TSJC) has recently confirmed the 18-month ban to participate in future public tenders that the ACCO had imposed on the companies Adasa Sistemas, SAU and MCV, S.A., after they agreed to share various public tenders relating to the installation, maintenance and supply of parts for the radar and weather stations of the Meteorological Service of Catalonia, between 2011 and 2019. The ACCO established for the first time the scope and duration of the prohibition to contract, in accordance with the provisions of articles 71.1.b) and 72 LCSP, an extreme validated by the TSJC.