Companies which collude to raise prices on government contracts are on notice as the Minns Labor Government and Australian Competition and Consumer Commission (ACCC) form a new partnership to stamp out illegal "bid rigging".
The partnership will bring artificial intelligence capability to processing the data and identifying opportunities for referral to the ACCC to take legal action.
The announcement is a direct outcome of discussions at the Commonwealth Treasurer's Economic Reform Roundtable last month.
The NSW Government will seek to share tender data and information with the ACCC to identify suspicious patterns that may indicate collusion between companies bidding for tenders.
AI systems will be employed to process the huge amounts of contract documents, submissions, tender data and other relevant information that the NSW Government receives as part of its procurement.
The ACCC will then screen that data to seek out patterns and identify possible cartel behaviour.
A global study by the Organisation for Economic Co-operation and Development (OECD) estimates that improving competition and stopping collusion could save the government as much as 20 per cent on its contracts.
When companies operate in cartels, they work together to raise prices or lower the quality of the goods or services offered in public tenders. This activity is illegal but can be hard to identify.
Suppliers who are found to be engaging in cartel conduct could be prosecuted by the ACCC and suspended from being considered for contracts with the NSW Government.
The ACCC has a strong history of taking legal action against illegal cartels to protect competition, including on large scale government infrastructure projects.
The NSW Government spends more than $42 billion each year on goods, services and construction.
Being able to identify where large companies are colluding to raise prices or reduce the quality of products will help the government deliver better projects.
Combating bid rigging through data sharing and screening tools has already had an impact in other OECD countries. In South Korea, their cartel screening tool flags on average 80 cases per month. Between 2018 and 2021, 26 investigations led to fines totalling approximately A$15 million.
This is another important reform being pursued by the Minns Labor Government to improve procurement practices and deliver value for money for NSW taxpayers.
Treasurer Daniel Mookhey said:
"We're partnering with the ACCC so we can deploy world leading technology to deter would-be conspirators.
"There are many good operators in NSW - and those are the companies we want to do business with.
"This agreement is designed to neutralise bid rigging and other cartel conduct in order to get the best outcomes for NSW taxpayers."
Minister for Domestic Manufacturing and Government Procurement Courtney Houssos said:
"This new agreement is another tool we are going to use to deliver value for money for NSW taxpayers.
"Using their expertise and legal powers of the ACCC will keep suppliers honest and make sure we deliver the best outcomes for the state for each project.
"We have a zero-tolerance approach to this illegal conduct.
"This is another key procurement reform we're delivering. We want the NSW Government to spend less money on illegally inflated contracts and more on the essential public services that families and households rely on."
ACCC Chair Gina Cass-Gottlieb said:
"The ACCC looks forward to new data sharing arrangements with the NSW Government which will help identify suspicious patterns in procurement indicating collusion and cartel conduct between tenderers.
"We are committed to working with all levels of government to prevent government procurement processes from being the target and victim of cartel conduct.
"Cartel arrangements, such as bid rigging, often inflate costs for consumers or other businesses and are a serious breach of the law.
"Enforcing cartel laws is an ongoing priority for the ACCC. Any business or individual that attempts to enter collusive agreements with competitors risks significant penalties."
