# Detecting Bid-Rigging in Public Procurement. A Cluster Analysis Approach
## 1 Introduction  
Bid rigging in public procurements is one of the main problematic aspects targeted by the governments and the local public authorities. Government procurements usually account for 10-15% of gross domestic product (GDP) in developing countries (Global Trade Negotiations 2006) and up to 25% of GDP in the developed countries ([PERSON] and [PERSON] 2006). Local public authorities outsource their utilitarian projects and services through open-hold auctions, direct negotiation, or competitive biddings ([PERSON] and [PERSON] 2006). Due to the public procurement legislation, in most cases, public procurements procedures are conducted through competitive auctions ([PERSON] et al. 2008). Collusion and corruption are the main factors of concern in the auctions ([PERSON] 2005; [PERSON] 2000; [PERSON] 2001). Other studies ([PERSON] 2005; [PERSON] and [PERSON] 2005; [PERSON] 2015; [PERSON] et al. 2003) confirm that bidders concluded anticompetitive agreements to increase the bidding price and get better contracts from the public authorities. Public procurements organized by the governmental bodies and the local authorities' departments have many weaknesses, depicted in the economic literature, as follows:  
1. Excessive state intervention, discrimination in awarding contracts, favoritism for local contractors create substantial problems in the awarding process ([PERSON] and [PERSON] 2013; [PERSON] 2018);
2. Lack of transparency in the public procurement contracts is a common practice within the government departments ([PERSON] and [PERSON] 1992; [PERSON] et al. 2018; [PERSON] and [PERSON] 2007);
3. Abuse of the state prerogatives and corruption in the public auctions ([PERSON] and [PERSON] 2018; [PERSON] et al. 2017);
4. Bidders form cartels to increase the auction price and get contracts at the auctioneers' costs ([PERSON] et al. 2018; [PERSON] et al. 2018; [PERSON] et al. 2018). Nevertheless, there are few articles reviewed in the empirical literature on bid-rigging for public procurement auctions. [PERSON] (1986) proposes and analyzes the bid-rigging inthe construction of the highways tendered in the public auctions, based on a multilinear regression model. [PERSON] (1991) describes the agreement between bidders of public works in Japan, while [PERSON] and [PERSON] (1989) evaluate the damages in bid-rigging cases with regression methods. Finally, [PERSON] and [PERSON] (1997) examined the scheme to submit identical bids within the public procurement auctions. In general, the detection of rigged tenders is based on two main components: structural screening (which addresses issues related to the specific features of the market and the tender) and behavioral screening (which addresses issues related to the behavior of tenderers). Structural screening is a predominantly preventive measure, but it can be applied both ex-ante and ex-post to the auction. Thus, the analysis of the market structure and the specificity of certain forms of auction organization can provide important information and indications about those markets or those types of purchases that are prone, by their specificity, to facilitate the auctioning of auctions. In developing the proposal for a set of indicators that could be considered for structural screening, both the indicators suggested by the OECD guide to combating auction fraud and those selected to build the aggregate competitive pressure index were considered. It is appreciated that the latter is relevant in assessing the ability of a market to facilitate or not the occurrence of such anticompetitive behavior. The role of structural screening is to act as a filter, which can lead to the identification of those tenders in industries or areas more exposed to the conclusion of agreements between competitors. Behavioral screening is performed ex-post during the auction and has the role of observing certain aspects that may suggest agreements between the participants in the auctions.