Security Cartels Mess Up Procurement Procedures Private security. Photo © Ivana Dervishi.

A review of tenders over the last four weeks awarded by the Ministry of Social Welfare and Youth (MMSR), the Financial Oversight Authority (AMF), the Albanian Post, and other government agencies show that security firms offering physical protection of properties are largely operating through price-fixing cartels.

As Exit explained before in the context of insurance companies, price fixing and the formation of cartels is in violation of the antitrust legislation, because it undermines the functions of the free market and obstructs the very aim of public procurement: to acquire services for a competitive price.

Albania even has a Competition Authority, which is supposed to fight cartels of the sort we will illustrate below. On its website, it clearly states that “agreements [between competitors] that determine […] the selling or buying prices or any other condition on trade […] are prohibited.” In fact, the Competition Authority has previously investigated the security firm market, but concluded no breach of the antitrust law.

Ministry of Social Welfare and Youth

Recently, the MMSR awarded four tenders for the security of several government-operated institutions, such as an elderly home in Shkodër, and the National Center for the Victims of Violence in Kamza. Total sum of those tenders is 7.8 million lekë (~€58,000).

In all four tenders, the same group of security firms (with a few exceptions) placed exactly the same bid. For example, on the tender to offer physical protection to the building of the State Social Service, Arbana, Aulona Pol, Dea Security, International Security, Leksi Security, Nazeri 2000, NSS, and SSX all bid exactly 1,936,205.01 lekë, or 87% of the maximum available funds. The winner of this tender, Myrto Security, bid exactly as much as Oktapus, 1,505,937.23 lekë, winning the tender by lot.

Another tender, for the physical protection of the Transitory National Emergency Center, showed exactly the same bids, with again Myrto Security and Oktapus offering the lowest bids of 1,505,937.23 lekë. This time, Oktapus won by lot.

Albanian Post

Similarly, the Albanian Post awarded several tenders for the physical security of its post offices in different regions. For the tender in the region Kukës, Eurogjici Security, Sabeta, and Shtiqni all offered the same bid: 1,434,997.80 lekë. For the region Dibra, Nazeri 2000, Res 03, and Safe all offered the same bid: 1,434,854.52 lekë. The winner was determined by lot.

For the region Elbasan, Eurogjici, Myrto, and Nazeri 2000 all offer the same bid: 6,931,980,00 lekë. Eurogjici and Nazeri 2000 are disqualified because they didn’t fulfill the qualifications for the standard tender documentation. Myrto is announced winner by default.

In Vlora, the same three companies plus another one all offer the same bid: 6,007,716,00 lekë. This time, Myrto and Eurogjici are disqualified for exactly the same reason: errors in the standard tender documentation. Nazeri 2000 is announced winner by default.

What are the chances that three companies bidding on the same two tenders hand in the same bids, but that in those two tenders different companies are disqualified because of violation of the same criteria? This chance, indeed, seems very small.

Financial Oversight Authority

Our final example concerns the security of the building of the Financial Oversight Authority. The maximum funds for this tender are 2,883,600 lekë. No less than twenty-three security firms placed exactly the same bid: 2,682,177.00 lekë, or 93% of the maximum available budget. The winner of the bid was determined by lot.

The examples of the tenders given above are just the tip of the iceberg, and based merely on the tenders awarded in the last four weeks. Even though the individual sums involved may not be large, their cumulative effect on the public budget is nonetheless significant, in the sense that physical protection of state buildings is and will remain for the coming year a necessity. Unless the cartels in the security industry and the price fixing mechanisms they employ are broken up, this will continue to have a negative impact on the state budget, and the free market climate in Albania.