How to avoid a cartel of consulting firms in software development?

15 September, 2020 | Reading 3 min.

The investigation of the National Commission of Markets and Competition (CNMC) for an apparent cartel of consulting firms that helped themselves to win public contracts has brought up an issue that can affect our companies dramatically, but let’s take it one step at a time.

The cartel

El supuesto cartel se enriquecía estableciendo precios por encima del mercado en las ofertas que presentaba en los concursos públicos. ¿Cómo lograba que se las aceptaran? Porque formaban un cartel. Una de las empresas montaba la oferta que realmente cumplía con los resultados del concurso y otras dos presentaban ofertas claramente por detrás de la primera. La misma empresa que resultaría ganadora proveía de las ofertas fantasma a las otras dos. Todo perfecto, reparto de territorios y todos se enriquecían a costa del erario público.

The alleged cartel was enriched by setting above-market prices on the bids it submitted in public tenders. How did it get them accepted? Because they formed a cartel. One of the companies made the bid that really met the results of the tender and two others submitted bids clearly behind the first one. The same company that would be the winner provided the other two with the fake bids. Everything was perfect, territories were distributed and everyone was enriched at the expense of the public treasury.

We could not stop it… or could we?

When the details were known, we lacked time for indignation, for accusations and for showing the lack of morals of those involved, but… has anyone done anything about it?

I repeat the question more clearly. Has anyone tried to establish a method, a way to avoid these situations before they happened? Has anyone really tried?

The truth is that it is not very reliable that nobody suspected anything, and nobody did anything about it. Some voices would say that they could not do anything, that they did not know, but the truth is that they could. Because they could suspect that there was something wrong.

The age of the software product

The solution comes from the digital transformation, from the product revolution that we are witnessing in our daily lives. In that arising of applications that we use for everything, we simply look for the functionality we need, we download it and that is it.

This age of the product allows us to measure it in a standard and transparent way through the size of the software product, the functionality it offers and through the market development cost.

In software sizing we have the wide step that the European Parliament has initiated by recommending in its projects the use of the de facto industry standard, the Function Points method promoted by IFPUG.

This recommendation comes at a time when the European Commission is seeking to rationalise spending and governance through a standard of what a project should bring to the market.

On the other hand, the use of a market database allows us to know what it will cost to develop that amount of software product in the market according to the technology we want.

The solution

The solution is then obvious. Calculate the amount of product with a standard and widely used method in the industry and once we have calculated the product calculate its value in the market.

If someone exceeds that value by a lot we should be suspicious. If it is much lower, we should also be suspicious. The market value should be our guide, our light that illuminates a path full of smoke sellers who try to take advantage of us.

Remember the price of the product according to the market, that is the essence of the matter.