Bid-rigging & commercial production — a call to action
by Bobby Amm. Bid-rigging isn’t just a concern in the US advertising and film production community; it’s a global issue with the potential to deeply affect South African independent production houses — not just by the threat of their own closure but also by the knock-on effects that inhibit the industry’s ability to employ and develop new talent, while providing competitive services.
In December 2016, the US Department of Justice began investigating allegations of advertising agency bid-rigging. In these cases, several agencies with in-house production teams were accused of structuring bids to their own tenders using the intellectual property presented in the bids from independent production houses.
An inherently unavoidable bias
The Institute of Practitioners in Advertising (IPA) has advised agencies to ensure that they don’t use information disclosed to them by production companies to enhance their own bids. But South Africa’s Commercial Producers Association (CPA) and related international bodies believe that this is simply not possible in practice — even with the best, most-honourable intentions.
Treatments presented in a bid contain hard-earned creative ideas and project methodology; information that can’t be unknown when an agency develops its own bid. Costs are also disclosed, so an agency would need to deliberately charge more than competitors for any work to be awarded to them — an unlikely act in a competitive environment.
While many agencies can and do emphasise that those who bid and those who receive bids aren’t connected, the risk for bias is too significant. A system is needed to ensure a fair and competitive bidding process, one that equally protects all those involved.
Universal rules of engagement
To address the need for transparency, and to protect the integrity of the industry, the CPA and its members agreed, as of February 2017, they would no longer pitch against in-house production companies. This trend has also been adopted across North America and Europe.
CPA members are implementing the commercial industry’s Universal Rules of Engagement:
“To keep focused on [their] core areas [namely, improving the creative product, finding efficient solutions and keeping the talent pool fresh and strong], business issues should be as standardised and predictable as possible… The topics discussed [in these principles of contracting a production company to produce a commercial] ensure that advertisers and agencies receive the highest quality product possible, and that production companies are treated fairly in the execution of each project.”
Further, the rules state that:
“There should be a maximum of three production companies invited to bid for a commercial project. These entities should be advised of others they are bidding against, as it helps shape the expectation of the desired outcome. In situations where there are more than three bidding companies on the same project, all participants should be notified in advance (or as this situation arises) so that companies can better assess whether they would like to participate in the bidding pool.”
What this means for agencies
While potentially disruptive to the way agencies have worked in the past, these adjustments contain the means to promote fairness and, ultimately, a thriving production industry for all.
As such, agencies may expect CPA members to:
- Request upfront declaration of whether an in-house production company will be pitching for the same work, or if there is a chance of their doing so during the process;
- Include a paragraph in their pitches stating that they are submitting their bid on the basis that no entity in the bidding pool, directly or indirectly, is a parent or subsidiary of, connected to, or is any holding company of the agency soliciting the bid; and
- Request a list of the companies they are pitching against, so they may plan resources and then decide if they are best-positioned to answer the brief.
The bottom line? Agencies have two options for commercial work: to produce their own material or to call for bids to outsource. Not both. Sound fair?
Bobby Amm is chief executive of the Commercial Producers Association of South Africa (CPA), the trade association of production companies that produce television, cinema and internet commercials for the local and international market. After a brief stint in journalism, she began her career in the industry at the Consultative Committee for the Entertainment Industry in the early 1990s. She first joined the CPA in 1997 but left three years later to join a production company. After finding that she missed the big-picture perspective of the CPA and the interesting issues which continuously perplex the production industry, Bobby made the decision to return to the CPA in 2003.
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