UK construction firms fined after 'bid-rigging' probe

The UK’s competition watchdog today fined 103 construction firms a total of £129.5m (€143m) after an investigation into illegal “bid-rigging”.

Several major companies – including Balfour Beatty and Carillion – are among those listed by the Office of Fair Trading (OFT) as having colluded with competitors on building contracts.

The OFT said it had detected bid-rigging activities on projects across England worth more than £200m (€221m), including schools, hospitals and apartment blocks.

The OFT said it had found 199 tenders dating from 2000 to 2006 where bid-rigging took place.

This was mostly in the form of so-called cover pricing, where one or more bidders arranges for competitors to put down high bids so as not to win the contract but to increase the appearance of competition.

“This distorts the tender process and makes it less likely that other potentially cheaper firms are invited to tender,” the OFT said.

It added that in 11 instances the lowest bidder faced no genuine competition at all as all other companies involved in the tender had put down cover bids.

The OFT warned that today’s revelation could be just the tip of the iceberg, with the practice of cover pricing described as “widespread and endemic” in the construction industry.

It uncovered evidence of cover pricing in over 4,000 tenders involving more than 1,000 companies but said it had to focus on the companies and instances where evidence was strongest.

In six instances, the OFT found that money had changed hands between the firms, with the successful bidder paying “compensation” up to £60,000 to its unsuccessful rivals by raising false invoices.

Of the firms fined today, 86 received a reduction in their fines because they admitted their involvement in cover pricing.

The average fine was £1.26m (€1.4m), which the OFT said represented 1.14% of their annual worldwide turnover.

Some representatives of the construction industry reacted with anger to today’s fines.

The UK Construction Group (UKCG), which represents 29 contractors, called the decision to penalise the firms “unfair”.

UKCG director Stephen Ratcliffe said the industry was already reeling from the housing market downturn and recession.

“Everybody knows – including the OFT – that cover pricing was widespread in the industry in the past,” he said.

“It is perverse and unfair to impose such disproportionate penalties on a small number of contractors selected by geographical sampling.”

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