UK contractors hit with bid-rigging fines

By Steve Skinner22 September 2009

Following investigations started in 2004, the UK's Office of Fair Trading has fined 103 construction contractors for collusion and anti-competitive bid-rigging.

Some of the UK's largest contractors are among the companies that have been collectively fined UK£ 129,5 million (€ 143 million) for their part in the scam which affected 199 tenders awarded between 2000 and 2006.

In most cases, the OFT found evidence of cover pricing where one or more bidders in a tender arranged for their competitors to submit artificially high prices to ensure a chosen contractor won the bid. In 11 of the tenders, the lowest bidder faced no real competition because all other bids were cover bids.

The OFT also found six cases where successful bidders had made compensation payments of between UK£ 2500 (€ 2700) and UK£ 60000 (€ 66000) to unsuccessful bidders. Cash for these payments had been generated through false invoicing.

The infringements affected building projects across England worth over UK£ 200 million (€ 221 million) including schools, universities, hospitals and private projects.

Of the 103 companies, 86 received reductions in their penalties because they admitted their involvement prior to the OFT's decision. The OFT also informed nine other contractors originally listed in its ‘Statement of Objections' that it will no longer pursue them over bid-rigging allegations because of insufficient evidence.

On handing down the fines the OFT issued guidance that those behind future tenders should not exclude the offending contractors from bidding in future as the practice of cover pricing was widespread in the construction industry. The OFT felt those companies that had faced investigation could now be expected to be particularly aware of the competition rules.

The OFT's senior director on this case, Simon Williams said, "Our investigation has uncovered significant infringements of competition law on nearly 200 projects across England. Bidding processes designed to ensure clients, and in many cases taxpayers, receive the best possible choice and price were distorted, creating a real risk of increased prices.

"This decision sends a strong message that anti-competitive and illegal practices, including cover pricing, must cease. The OFT welcomes initiatives by the leadership of the construction industry to add weight to that message through a clear code of compliance, which we hope will help to embed more fully a culture of competition within the sector."

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