Construction firms in bid rigging claim

MORE than 100 construction firms, including a number with bases in East Anglia, have been accused of “bid-rigging” by competition watchdogs after one of the biggest ever investigations by the Office of Fair Trading (OFT).

MORE than 100 construction firms, including a number with bases in East Anglia, have been accused of “bid-rigging” by competition watchdogs after one of the biggest ever investigations by the Office of Fair Trading (OFT).

Construction giants Balfour Beatty and Carillion are among the 112 firms alleged to have taken part in a cartel to fix prices when bidding for business.

Also among the 112 are Ipswich-based ISG Jackson, Haymills, which has offices in Stowmarket, and R G Carter, based in Norwich.

The OFT said more than 40 companies had already admitted price-fixing in the inquiry so far, which first started after an initial complaint in the East Midlands. Another 37 firms out of the 112 have applied for leniency, according to the OFT.

The inquiry spans 240 alleged cases where firms have colluded to inflate prices during a tender process, covering both the private and public sector, including building contracts for schools, universities and hospitals.

In a minority of more serious cases under investigation, the OFT alleges that some firms agreed to make “compensation payments” to unsuccessful bidders, accompanied by false invoices.

Most Read

However, the bulk of the allegations relate to “cover pricing”, where some firms in the bidding for contracts put in artificially-high tenders because they do not want the work.

This, the OFT argues, is also illegal and could lead to more inflated prices and give the client a false impression of the level of competition in the market.

John Fingleton, OFT chief executive, said: “Cartel activity of the type alleged today harms the economy by distorting competition and keeping prices artificially high.”

The OFT investigation should “send out a strong message to the construction industry about the seriousness with which we view suspected anti-competitive behaviour,” he added.

The OFT said the investigation was sparked by a complaint from a health authority in the East Midlands, but added it “quickly became clear from the evidence that the practice of cover pricing was widespread”.

The formal allegations cover neighbouring areas including Yorkshire and Humberside and also elsewhere in England.

It said the firms named in its investigation had 30 days to respond to the allegations.

ISG Jackson issued a statement saying it had “co-operated fully” with the OFT and would keep shareholders informed of any further material developments.

“Shareholders were made aware of the OFT's enquiries at Propencity Group Ltd, which ISG acquired in 2006, in the annual report of that year,” it said. “ISG and Propencity have co-operated fully with the OFT and the OFT has granted leniency to Propencity, thus reducing any fines that might ultimately be levied.”

Haymills Contractors said it was “fully committed to its internal competition law compliance programme” and did not tolerate practices such as cover pricing.

“As the OFT press release notes, no assumption should be made at this stage that there has been an infringement of competition law by any of the companies named in the Statement of Objections - the Statement of Objections does not constitute a final decision by the OFT,” it said.

“Haymills will review the document carefully and obtain legal advice in relation to the issues. Needless to say, the company is co-operating fully with the OFT's investigation.”

It added: “Our core values and management procedures further guarantee compliance at the highest levels and reflect our approach of best practice and continuous improvement.”

A spokesman for R G Carter Construction Ltd said: “Certainly I can confirm that we have received from the Office of Fair Trading a Statement of Objections for three alleged infringements. At this point in time, that is all the statement I'm prepared to give.”

Balfour Beatty confirmed that it was one of the firms that has applied for leniency from the OFT.

It said in a statement it had reviewed its compliance with the Competition Act in June 2007 and was “confident that all of its subsidiaries are now fully compliant”.

The group said: “Balfour Beatty neither promotes nor condones anti-competitive behaviour. The company and its operating businesses have co-operated fully with the OFT in all aspects of its investigation.”

Fines of up to 10% of a company's turnover are potentially available for competition breaches, although construction industry representatives claim such penalties would be draconian.

The Construction Confederation said that although cover pricing was a technical breach of competition law if firms discussed their intentions with each other, there would usually be no extra cost to the client as the winning bid would be a fair price.

However, Alan Ritchie, general secretary of construction workers union Ucatt, called for the maximum possible fine to be levied on all construction companies found guilty of price fixing on public contracts.