£130m fine for public sector bid-riggers

By Liz Stephens

Construction companies were fined £129.5 million by the Office of Fair Trading (OFT) following an investigation into bid cartels.

103 companies in total – including well-known firms such as Kier Group, Galliford Try, Balfour Beatty and Carillion – were fined for engaging in anti-competitive behaviour and rigging tender bids for public sector building contracts worth an estimated £3 billion.

The OFT said the companies had been engaged in “cover pricing” – where companies collaborate illegally to submit knowingly overblown prices to a client in order to inflate the average price of the bid for a tender.

These bids are not intended to win the contract but to rig the bidding in favour of a ‘rival firm’ (who will then put in a lower bid).

However, the fine was far lower than the industry expected – which has led to criticism that it will not act as a firm enough deterrent.

Some firms that co-operated with the OFT allegedly had their fines cut by up to 65 per cent.

Construction industry bodies such as the National Federation of Builders (NFB) have said they have been petitioning the OFT to soften its stance because of fears that huge fines would spell disaster for the industry, which has been badly hit by the recession.

NFB chief executive Julia Evans said: “It does seem unfair that a small, random sample of companies has been selected by the OFT to be punished as an example to the wider industry.”

Referring to rumours that companies involved in the bid-rigging could be banned from submitting bids to government tenders in future, Ms Evans said: “As the construction economy continues to deteriorate, these fines will hit the businesses involved particularly hard. They should not now face additional financial hardship by losing access to public sector work.”

It is believed that “cover pricing” has been endemic in the industry for years.