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OFT fines 103 construction firms £130M

The Office of Fair Trading (OFT) this morning fined 103 construction firms in England a total of £129.5M after finding them guilty of colluding with competitors on building contracts.

It said that the firms engaged in illegal anti-competitive bid-rigging activities on 199 tenders from 2000 to 2006.

The decision follows an OFT Statement of Objections in April last year after one of its largest Competition Act investigations.

“Our investigation has uncovered significant infringements of competition law on nearly 200 projects across England,” said OFT senior director for the case Simon Williams. “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.”

Most of the fines relate to cover pricing activities where one or more bidders in a tender process obtained an artificially high price from a competitor.

Such cover bids are priced so as not to win the contract but are submitted as genuine bids, which gives a misleading impression to clients as to the real extent of competition. The activity distorts the tender process and makes it less likely that other potentially cheaper firms are invited to tender.

In 11 tendering rounds, the lowest bidder faced no genuine competition because all other bids were cover bids, leading to an even greater risk that the client may have unknowingly paid a higher price.

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

The OFT also found six instances where successful bidders had paid an agreed sum of money to the unsuccessful bidder (known as a“‘compensation payment”). These payments of between £2,500 and £60,000 were made with false invoices.

The infringements affected building projects across England worth in excess of £200M including schools, universities hospitals and numerous private projects.

Reductions in penalties were granted to 86 of the 103 firms because they admitted their involvement in cover pricing prior to today’s decision.

However, the OFT said it had dropped its investigations of bid-rigging against nine companies originally listed in its Statement of Objections because of a lack of evidence.

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