OFT launches proceedings against construction companies alleged to be involved in bid rigging in breach of Competition Law 
(24/04/2008)
Last week, the OFT launched proceedings against 112 construction companies alleging that they had been involved in bid rigging in breach of Competition Law. The companies concerned range from multi-billion pound national companies to SMEs.
The companies concerned have received a massive 1700 page document called a statement of objections or 'SO' which sets out the evidence and allegations against them and all the other companies involved. In a worst case scenario a company could receive a fine equivalent to 10% of turnover.
Andrew James, a specialist construction partner at law firm Harrison Clark LLP, commented: "This is one of the biggest OFT investigations to date and we had been expecting the SO to be served. For many companies involved it is only now that they have received the SO that they know the substance of the allegations against them."
“Contrary to some of the publicity, most of the cases do not involve people’ throwing bungs' or colluding to carve up market sectors, but involve the less reprehensible practice of 'cover pricing’. Cover pricing normally involves one tenderer contacting another to find out what price the other tenderer is quoting with a view to bidding too high a price so as not to get the contract. This may seem to be a bizarre practice, but it was widespread in the industry and occurred where a contractor wanted to be seen to be willing to do a contract (in the hope of being invited to tender for other contracts in the future) but was too busy or otherwise unable to perform the particular contract, and therefore wanted to 'over bid' so as not to be awarded the contract."
“Whilst collusive tendering is wrong and I would not condone it, it does not necessarily result in a client paying too much for a project, and the contractor derives no financial benefit from it. Many in the industry did not realise that 'giving a cover' was wrong, and for the few who still do not realise this, this latest action should provide the necessary wake up call."
“There will, however, be some clients who have paid too much because of bid rigging. If the OFT decides that a contractor has been guilty of bid rigging then they will publish the decision and the aggrieved client will have a claim for compensation."
“As the scale of this investigation is unprecedented, it is not clear when the OFT will publish its decision. The contractors concerned only have until 27 June to respond but I suspect it could be 12 to 24 months before the OFT makes it decision."
Related categories: Standards and Legislation
