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Construction companies face OFT bid-rigging fines

The Office of Fair Trading is expected to impose multimillion-pound fines on 150 construction companies after a bid-rigging investigation into local council contracts worth £3 billion.<br/> <br/> Evidence of wrongdoing is expected to be sent to the construction companies this month as part of the OFT’s “statement of objections”, The Times has learnt. The recipients will include six quoted construction companies that have admitted involvement.<br/> <br/> The inquiry, into 3,000 contracts in England, is the OFT’s biggest investigation into cartel activity. Companies found guilty of uncompetitive behaviour can be fined 10 per cent of their world turnover. For Balfour Beatty, one of six quoted companies cooperating with the OFT, this equates to more than £600 million. If the behaviour is deemed to be criminal, directors could be jailed for five years.<br/> <br/> Construction companies have been scrambling to help the OFT, which began its investigation in 2005, in the hope that any fines may be reduced. So far 38 companies have applied for leniency, although many larger organisations are thought to be waiting to see what evidence the watchdog has.<br/> <br/> The focus of the OFT’s investigation is on “cover pricing”, where companies place a high bid for work that they have no intention of winning so that they are not left off a client’s tender list. The cover price is fixed after consultation with another supplier.<br/> <br/> One contractor said: “Clients, particularly in local authorities, like to see a few names in the frame when a new project comes up. You’d chat with another bidder, find out what it was pricing at, and go in far enough over the top to make sure you didn’t win.”<br/> <br/> The OFT is expected to say that it has evidence of bungs, sharing out of contracts between companies, agreements to cover bid costs for other contractors and payments to losing bidders. According to people familiar with the investigation, the inquiry was halted when the number of companies involved reached 150 because the OFT lacked the resources to consider any further alleged illegal activity. The OFT declined to comment on the progress of the investigation.

Full post as published by International and UK Law on December 31, 1969 (boomark / email).