OFT fines construction companies £130m for bid rigging

The Office of Fair Trading (OFT) has fined 103 construction companies a total of £130m for rigging bids for building contracts. The fines follow one of the most complex cases ever investigated by the OFT, which found that the firms had engaged in illegal anti-competitive bid-rigging activities on 199 tenders from 2000 to 2006, mostly by way of a practice known as “cover pricing”. Cover pricing occurs when firms submit quotes for jobs at an artificially high price with no intention of winning the contract; this gives the client a misleading impression about the real extent of competition. The infringements affected building projects across England worth more than £200m. The projects included schools, universities, hospitals, and numerous private projects ranging from the construction of apartment blocks to housing refurbishments. Eighty-six out of the 103 firms received reduced penalties because they admitted their involvement prior to today’s OFT announcement. Simon Williams, the OFT’s senior director for the case, said: “Our investigation has uncovered significant infringements of competition law on nearly 200 projects across England. “Bidding processes designed to ensure that clients, and in many cases taxpayers, receive the best possible choice and price were distorted, creating a real risk of increased prices. “This decision sends a strong message that anti-competitive and illegal practices, including cover pricing, must cease. “The OFT welcomes initiatives by leaders of the construction industry to reinforce 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 highest penalty was levied on Kier Group, which was ordered to pay £17.9m. Other companies that were heavily penalised included Interserve, which was fined £11.6m; Ballast Nedam (£8.3m); Galliford Try (£8.3m); Bowmer & Kirkland (£7.6m); Carillion (£5.4m); and Balfour Beatty (£5.2m). Galliford Try said it “deeply regrets” any breaches of competition law, adding that the incidents took place before cover pricing was found to be anti-competitive. In a statement it said: “It is more than five years since the last incidence occurred and Galliford Try has in place a comprehensive competition law compliance policy and procedures to ensure that it does not engage in anti-competitive activities, including cover pricing”.