By Helen Mooney
23 September 2009
Building firms that have been fined for rigging bids for public sector contracts should apologise to the public and hand back some of their profits, the Local Government Association has said.
LGA chair Margaret Eaton said that there were ‘simply no excuses for collusion or cover pricing, which leaves the public and councils to pick up the tab’.
She added that firms found to have colluded to inflate prices should ‘not only have to apologise to the public but also should consider giving money back to local areas where this activity has taken place’.
After a five year-investigation, the Office of Fair Trading has fined 103 firms £129.5m for colluding with competitors to drive up prices on building contracts. The infringements affected some £200m worth of building projects in England between 2000 and 2006, including schools, universities and hospitals.
The majority of fines were for ‘cover pricing’, where building firms submit quotes for jobs that are not actually priced to win the contract, misleading the client about the real extent of competition.
The process often involves builders disclosing to one another the price they intend to quote. The OFT investigation, whose results were published on September 22, found that in 11 instances the lowest bidder faced no competition because all other bids were cover bids.
It also found six instances where successful bidders had paid an agreed sum of money to the unsuccessful bidder. These payments were between £2,500 and £60,000 and were made using false invoices.
Eaton told Public Finance that it would come as a ‘shock to residents that some construction companies have rigged bids for contracts at taxpayers' expense’.
‘Local authorities strive to ensure that any new building which they pay for is delivered at the best value for the taxpayer, but it appears that some firms have failed to abide by the law.’
Simon Williams, senior director of the investigation at the OFT, said: ‘Our investigation has uncovered significant infringements of competition law on nearly 200 projects across England.’
‘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.’
However, the UK Construction Group, which represents 29 contractors, claimed the decision to penalise the firms was ‘perverse and unfair’.
‘Everybody knows - including the OFT - that cover pricing was widespread in the industry in the past,’ said director Stephen Ratcliffe. ‘It is perverse and unfair to impose such disproportionate penalties on a small number of contractors selected by geographical sampling.’
23 September 2009
Building firms that have been fined for rigging bids for public sector contracts should apologise to the public and hand back some of their profits, the Local Government Association has said.
LGA chair Margaret Eaton said that there were ‘simply no excuses for collusion or cover pricing, which leaves the public and councils to pick up the tab’.
She added that firms found to have colluded to inflate prices should ‘not only have to apologise to the public but also should consider giving money back to local areas where this activity has taken place’.
After a five year-investigation, the Office of Fair Trading has fined 103 firms £129.5m for colluding with competitors to drive up prices on building contracts. The infringements affected some £200m worth of building projects in England between 2000 and 2006, including schools, universities and hospitals.
The majority of fines were for ‘cover pricing’, where building firms submit quotes for jobs that are not actually priced to win the contract, misleading the client about the real extent of competition.
The process often involves builders disclosing to one another the price they intend to quote. The OFT investigation, whose results were published on September 22, found that in 11 instances the lowest bidder faced no competition because all other bids were cover bids.
It also found six instances where successful bidders had paid an agreed sum of money to the unsuccessful bidder. These payments were between £2,500 and £60,000 and were made using false invoices.
Eaton told Public Finance that it would come as a ‘shock to residents that some construction companies have rigged bids for contracts at taxpayers' expense’.
‘Local authorities strive to ensure that any new building which they pay for is delivered at the best value for the taxpayer, but it appears that some firms have failed to abide by the law.’
Simon Williams, senior director of the investigation at the OFT, said: ‘Our investigation has uncovered significant infringements of competition law on nearly 200 projects across England.’
‘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.’
However, the UK Construction Group, which represents 29 contractors, claimed the decision to penalise the firms was ‘perverse and unfair’.
‘Everybody knows - including the OFT - that cover pricing was widespread in the industry in the past,’ said director Stephen Ratcliffe. ‘It is perverse and unfair to impose such disproportionate penalties on a small number of contractors selected by geographical sampling.’
