Fines Imposed By The OFT On Construction Companies
On 22 September 2009, the Office of Fair Trading (OFT) concluded its investigation under the Competition Act 1998 in relation to collusive tendering within the construction industry by fining some 103 construction companies a total of £129.5 million.
The investigation found that many of the parties fined were involved in submitting what are commonly called “cover bids” (namely tenders which were not intended to win contracts but which helped to ensure that the tenderer was approached for future tenders and in some instances increased the price which the employer was required to pay to the successful tenderer). In a minority of cases, there was evidence of bid-rigging where parties that were unsuccessful in winning a contract received “compensation payments” from the successful bidder ranging between £2,500 and £60,000.
Whilst the OFT investigation has led to real improvements in tendering practice, there has been substantial industry criticism of the OFT’s apparent approach in failing to distinguish between “cover bids” and more serious bid rigging activity as well as the targeting of particular companies in particular areas of the country when the illegal activities were commonplace.
Commenting on the fines, Chris Hoar, a partner and head of Foot Anstey’s construction unit observed that “These fines are a salutary reminder to the UK construction industry that the widespread practice of “cover pricing” is unacceptable and will result in serious penalties for those involved. Whilst it is fair to say that for many construction companies the punitive level of fines imposed will cause real pain in what is an already extremely difficult market, the OFT investigation has had the benefit of encouraging better tendering practice in the industry and generally making procurement more transparent.”
Published 24/09/2009
