Thu 17 Apr 2008
OFT names 112 builders in bid scam
Large construction companies Balfour Beatty, Carillion, and Kier, are among 112 building construction firms which are today accused by the Office of Fair Trading (OFT) of conspiring to swindle taxpayers in a “bid-rigging” scandal worth hundreds of millions of pounds.In what was the OFT’s biggest investigation of cartel activity to date, which began in 2004, the firms were today issued with a "statement of objections", with multi-million pound fines expected to follow.
The companies are accused of “cover pricing”, which effectively fixed the prices of tenders on a range of public sector and local authority projects. Companies would literally place a high bid for work that they had no intention of winning, in order to ensure that another supplier’s artificially high bid was successful.
The OFT, which is pursuing 240 alleged offences, said that this form of cover pricing – which has been illegal since 2000 – often led to ten per cent higher quotes than those achieved in a normal competitive situation.
John Fingleton (pictured), the chief executive of the OFT, said: "Cartel activity of the type alleged today harms the economy by distorting competition and keeping prices artificially high. This investigation, together with the OFT's previous decisions in the roofing sector, will hopefully send out a strong message to the construction industry about the seriousness with which we view suspected anti-competitive behaviour. Businesses have no excuses for not knowing and abiding by the law."
The Property Owners Directory (POD) has welcomed the OFT’s ongoing investigation, and says that it highlights just how “widespread cowboy building practices” are in the construction sector.
"What is most worrying from this investigation is that this unscrupulous practice appears to be so systematic throughout the building sector," Andy Stern, POD director, says. "Recent government surveys have shown that 51 per cent of people do not trust tradesmen, and cowboy builders have overtaken used car salesmen as the number one consumer gripe."
However, the Construction Confederation has called on the OFT to ensure a “sensible and proportionate response” to their findings.
Kurt Calder, communications director, Construction Confederation, told Show House online: “The OFT’s findings need to be viewed in context. The 240 alleged infringements are minor, when taking into consideration the fact that we operate in an enormous industry.
“Cover pricing used to be fairly common practice, and although it is now a technical breach of the law, it didn’t used to be this way. It’s apparent that some developers are still stuck in their ways. What’s needed here is education and awareness, not disproportionatly large fines, which we now fear will be the case.”
Around 37 construction companies have so far applied to the OFT for leniency, while other organisations appear to be waiting to see what evidence is unveiled by the regulator.
Kier Group for example, which has a long-term relationship with Newlon Housing Trust, informs showhouse.co.uk that they are currently “digesting the contents of the OFT's statement” but say that it would be “inappropriate” to comment further at this stage. Only last week, the company was appointed as the contractor for a new residential scheme on Repton Street, E14.
Construction companies are now queuing up to help the OFT in their investigation, in the expectation that fines will be reduced for full compliance.
In a statement Balfour Beatty, the largest company named, said: "The company and its operating businesses have co-operated fully with the OFT in all aspects of its investigation. As a result and subject to ongoing co-operation, the OFT has granted leniency to Balfour Beatty, thus reducing any fines which might ultimately be levied on Balfour Beatty or any of its operating businesses.”
Posted by Marc Da-Silva
in Balfour Beatty, Carillion, Construction Confederation, John Fingleton, Kier, Kurt Calder, News, Office of Fair Trading, Property Owners Directory on Thu 17 Apr 2008
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