Rigged contracts in the construction industry: latest news
RIGGED CONTRACTS IN THE CONSTRUCTION INDUSTRY: LATEST NEWS
Background
The Office of Fair Trading (“OFT”) has fined 103 construction firms a total of £129.5 million for rigging activities in relation to construction contracts.
The firms were found to have colluded by disclosing to each other their intended quotes for tender. Firms then submitted cover bids designed to obscure the project cost, rather than to win the contract. Procurers were therefore misled in relation to costs, leading to their paying an inflated price.
These ‘cover bids’ have affected numerous public projects, such as schools and hospitals.
OFT Recommendations
The OFT investigation suggests that rigging was “a widespread and endemic practice”. However, in their recent information note, the OFT suggests that firms should not automatically be excluded from a tendering process because they have been fined.
It makes the following points:
* the firms have received significant financial penalties;
* it would be wrong to assume automatically that firms not named have also not been involved in bid rigging;
* firms are now expected to be more aware of competition rules and the need for compliance with them;
* firms are therefore more likely to be compliant with the law; and
* firms have taken steps to introduce/reinforce formal programmes, to ensure that all staff are aware of their competition law obligations.
Further Reading
Guidance is offered by the OFT in the following documents:
‘Making competition work for you’
www.ogc.gov.uk/documents/CP0144MakingCompetitionWorkForYou.pdf
‘Guidelines for Fighting Bid Rigging in Public Procurement’
www.oecd.org/dataoecd/27/19/42851044.pdf
Contacts
For further information or advice on any of the above, please contact Stephen Pearson at Freeth Cartwright LLP.
Tel: 0115 985 3206
Email: stephen.pearson@freethcartwright.co.uk
ends - 1 November 2009