18-04-2008
Construction price fixing goes to court
On 17 April the OFT launched proceedings against 112 construction companies alleging that they had been involved in bid rigging in breach of Competition Law.
The companies concerned range from multi-billion pound national companies to SME's and in the worst cases a company could receive a fine equivalent to 10% of turnover.
Andrew James, a specialist construction partner at a leading West Midlands and Worcestershire-based law firm, Harrison Clark LLP, is acting for a number of the contractors involved. He commented, “Contrary to some of the publicity, most of the cases do not involve people’ throwing bungs' or colluding to carve up market sectors, but involve the less reprehensible practice of 'cover pricing’. Cover pricing normally involves one tenderer contacting another to find out what price the other tenderer is quoting with a view to bidding too high a price so as not to get the contract.
"This may seem to be a bizarre practice, but it was widespread in the industry and occurred where a contractor wanted to be seen to be willing to do a contract (in the hope of being invited to tender for other contracts in the future) but was too busy or otherwise unable to perform the particular contract, and therefore wanted to 'over bid' so as not to be awarded the contract."
He continued, “Whilst collusive tendering is wrong and I would not condone it, it does not necessarily result in a client paying too much for a project, and the contractor derives no financial benefit from it. Many in the industry did not realise that 'giving a cover' was wrong, and for the few who still do not realise this, this latest action should provide the necessary wake up call.
“There will, however, be some clients who have paid too much because of bid rigging. If the OFT decides that a contractor has been guilty of bid rigging then they will publish the decision and the aggrieved client will have a claim for compensation."