Clients set to blacklist cover-pricing contractors

A number of local authorities are considering blacklisting contractors or taking legal action against them after the Office of Fair Trading announced the level of fines imposed on those guilty of tender malpractice.

The OFT fined 103 firms a total of £129.5m on Tuesday for anti-competitive behaviour, including cover pricing and bid-rigging.

The YORbuild consortium of local authorities in Yorkshire and Humberside has said it has already started including clauses in contracts to allow it to terminate framework deals with suppliers found guilty by the OFT. The consortium procures up to £1.2bn of work annually.

Steve Baker, construction services manager for the East Riding of Yorkshire council, said that following the OFT ruling YORbuild would discuss whether to enforce the clause at its next board meeting. “It is an option,” he said. “We’ll have to decide what action we’ll take.”

The £500m Construction Framework South West (CFSW) said it had also had safeguards written into its tender documents in the event that contractors appointed to the framework were found guilty by the OFT inquiry.

A spokesperson said: “Four of the contractors fined by the OFT are part of our framework, and we have sought clarification [about the nature of the offence] from them under the terms of the agreement.”

We will be seeking compensation where appropriate and will be looking at contractors

Leeds council

Building understands that a number of councils in Wales and the South-west have also blacklisted guilty firms despite OFT advice for the public sector not to do so.

The news comes as several clients said they were considering legal action to claim back money lost as a result of breaches of competition rules.

A spokesperson for Leeds council said it would consider “seeking compensation where appropriate” and would be “looking again at contractors”.

Kathy Hollyer, the chief executive of charity Ashgate Hospice, said legal action was something the charity would “have to” look into. Ashgate was one of 11 cases in which all but one bid was a cover price.

“We need to make further enquiries,” she said. “It’s something the board of directors will have to talk about once we have all the facts.”

Peter Cunningham, chief executive of the Construction Clients Group, said he was “not an advocate of blacklisting”, but added: “From an occasional client’s perspective I can see that if you’ve tried to build a relationship and this happens that you might go down the legal route. It damages the integrity and credibility of the industry.”