Counting the cost of the bid-rigging scandal

Four years of investigation, £3bn of tenders probed and, potentially, up to 112 companies found guilty of collusion. The Office of Fair Trading's initial findings from its inquiry into bid rigging, which read like a who's who of the construction industry, have sparked images of a corrupt sector that is ripping the heart out of the taxpayer and now faces the draconian punishment it deserves. But just how bad are these allegations for the firms involved, and for the industry's reputation?

Ironically, it may well be the sheer scale of the findings that protects the industry, at least in the short term. With over 100 firms implicated, it is surely implausible for public-sector clients to ban these companies from their tender lists - unless they want to push ahead with much-needed health, education and infrastructure renewal programmes using the builder next door, who, the OFT has admitted, may well be just as guilty as those companies it has named (but it has lacked the resources to investigate further). In any case, is it really going to provide the taxpayer with value to eliminate some of the largest, most successful and progressive companies in the industry, like Balfour Beatty, Willmott Dixon and Kier, from future work?

Had it been only five or six firms that were named, the situation could be very different. Clients can and will boycott a firm - they can hardly boycott a sector. In addition, judging by share price movements in the hours after the OFT announcement broke, the stock market seems largely unconcerned by the prospect of fines for the sector's quoted companies, which should mean that any financial impact is limited to a one-off fine. Some of these may be steep, and small firms in particular could be hit hard. But for most this is infinitely preferable to the cost of lost work and a continuing question mark over market valuation, which could damage a business for years to come.

The handful of firms in the OFT's inquiry which allegedly received financial gain from collusion should, if guilty, face severe punishment from the OFT. And if this investigation serves to force any companies that still practise such behaviour to clean up their act, few would argue with that. But if the wider sector avoids being dragged down in heavy punishments for a practice that is confined to an increasingly marginal amount of contracts, then it is unlikely to cause the taxpayer too much distress. Especially if it means they'll have new schools, leisure facilities and hospitals to distract them.