Cover pricing 'as common now as it was two years ago'

Contractors believe tender malpractice is as rife as it was two years ago despite the £130m of fines imposed by the Office of Fair Trading last September, a report has revealed.

According to a survey of more than 400 firms carried out by Europe Economics for the OFT 13% of respondents thought cover pricing was either “common” or “appears in most bids”, the same proportion as in 2008. About one third of contractors believe they have been disadvantaged by collusion among competitors.

The survey also found that most firms believed that more serious breaches, such as non-compete agreements and price fixing, sometimes occurred.

Many industry figures have dismissed the findings. The National Federation of Builders, said: “We don’t believe it’s going on to the extent it was in 2008. We’re not clear why the perception has stayed the same.”

A spokesperson for Willmott Dixon said: “The industry has moved on and companies know where they stand now.”

About a third of firms believe they have been disadvantaged by bid rigging

Europe Economics report

Despite the finding, the OFT also found that two-thirds of contractors had created mechanisms to detect anti-competitive practices.

The UK Contractor’s Group said the findings showed the industry was moving away from anti-competitive behaviour. “We are pleased that the OFT has acknowledged the high levels of awareness of competition law in the construction sector and the actions taken by contractors to avoid anti-competitive behaviour,” it said.

The report found that 86% of contractors knew that cover pricing was a finable offence, up 4% from two years ago, and 72% said they had heard about the investigation and the fines. In 2008, fewer than one in three firms knew about the inquiry.

The survey also found that clients had become less likely to blacklist guilty contractors: the percentage of procurers who said they would refuse their bids fell from 76% in 2008 to 48% in 2010; 83% had not blacklisted a guilty contractor in the past two years.

Alan Davis, a partner in solicitor Pinsent Masons, said he expected this was in response to the OFT’s guidance, issued in September, that advised against blacklisting. “It was because companies had been punished enough,” he said.

Leeds council, which was named by the OFT as a victim of malpractice, said no action had been taken because the OFT had not proved anti-competitive behaviour had occurred. “The OFT never gave us clear evidence. The tender that had supposedly been colluded over wasn’t even awarded,” a spokesperson said.

In September last year, the OFT fined 103 contractors a total of £130m after a five year inquiry. Kier suffered the largest fine of £17.9m. Other firms punished were Interserve, which was fined £11.6m, Balfour Beatty (£5.2m) and Galliford Try (£8.3m).