Industry calls on councils not to drop 'bid rig' firms

The Construction Confederation has written to every local authority in the UK in a bid to ensure companies named in the Office of Fair Trading bid rigging inquiry are not unfairly removed from tender lists.

Confederation chief executive Stephen Ratcliffe claims that some of the OFT statements on the inquiry have led to confusion in public sector clients over the level of anti-competitive behaviour in the industry, and its impact on pricing.

Ratcliffe said: “The OFT's public statement that contract prices were typically artificially inflated by 10% is quite simply unproven and unsustainable – the OFT has no such evidence and their statement is pure supposition based on a generic study carried out with reference to 'hard core' pricing-fixing cartels, which Cover Pricing clearly is not.

Ratcliffe called for a measured response and consideration from local authorities, saying: “It should be noted that last week was the first time that companies had seen the evidence against them and they will now be given a proper opportunity to defend their position. Just because a company has been named in the press release does not mean that they will eventually be found to be in breach of competition law.

He added: “Many companies are concerned that they might be removed from public sector tender lists. However, the OFT has already gone on record to say that it is not their intention this should happen and has issued a guidance note for public sector clients. Indeed, it would be likely to contravene the EU public procurement rules to discriminate against companies who have been named by the OFT in the recent press release.”

In his letter to the authorities, Ratcliffe stresses that the bulk of the alleged infringements listed in the SO are examples of cover pricing, where busy companies who did not want to win the work submitted an artificially high bid. Ratcliffe argues that although this may have breached competition law, the eventual price paid by the winning contractor is unlikely to have been affected.

The OFT claimed to have found evidence of more serious allegations and cartel activity amongst the construction companies, alleging that some firms involved in cover pricing had received compensatory payments from the winning bidder. However, the Construction Confederation has challenged the OFT over its failure to explain that of the 240 contracts investigated by the OFT, less than 5% involved such practices. It is understood no more than 9 companies are subject to these more serious allegations.