OFT: councils can sue guilty contractors

The director of the Office of Fair Trading’s investigation in tender malpractice in construction has given the green light to councils considering suing contractors over potential losses from tenders that were subject to cover pricing.

Simon Williams (pictured) said the OFT was not advising public sector clients to blacklist builders or take other civil action, but that it was “understandable” if they did take that route.

In addition, he said the OFT would consider prosecuting or seeking to disqualify the directors of companies who engage in cover pricing in the future.

The OFT issued guidance alongside this week’s ruling saying that clients should not blacklist contractors that had been fined because they were most likely to have cleaned up their act, and that it could not guarantee that other builders were not guilty as well.

Williams said: “We can’t force clients to behave in a certain way; what we’ve issued is purely intended for guidance. I can understand procurers will want to examine very carefully any contract where cover pricing has taken place, and consider what further action they might want to take, including civil suits or blacklisting.”

He added: “It’s a matter for individual procurers to decide what action they want to take.”

Williams said the OFT had no plans to prosecute guilty firms or to disqualify directors, both of which it has the power to do, but it may take legal action if new cases of cover pricing emerged.

He said: “If people were shown to have been aware of everything that has occurred and continued cover pricing anyway, that would be a very serious matter and attract more significant fines. We would not hesitate to investigate, using our criminal powers.”

Williams rejected allegations by some contractors that the fines have been excessive, and unfairly targeted at those working in particular geographical areas.

He said: “These are serious breaches of competition law, including 11 instances where there was only one serious bidder in a particular competition.

“Any investigation has to start with a particular lead, as ours has done. If you criticise that then effectively you’re saying we should investigate everybody or nobody. We have followed logical criteria.”