OFT press reaction: 'Cowboys, crooks and cover-pricing'

Taxpayers hit by corporate cowboy sting

The cowboy builder has become something of a British archetype, providing a steady stream of easy fodder for television consumer shows when they're short of ideas. And when the crooks are exposed, they give the bigger boys the chance to suck air into their teeth and counsel people only to use proper accredited companies that might not be cheap, but do things properly.

Well, yes, because as was made clear yesterday, when many of those proper accredited companies do the dirty on their clients, they prefer to do it in a "respectable", white-collar way. You won't find the Kiers, the Interserves, the Carillions and the Balfour Beatty's of this world spreading tarmac on driveways that melts on a sunny day or throwing up conservatories that collapse at the merest hint of a breeze. They're proper blue-chip companies that only deal with big-ticket projects.

It's just that, as the Office of Fair Trading showed, they still rip their clients off, not so much by cutting corners and using shoddy materials (although that's not unknown). No, its about getting together in smoke-filled rooms (the OFT's probe dates from before the ban) to ensure that competitive tendering processes are anything but. They are staged so that the winning bidder usually faces no competition because the other bids are from companies that don't have any interest in the work.

The Independent, James Moore

Cover price fines are a bargain for builders

Forget the bankers, it should be the building industry lobbyists who get bumper bonuses this year. The £130 million of fines for bid-rigging imposed on 103 construction companies by the Office of Fair Trading may look swingeing. But they could have been a great deal higher. The industry appears to have persuaded the watchdog that, given the parlous state of many construction companies' finances, much bigger fines could have pushed some over the edge. The last thing the OFT wants is tabloid headlines accusing overzealous bureaucrats of putting brickies out of work.

But the scale of the offences is breathtaking. The OFT has focused only on those cases where the evidence was strongest and all the signs are that bid-rigging was endemic across the industry. Even more extraordinary, some executives say it is still around, though not at the companies that have been targeted by the OFT.

The Times

Big builders cut down to size by fines for collusion

Building industry "bent" shock - hold the front page! "Repairing the attic partition wall? Phew, guv ... think you're looking at a few grand. We're gonna have to take the roof off. Canvas job."

The near-GBP 130 million of fines handed out by the Office of Fair Trading to some of the construction industry's finest for colluding on bidding work will have uncomfortable echoes for many people who have had building work done at home, or been "quoted" for such (with much sucking of teeth and shaking of head)

The systemic nature of the price collusion on projects discovered by the OFT is shocking and abhorrent and it will not dispel the "cowboy" image that has attached itself to the building industry like dry rot down the years.

What makes it worse is that many of those fined by the regulator were not fly-by-nights but respected names.

The Scotsman

HAMMERED: Price-fix builders hit by £129m fine

More than 100 construction companies — including one of the Queen's maintenance firms — have been fined a record £129.5million for price-fixing.

The Office of Fair Trading yesterday slammed some of the UK's biggest builders for colluding to push up prices on 200 contracts.

Following a tip-off, the OFT found the firms were routinely teaming up in local cartels to rig council and private sector tenders from 2000 to 2006.

The Sun

Uncovering the true costs of PFI

Perhaps the most significant thing about the report is that it shows the extent to which companies are capable of forming cartels at public expense. The OFT's concern that cover pricing limits competition and leads to overcharging is also interesting since all PFI schemes are awarded after long periods of exclusive negotiations in which all competitive tension is removed.

[…] It is time to have a proper investigation into the PFI bidding and procurement practice; cover pricing, an absence of bidders and cost escalation at the preferred bidder stage are all hallmarks of an uncompetitive market and cartel activity – and all conceal the true costs of PFI to the government and the taxpayer.

Allyson Pollock, The Guardian

British builders fined for collusion

LONDON -- Britain's competition watchdog, the Office of Fair Trading, said it imposed fines totaling £129.5 million ($210 million) against 103 construction companies it found had colluded with rivals on building contracts.

The OFT probe started with a complaint in the East Midlands in 2004, but expanded nationally as it became clear how widespread cover pricing was. The agency said it found illegally rigged bids on 199 tenders between 2000 and 2006 on projects including schools, university hospitals and private projects valued at more than £200 million.

In Britain, price-fixing fines can be as high as 10% of a company's world-wide revenue. In this case, the companies were fined an average of £1.26 million, representing roughly 1.1% of their annual revenue.

The Wall Street Journal

Builders slide as watchdog bares its teeth

CONSTRUCTION shares were hammered after the Office of Fair Trading dished out fines of almost £130m to 103 building and engineering companies for rigging bids on contracts worth more than £200m.

Kier (down 32p at 1,262p) was worst hit with a £17.9m penalty, following the watchdog's five-year probe into the practice of colluding with rivals to keep contract prices artificially high.

This is known as cover pricing - when bidders that have no intention of winning a contract submit a high price, ensuring the one company that enters a genuine estimate wins the deal.

Other stock market listed companies that were clobbered include Interserve, which fell 4.7p to 245.8p, Galliford Try (down 1/2p

at 611/2p), Connaught (4.7p weaker at 415.4p), Carillion (down 6.1p at 282p) and Balfour Beatty, which edged 2.2p lower to 337.7p. Galliford is considering an appeal.

Daily Mail