The Office of Fair Trading has begun using secret service-style techniques to spy on contractors suspected of cartel activity.

Sean McNabb, principal investigations officer at the OFT's cartel division, told Building that powers to tap phones and track suspect vehicles had been used in investigations.

He said: "The use of those powers has been relatively modest. We'd only use them where it was necessary and proportionate, and they'd be strictly controlled."

Rights granted in June 2003 allow the OFT to use such intrusive powers, which also include breaking into suspected industry executives' homes and hotel rooms.

McNabb added that the OFT was also recruiting informants at suspected companies to help ensure convictions.

He said that anyone who wished to blow the whistle on cartel activity would be given absolute protection. He said: "We would never release information of the informant involved, or even the fact of their existence."

The OFT is also considering whether to pay informants.

The National Federation of Builders welcomed the OFT's efforts, but warned: "The OFT must differentiate between the hardcore cartels and those companies that are involved in ‘cover pricing' [in which firms submit false tenders in order to stay on framework lists]. We don't condone cover pricing but clients sometimes request it."

Graham Watts, chief executive of the Construction Industry Council, said: "I hope that whistleblowing doesn't become a method to settle grudges."