Stansted Airport Chamber of Commerce

Yesterday (17th April) the OFT named 112 construction companies, alleging they have been involved in bid-rigging activities, including Cover Pricing.

In its Statement of Objection, the OFT describes the practice of Cover Pricing as 'where one or more bidders collude with a competitor during a tender process to obtain a price or prices which are intended to be too high to win the contract. The tendering authority, for example a local council or other customer, is not made aware of the contacts between bidders, leaving it with a false impression of the level of competition and this may result in it paying inflated prices.’

But why did the OFT start investigating the construction industry in the first instance? Back in June 2002, the OFT started an investigation into tendering practices of flat-roofing contractors in the West Midlands. In March 2004, the OFT team completed its investigations and nine roofing contractors from the West Midlands area were fined just over £300,000 for price fixing . In January 2005, the OFT warned it would be widening its investigations into the whole house building and construction sector.

The process of putting in an artificially high bid is not a breach of competition law – but any conversations between bidders which confirmed the bid is sufficiently high not to win is an infringement.

"Companies often engage in anti-competitive activity without knowing it. However, ignorance cuts little ice with the OFT." said Luisa Leone, Competition Law specialist at leading law firm Hewitsons

"The OFT's current investigation should remind companies that much can be gained by conducting an internal audit of their business practices to ensure that they are not engaged in illegal behaviour. Our competition law team are highly experienced in assisting companies to carry out such audits and put in place competition law compliance programmes" she continued.

The investigation looked at building contracts up to 31 December 2006. Most of these contracts are concentrated in the East Midlands, Yorkshire and Humberside areas.

More than 3,000 suspect contracts worth £3bn have been examined, with values ranging from just £30,000 right up to a major £25m design-and-build job and some 57 firms are believed to have been subject to dawn raids.