Collusion confusion.

Colluding contractors caught

Published:  23 September, 2009

LONDON: The Office of Fair Trading (OFT) has imposed fines totalling £129.5m on 103 construction companies in England which it has found had colluded with competitors on building contracts.

The decision follows an OFT Statement of Objections in April 2008 after one of its largest Competition Act investigations. The OFT has concluded that the firms engaged in illegal anti-competitive bid-rigging activities on 199 tenders from 2000 to 2006, mostly in the form of 'cover pricing'.

Cover pricing is where one or more bidders in a tender process obtains an artificially high price from a competitor. Such cover bids are priced so as not to win the contract but are submitted as genuine bids, which gives a misleading impression to clients as to the real extent of competition. This distorts the tender process and makes it less likely that other potentially cheaper firms are invited to tender.

In 11 tendering rounds, the lowest bidder faced no genuine competition because all other bids were cover bids, leading to an even greater risk that the client may have unknowingly paid a higher price. The OFT also found six instances where successful bidders had paid an agreed sum of money to the unsuccessful bidder (known as a 'compensation payment').

These payments of between £2500 and £60 000 were facilitated by the raising of false invoices. The infringements affected building projects across England worth in excess of £200m, including schools, universities hospitals, and numerous private projects from the construction of apartment blocks to housing refurbishments.

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