Editorial: Corrupt to the core

contractjournal.com Newsletter: 04.08.05

Editorial: Corrupt to the core

When is an agreement illegal? When it's a cartel, writes Contract Jounal news editor Justin Stanton.

Corruption: it's a dirty word for a dirty business. The Office of Fair Trading's (OFT) continuing sweep of construction cartels and bid rigging must be ringing alarm bells in offices throughout the country.

So far the OFT has concentrated on localised cartels, usually where there is a particular demand for a service in a defined region - flat roofing in western-central Scotland for instance.

In this case, six firms were fined £138,000. The OFT noted that the parties "collusion in setting tender prices was intended to restrict or distort competition and meant that buyers were unable to obtain competitive prices".

While in no way condoning their operation, one might speculate why firms form cartels in the first place: is it pure greed or simply a matter of economic survival?

In this cutthroat, low-margin industry, how far would you go to protect your business? If joining a cartel meant you could maintain a constant flow of work, ironing out the peaks and the ever-increasing troughs, would you do it?

This survival instinct is of course driven by clients procuring on a 'cheapest bid wins' basis. It’s all very well the OFT threatening fines and custodial sentences for firms caught operating cartels, but the only way cartels will be erased from the industry will be if all clients are better-educated and make more informed and sustainable procurement decisions.

Until that day those operating in cartels must live in fear of the OFT's dawn raids.