Contractors wary of bidding amid OFT bid-rigging probe

Clients are finding it increasingly difficult to attract bidders as the Office of Fair Trading's (OFT) investigation into bid rigging continues to unnerve the industry.

The OFT probe has uncovered dishonest tendering on more than 3,000 contracts worth £3bn. Contractors are shying away from tender races as they strive to ensure their bidding procedures are squeaky clean.

Chartered Institute of Building (CIoB) chief executive Chris Blythe said: "We are hearing that clients are finding it harder to find bidders as contractors decide to play everything by the book.

"That is happening now and I'm sure it will become more of a problem over the coming months."

The OFT investigation has centred on "cover pricing", whereby a contractor enters an inflated bid with no intention of winning the work.

The high bids are designed to keep in favour with a client when a firm has no interest in winning the current job but wants to win work in the future.

One contractor said: "Clients, particularly in local authorities, like to see a few names in the frame when a new project comes up. You'd have a chat with another bidder - find out what they were pricing at - and go in far enough over the top to make sure you didn't win.

"Now the OFT has come down hard, those days are over, so it stands to reason that clients will struggle to find bidders.

"There's a lot of heat on at the moment and everyone is doing things exactly by the book."

OFT officials are currently talking with clients in a bid to stamp-out cover pricing.

Deputy director of the Cartels group Deborah Jones said: "We are already talking with clients - warning them about becoming victims and opening their eyes to things they do that encourage this practice."

The OFT will publish its full findings next spring with prosecutions expected in 2009 where fines could run into hundreds of millions.

But penalties under competition law are not the only threat facing firms caught up in the investigation.

Legal experts are warning that companies and directors could face criminal prosecutions, disqualifications and compensation claims in the civil courts.

David Harrison, head of EU & Competition at law firm Berwin Leighton Paisner, said: "Cover bidding is an offence under the Enterprise Act, carrying a maximum sentence of five years in jail. "Directors can also be disqualified for up to 15 years if found guilty of this and clients who think they have lost out financially may also bring civil claims for compensation."

Collaborators

Firms that have admitted to co-operating with the OFT:

• Balfour Beatty
• Connaught
• Rok
• Galliford Try
• Interserve