Bid-rigging: OFT accuses 112 construction companies

The OFT named 112 construction companies in a Statement of Objections (SO) this morning (17 April), alleging they have been involved in bid-rigging activities, including cover pricing. 

Developments since the announcement include: 

• ODA plays down accusations of cover pricing
• How accused companies shares fared
• FMB slams big companies
• Ucatt calls for 'maximum possible penalties' to guilty firms
• Construction Confederation calls for 'sensible' response to accusations

In its SO, 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.’

The Statement also alleges that some of the companies entered into arrangements where it was agreed that the successful tenderer would pay an agreed sum of money to the unsuccessful tenderer (known as a 'compensation payment'). It said this is usually facilitated by false invoices.

The OFT's investigation started with a specific complaint in the East Midlands in 2004, and has grown to approximately 240 alleged infringements cover projects, including tenders for schools, universities and hospitals. It visited the sites of 57 firms.