A five-year Office of Fair Trading (OFT) investigation into “bid rigging” for construction contracts has seen the OFT impose fines totalling £129.3 million on 103 firms in England.
Following one of its largest Competition Act investigations to date, the OFT said that all the firms, which included such big names as Balfour Beatty Construction, Ballast Nedam, Concentra, Durkan, Haymills, Henry Boot Construction UK, Interserve Project Services, John Sisk & Son, Kier Group, Pearce Construction (Midlands), Try Accord, and Galliford Try, had “engaged in illegal anti-competitive bid rigging activities”, on 199 tenders dating from 2000 to 2006, mostly in the form of “cover pricing”, where one or more bidders in a tender process obtains an artificially high price from a competitor. The cover bids are priced “so as not to win the contract but as genuine bids, which gives a misleading impression to clients as to the real extent of competition”. This, the OFT maintains, “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. The OFT also found six instances where successful bidders had paid agreed “compensation payments” to unsuccessful bidders, apparently facilitated by the raising of false invoices. Eighty-six of the firms fined received reduced penalties by admitting involvement in cover pricing. On the day of the announcement the OFT and the Office of Government Commerce cautioned procurers against excluding the infringing firms from future tenders, since they believed cover pricing was now “widespread in the construction industry” and those companies that had already faced investigation “could now be expected to be particularly aware of the competition rules”. Healthcare construction projects where cover pricing and or “compensation payments” had been made included:
• “Trust-wide fire improvements” at various Leicestershire and Rutland Healthcare NHS Trust sites (in December 2001), by Bodill to T Denman, with the winning tender £307,000.
• A renal dialysis unit at City Hospital, Birmingham (in December 2001), by Wygar to Thomas Vale – winning tender: £437,000.
• The refurbishment of two psychiatric wards at Addenbrooke’s Hospital, Cambridge (in April 2002), by Haymills to Jackson – winning tender: £849,000.
• The construction of a new critical care development at the Queen Elizabeth Hospital, Kings Lynn (September 2002), by Haymills to Jackson – winning tender: £2,469,000.
• An 18-bed ward extension, at the Beynon Centre, New Cross Hospital, Wolverhampton (December 2003), by Shaylor to Thomas Vale – winning tender: £603,000.
