Page last updated at 14:58 GMT, Tuesday, 22 September 2009 15:58 UK

Building companies fined 129.5m

Construction cranes
The OFT was originally looking at 1,000 companies

Some of the UK's leading building companies have been handed big fines by the Office of Fair Trading (OFT) for rigging bids for contracts.

The OFT has fined a total of 103 firms £129.5m for colluding with competitors on building contracts.

It said the firms colluded among themselves during the bidding process, leading to customers, such as local authorities, having to pay too much.

The ruling comes at the end of a five-year investigation by the OFT.

Disclosing prices

The fines were largely for the practice known as "cover pricing".

This is where building firms submit quotes for jobs that are not actually priced to win the contract, so the client gets a misleading idea about the real extent of competition.

SEE FULL LIST OF FINDINGS

Most computers will open this document automatically, but you may need Adobe Reader

The process will often involve builders disclosing to one another what price they intend to quote.

Kier Group was fined £17.9m, more than any other building firm.

Interserve was fined £11.6m, while other companies fined more than £5m were Galliford Try, Ballast Nedam, Bowmer & Kirkland, ISG Pierce and Crest Nicholson, John Sisk & Son, Connaught, Carillion JM, Concentra and Durkan Holdings, and Balfour Beatty.

Balfour was fined £5.2m for practices that took place at subsidiary Mansell before its acquisition, the company said.

"In light of the investigation, Balfour Beatty carried out a thorough and detailed audit of all its businesses to ensure that it is fully compliant with all aspects of competition law," it said in a statement.

Carillion, which was fined £5.4m, said its punisihment related to contracts tendered by Mowlem, which it bought in 2006.

"The decision does not involve any other business within the Carillion group," it added.

Meanwhile Galliford Try, fined £8.3m, said it was that it was not found to have made any financial gain, and the eventual price paid by the client had not increased.

Alan Ritchie, general secretary of construction union Ucatt, said: "It is clear that construction companies can't be trusted to run their affairs properly.

"A zero tolerance approach must be taken with the construction industry to ensure that companies follow the law."

'Unfair'

The UK Construction Group, which represents 29 contractors, called the decision to penalise the firms "unfair".

Deborah Jones, OFT: "It's a breach of competition law"

"Everybody knows - including the OFT - that cover pricing was widespread in the industry in the past," said the body's director Stephen Ratcliffe.

"It is perverse and unfair to impose such disproportionate penalties on a small number of contractors selected by geographical sampling."

Adam Aldred, competition partner at law firm Addleshaw Goddard, which represents five of the firms investigated, said the OFT was the first competition authority in Europe to rule against building firms for the practice of cover pricing.

'Price distortions'

In 11 instances investigated by the OFT, the body found that the lowest bidder faced no competition because all other bids were cover bids.

It also found six instances where successful bidders had paid an agreed sum of money to the unsuccessful bidder. These payments were between £2,500 and £60,000 and were made using false invoices.

The infringements affected building projects across England worth in excess of £200m, including schools, universities and hospitals, between 2000 and 2006.

The OFT said that 83 out of the 103 firms had received reductions in their fines because they had already admitted the practice.

"Our investigation has uncovered significant infringements of competition law on nearly 200 projects across England," said Simon Williams at the OFT.

"Bidding processes designed to ensure clients and in many cases taxpayers receive the best possible choice and price were distorted, creating a real risk of increased prices."



Print Sponsor


SEE ALSO
Building firms 'rigged contracts'
17 Apr 08 |  Business

RELATED INTERNET LINKS
The BBC is not responsible for the content of external internet sites


FEATURES, VIEWS, ANALYSIS
Has China's housing bubble burst?
How the world's oldest clove tree defied an empire
Why Royal Ballet principal Sergei Polunin quit

BBC navigation

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.

Americas Africa Europe Middle East South Asia Asia Pacific