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Construction giants accused of 'bid rigging'

More than 100 construction firms were today accused of 'bid-rigging' by competition watchdogs after one of the biggest ever investigations by the Office of Fair Trading (OFT).

Giants Balfour Beatty and Carillion are among 112 firms alleged to have taken part in a cartel to fix prices when bidding for business, as reported by the AJ's sister publication Construction News .

The OFT said more than 40 companies had already admitted price-fixing in the inquiry so far, which first started after an initial complaint in the East Midlands.

Another 37 firms out of the 112 have applied for leniency, according to the OFT.

The inquiry spans 240 alleged cases where firms have colluded to inflate prices during a tender process, covering both the private and public sector, including building contracts for schools, universities and hospitals.

In a minority of more serious cases under investigation, the OFT alleged some firms agreed to make 'compensation payments' to unsuccessful bidders, accompanied by false invoices.

The investigation follows a similar inquiry in the roofing industry by the OFT between 2004 and 2006, covering projects including the Bullring shopping centre in Birmingham.

OFT chief executive John Fingleton said: 'Cartel activity of the type alleged today harms the economy by distorting competition and keeping prices artificially high.

'This investigation, together with the OFT's previous decisions in the roofing sector, will hopefully send out a strong message to the construction industry about the seriousness with which we view suspected anti-competitive behaviour. Businesses have no excuses for not knowing and abiding by the law.'

The OFT said today's investigation was sparked by a complaint from a health authority in the East Midlands, but added it 'quickly became clear from the evidence that the practice of cover pricing was widespread.'

The formal allegations cover neighbouring areas including Yorkshire and Humberside and also elsewhere in England.

It said the firms named in its investigation have 30 days to respond to the allegations.

Balfour Beatty confirmed that it was one of the firms that has applied for leniency from the OFT.

It said in a statement it had reviewed its compliance with the Competition Act in June 2007 and was 'confident that all of its subsidiaries are now fully compliant'.

The group said: 'Balfour Beatty neither promotes nor condones anti-competitive behaviour. The company and its operating businesses have co-operated fully with the OFT in all aspects of its investigation.

'As a result and subject to ongoing co-operation, the OFT has granted leniency to Balfour Beatty, thus reducing any fines which might ultimately be levied on Balfour Beatty or any of its operating businesses.

'The company will respond to the OFT in respect of its statement of objections in due course.'

RIBA president Sunand Prasad said: 'Collusion in tendering in construction has been generally but only anecdotally known about.

'To have evidence now is very significant because it will enable the OFT to do something about a practice that damages probity and competition amongst contractors; a subject around which the OFT has put the professions under great scrutiny for a long time.'

By Lisa Glancy and Richard Waite

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