103 construction firms have been fined for bid-rigging by the Office of Fair Trading.

A total of 103 construction firms have been fined for bid-rigging by the Office of Fair Trading (OFT), which found evidence of industry-wide cover pricing.

The OFT has imposed fines totalling £129.5 million on the charged firms in England which it has found had colluded with competitors on building contracts.

Following its Statement of Objections in April 2008 after one of its largest Competition Act investigations, the body concluded that the firms engaged in illegal anti-competitive bid-rigging activities on 199 tenders from 2000 to 2006, mostly in the form of ‘cover pricing’.

This term describes a situation whereby a bid is made at an unrealistically high level with no intention of winning the contract, giving a misleading impression to clients as to the real extent of competition. This distorts the tender process and makes it less likely that other potentially cheaper firms are invited to tender.

In fact, in 11 cases investigated by the OFT, cover pricing meant that the lowest bidder in the contract tender faced no genuine competition; furthermore, in six instances, the winning bidder raised false invoices to make payments of up to £60,000 to bidders that were not chosen to carry out the work.

Simon Williams, the OFT’s Senior Director for this case, said: “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. This decision sends a strong message that anti-competitive and illegal practices, including cover pricing, must cease.”

The infringements affected building projects across England worth in excess of £200 million including schools, universities hospitals, and numerous private projects from the construction of apartment blocks to housing refurbishments.

Businesses found to have contravened the Competition Act 1998 and Article 81 of the EC Treaty can be fined up to 10% of their worldwide turnover. In this case, the parties have on average been fined £1.26m, representing on average 1.14% of their annual worldwide turnover, yet have been granted three years to pay the fines rather than the usual two months.

Eighty-six out of the 103 firms received reductions in their penalties because they admitted their involvement in cover pricing prior to today’s decision.

The OFT has also informed nine companies originally listed in its Statement of Objections that it will not pursue allegations of bid-rigging against them as it considers it has insufficient evidence to proceed to an infringement finding.

For more information and a table of the fined construction firms, click here.