01 September 2008 | Jake Kanter
Public sector buyers are considering legal action against construction firms caught up in the Office of Fair Trading's bid-rigging investigation.
Rob Murray, managing partner at law firm Cohen, Milstein, Hausfeld and Toll, said a number of public sector bodies are looking "very seriously" at bringing cases against suppliers.
"People think they have been ripped off. If you have a local authority and they have paid too much for a school, you're talking about public money. It is their duty to get it back," he said.
Antony Faughnan, partner at EC Harris and chairman of the CIPS construction group, said buyers wanting to take action against suppliers are likely to be attracted to deals offering a "no win, no fee" arrangement, with insurance covering legal costs.
"When you hear no-win, no-fee lawyers are in town, the temptation is to view them negatively - perhaps seeing them as acting opportunistically," he said. "But their anti-trust experience and knowledge of anti-competitive practices is going to be in demand. With zero investment upfront, many clients may take up their offer to pursue a claim."
But Peter Smith, managing director of FirstAssist Legal Protection, told SM although buyers have a "strong" chance of winning if they can prove they have suffered a loss, cases must be assessed carefully. "Some of these firms will be clients and procurement won't want to put their suppliers out of business."
He suggested buyers introduce more litigation into contracts by asking more questions and ensuring suppliers sign off on not getting involved in anti-competitive behaviour. These measures are important as if a vendor is later found guilty of anti-competitive behaviour, the financial penalty would be much higher.
Both Murray and Smith believe more price fixing will be exposed in the future through suppliers blowing the whistle. Faughnan said buyers should be alive to anti-competitive behaviour by benchmarking costs and ensuring tendering processes are transparent.