UK councils lose faith in construction suppliers

22 October 2009

23 October 2009

Local authorities are re-examining construction contracts after the Office of Fair Trading (OFT) fined 103 building firms for bid-rigging.

Of 25 senior council construction buyers surveyed by Construction News (CN) and sister publication Local Government Chronicle , 80 per cent said the inquiry "would or might" impact purchasing decisions. More than 10 per cent said the investigation would "strongly affect" decisions.

One manager said their authority had already "ordered the retendering of certain contracts". Most respondents said their purchasing functions had begun investigating the issue, while a number reported new controls were "under discussion" to protect their authorities from bid-rigging in future.

"We revised our invitation to tender documents, making it clear that if we become aware of any anti-competitive behaviour, such as cover-pricing, the firms concerned will be struck off our approved list and we will report them to the OFT, the police, or both," said one.

The OFT levied the fines in September after it found construction firms were engaged in illegal, anti-competitive activity on 199 contracts between 2000 and 2006. This was mostly in the form of cover-pricing, where competing contractors collude to fix their bids, leaving buyers with a false impression of competition (Web news, 22 September).

More than 90 per cent of CN survey respondents said the reputation of the construction industry had been tarnished as a result of the scandal. One manager warned: "Trust in these companies has been lost, and procurement will be more robust in the future." The OFT and the Office of Government Commerce advised public sector buyers to closely monitor bidding processes (News, 8 October), but said they should not "automatically exclude" guilty suppliers from future deals.


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