Tuesday, 29 September 2009

Berkshire Builders Fined For Cover-Pricing

After a major investigation the Office of Fair Trading has levied record fines against some of the country's biggest builders for price fixing - including for contracts undertaken in Berkshire.

The 'cover pricing' scam involved collusion between bidders in competitive bid processes to artificially inflate and distort contract values payable by customers, sometimes including local authorities.

In many cases this also included 'backhand' payments between bidders as part of prearrangements to guarantee 'preferred bidder' status.

A total of £129.5m punishments were handed out to companies for illegal practices between 2000 and 2006.

Projects in Berkshire found to have been illegally tendered include:-

Mount Pleasant in Bracknell,
10/12 Bowden Hill in Sunninghill,
12, 14 & 16 Redlands Road in Reading,
a classroom extension at Hillside Primary School in Reading and
Herschel Grammar School in Slough.

According to Building Magazine the fines have also opened the door to councils undertaking further criminal proceedings out against the guilty parties which may lead to the disqualification of directors. The OFT said they would take no further action themselves, but encouraged civil suits and blacklisting as further measures against companies where it is appropriate to do so.

Both Wokingham Borough Council and Reading University responded to the news by reassuring the public with the explanation that their tender processes are transparent and comply with competition law, but they would take a second look at companies found guilty of malpractice.

Bracknell Blog has been on the case, previously expressed concern about the high cost of works. They also note that Apollo has denied the charges and will be appealing against their fine.

Meanwhile Alyson Pollock at Comment is Free argues that this scandal highlights another failure in the Government's Private Finance Initiative (PFI) which it uses to drive capital investment schemes, and lies behind a recent report by the National Audit Office called Improving the Competitive Tender Process.

Building industry spokespeople said companies were now in compliance with updated regulations, but the fines would almost certainly cost jobs because the extra profits had likely already been absorbed.

However, the OFT stated the problem is 'endemic' within the industry and will remain so while the behaviour continues to be incentivised.

Oranjepan says:
After a 5-year investigation it is a scandal that the regulator finds itself hindered by a lack of resources and a changable economic climate, to add to the futile pursuit of enforcing bad regulations which create the problems in the first place.
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