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Tees price-fixing ‘rife’
PRICE-FIXING and preferred bidding in the construction industry, which has been slammed by the Office of Fair Trading, is rife in Teesside’s booming building sector, according to local contractors.
They claim the illegal practices are squeezing smaller firms out of the tendering process and forcing them to squander valuable resources in submitting bids that have no chance of being accepted.
Last week the Office of Fair Trading (OFT) accused 112 construction companies of rigging bids for contracts. The campaign follows similar pursuit by the OFT of some supermarkets and processors for alleged price fixing in the dairy sector. Today it announced it was investigating illegal price sharing between tobacco companies and retailers, includingh Tesco and Sainsburys.
Alex Adamson, contracts manager for Middlesbrough-based CT Contractors, said the bidding process in the construction industry was frequently tainted by collusion and rigging. He said: “Sometimes the client has chosen the nominated contractor before the tender process has been completed. We have fallen out with clients over the issue and even struck some off our database.
“A lot goes on behind closed doors. Bigger companies have large overheads and have to go to another level to get new contracts. It’s frustrating because we act in good faith.”
Chris Howitt, owner of CMH Joinery in Darlington, claimed rigging was rife and there was more chance of securing the work “if you know someone in the bidding process”.
Angelo Basu, an associate in the commercial department of law firm Ward Hadaway – which is acting on behalf of some companies in the OFT investigations – said: “It would be complacent for the Tees Valley to say ‘this issue doesn’t affect us’.”
Interserve Project Services - which last year was the contractor on a £12m project to build an interchange at Long Newton - is one of the companies under investigation.
Giles Scott, head of corporate communications at parent company Interserve plc, denied the firm was being accused of price fixing. He said: “The OFT had originally identified 16 possible bids which might affect us but this has been reduced to a very small number relating to one small part of our business.”
Frank Haslam Milan North-east, another local firm named by the OFT, is being investigated along with parent company Keepmoat, which admitted that the company had been involved in cover pricing, but not to influence the outcome of tenders “or receive any financial gain”. It said it took part in cover pricing “out of convenience or lack of resources to ensure they remain on procurement rosters”.
‘Rigging’ occurs when a group of contractors - or one or more contractors and the tenderer - collude with each other to deliberately inflate or deflate prices during the bidding process, or decide on the preferred contractor before the process has been completed.
In light of the investigations, the Forum of Private Business (FPB) has called for the process of bidding for public contracts to be made more accessible to small businesses. It is urging the government to intervene if it is to achieve its target of awarding 30% of all public contracts to small firms.
Research carried out by the FPB showed that 49% of business owners had been put off bidding for public contracts, with 28% of those blaming the complexity involved as the main reason.
