UK Construction firms fined £129.5 million for illegal anti-competitive bid-rigging activities

The Office of Fair Trading (OFT) has fined 103 companies including many of the UK’s largest construction companies such as Kier, Interserve, Try Accord, Carillion and Balfour Beatty for colluding with competitors to rig the pricing of contracts worth more than £200 million.

Kier was fined £17.9m, more than any other building company. Interserve was fined £11.6m, Try Accord £8.3m, Ballast £8.3m, Bowmer & Kirkland £7.6m, Carillion £5.4m and Balfour Beatty £5.2m.

The most shocking aspect is that these are considered to be respectable companies and not the archetypal cowboy builders that we expect to rip us off. And it is us, the taxpayers, that were being ripped off, as many of these construction contracts were for public sector projects, such as school extensions, refurbishment of council housing, new medical centres, etc.

The investigation focused on the practice known as cover pricing, where one or more of the firms invited to bid submits an inflated price, making a supposed competitors bid look more attractive. This gives the client a misleading idea about the real extent of any competition. Indeed in some cases the winning bidder made payments of up to £60,000 to the others that had submitted high bids.

Predicatably some of the trade bodies such as the UK Contractors Group (UKCG) and the National Federation of Builders have called the fines unfair and that they will cost jobs. Is that really the case though, these companies have broken the law and the fines only account for 1% of their turnover. The Public Contracts Regulations allow for companies guilty of such offences to be barred from participating in any future public contracts, so they seem to have got off rather lightly.

It seems Lord Mandelson has personally intervened to ensure that these firms are not blacklisted by the public sector and unusually the OFT issued a guidance note to public procurement staff at the same time that the outcome of the investigation was announced.

Not every commentator has been so sympathetic, even those who are concerned about jobs in the construction sector. Alan Ritchie General Secretary of construction union UCATT, said: “It is clear that construction companies can’t be trusted to run their affairs properly ….. The cover pricing scandal demonstrates why the construction industry cannot be trusted to police itself.”

Health board urged by police to pull out of contract with taxi firm

Strathclyde Police have asked Greater Glasgow Health Board to pull out of a patient transport contract as the firm has links to serious organised crime. The Glasgow Herald reports that the taxi firm, Network Private Hire, was raided in 2004 as part of the Operation Maple money-laundering probe.

The Scottish National Party MSP, Stewart Maxwell, has said that he will introduce an amendment to the Criminal Justice Bill to close the loophole which allows firms with links to organised crime to benefit from public contracts. In fact, the legislation which governs public procurement in Scotland (Public Contracts (Scotland) Regulations 2006), already includes provisions for treating a company as ineligible to tender if their directors have been convicted of certain offences, including money laundering.  

The problem in this situation seems to be that because the case is still running, the directors of Network Private Hire haven’t been convicted. On the basis that someone is innocent until proven guilty, it clearly presents a problem to barr them from participation in a public contract as they may be acquitted. Yet the firm apparently has links to the notorious McGovern family and Strathclyde Police are obviously convinced that they are guilty, otherwise they wouldn’t have written to the health board.

The Herald also reports that the Health Board tender did not include a requirement for the taxi’s to be licensed or stranger still that they didn’t require that they should be wheelchair accessible.  

To Bid or Not to Bid

Selecting the right contracts to go for is critical to the growth of your business. So often we waste a huge amount of time responding to tenders we are destined never to win. It can be due to a lack of resources, limited experience or it simply just doesn’t fit with your core business.

Here’s a quick and effective checklist for deciding whether you should go for a contract or not.

Step 1
Rank your response from 1 to 5, with 1 as the most negative and 5 as the most positive answer. If the total score is below 20, you should seriously consider whether it is worth proceeding to Step 2.

1. Were we aware of the opportunity before it was advertised?
2. Do we know the decision-maker(s)?
3. Do we have a significant technical or other competitive advantage?
4. Have we done an effective job of pre-selling for this project?
5. Do we have a champion in-house who is motivated to win?
6. Have we allowed enough time for preparing the proposal?

Step 2
Answer yes or no to the following Qualitative Factors:

1. Will our price be competitive?
2. Does the opportunity match our target market area and services?
3. Does the project present us with an unusual opportunity to break into a new market?
4. Will the submittal effort be proportional with the expected fee?
5. Is the project consistent with our minimum/maximum project size objectives?
6. Can we make a profit doing this project?
7. If we cannot make a profit, are there any prevailing reasons to want the project?
8. Do we have qualified staff available to perform the work?
9. Do we have the staff and time available to prepare a quality proposal?
10. Do we have the track record/experience for the project?

If you have answered ‘no’ to more than two of these questions, you should seriously consider whether this is the right contract for you.

Welcome

Welcome to the Tenders Direct blog.

We finally decided to embrace the social media phenomenon and have our own blog to provide you with information on developments in the world of public procurement but also to discuss directly with you and get your feedback and your thoughts about what is going on in this arena.

We will try to keep this blog updated as things happen and will also try to give our analysis and comment on any new developments.

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