Scandal hits UK construction firms

Some British construction firms including building giant Balfour Beatty have been fined for ripping off taxpayers in a price-fixing scandal. The 103 companies rigged the bids on projects such as hospitals, schools and universities, an investigation by the Office of Fair Trading (OFT) has found. The firms were accused of ‘cover pricing’, a scam in which bidders offer inflated prices for work. Fooling local councils into believing projects cost more than they did also increased the risk of firms lining their pockets with the excess taxpayers’ cash, the findings suggest. The investigation, one of the biggest undertaken by the OFT, found six cases where bidders conspired to ensure the firm with the winning tender paid ‘compensation payments’ to the losing bidders. Simon Williams of the OFT said: ‘Bidding processes designed to ensure clients and in many cases taxpayers receive the best possible choice and price were distorted, creating a real risk of increased prices. ‘This decision sends a strong message that anti-competitive and illegal practices, including cover pricing, must cease.’ The UK Contractor’s Group hit back at the fines, saying they would be hard for building firms to absorb and will cost jobs. UKCG director Stephen Ratcliffe said: ‘These fines could not have come at a worse time for the industry and are unfair. ‘The industry is going through its sharpest downturn on record with huge falls in demand, employment and profits and on current trends is expected to contract 20% by the end of 2011.’ The firm fined the most is Kier, which was ordered to pay GBP18 million. Closely following it is the Midlands’ Interserve Project Services on GBP12 million and the stock-exchange listed housebuilder Galliford Try on GBP8 million. Balfour Beatty was also fined GBP5 million. The OFT found the companies to be in breach of the Competition Act. The investigation began after the OFT received complaints about the deal to build the Queens Medical Centre in Nottingham. It then spread throughout the East Midlands, Yorkshire and Humberside taking in thousands of projects. The number of firms involved allegedly accounted for 6 per cent of the country’s construction industry. Balfour Beatty was involved in plea-bargaining deal with the OFT to reduce a fine. The company said it performed an internal review last year and is now confident it is fully compliant with the Competition Act. The OFT investigated 112 firms. Of these 37 firms, including Balfour Beatty, applied for leniency while 40 unnamed companies admitted participation in bid-rigging actvities. Although a few of the companies involved are multinationals, many are small firms.

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