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Why we put in cover prices

October 2nd, 2009

The OFT has announced who’s being fined what for cover pricing and bid-rigging, but what was it like to be one of the firms involved? Well the finance director of a contractor that was fined told his story, on condition of anonymity

I just can’t see how the way the Office of Fair Trading dealt with this situation was right. Cover pricing has been used by companies all over the country for tens of years. Nobody in the construction industry even knew that it was illegal until 2005. This is when the OFT took the case to lawyers and we all had seminars and meetings with legal advisers who filled us in on the details.

What then happened was that the OFT’s case was backdated to 2000, before many decent building firms – who stopped the practice after those meetings in 2005 – knew the full picture. I know ignorance is no defence here – it certainly isn’t as far as the OFT is concerned – but I don’t think that’s fair. They have now been given carte blanche to penalise people who were not aware they were doing anything wrong.

In our case, we were found to have participated in cover pricing on three contracts out of 300. There would have been three reasons for doing this – if we didn’t have the resources to do the job, if we didn’t have the skills base to do the job or if we were initially lied to and told three or four people were going for the job, only to find out the number was nearer 10. When that happens and you realise you only have a one in 10 chance of winning – you often think, what’s the point? It costs a lot of money and takes up a lot of resources to put in a fully contracted price, so in these instances we would just ring up other people going for the job, ask what their bid was and put a higher price in.

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