UK construction groups accused of ‘bid rigging’ in £150mn contracts
Several cartels involving ten construction suppliers conspired to rig bids for contracts worth £150mn and cheat clients including Selfridges and Oxford university, the UK competition regulator has found.
On Friday, the Competition and Markets Authority said it had provisionally found that the businesses colluded over contract tenders for demolition and asbestos removal projects.
The three-year investigation is part of a wider crackdown into anti-competitive behaviour in the construction industry by the CMA, which has resulted in millions of pounds in fines and 11 directors being disqualified.
The CMA has the power to fine companies of up to 10 per cent of turnover for breaches of the Competition Act. It can also pursue criminal cases for cartel offences and take individuals to court, resulting in potential prison sentences for those convicted.
The update on Friday related to a civil probe. According to the watchdog, eight of the construction groups, including Brown and Mason Group, Cantillon and Keltbray admitted to being involved in at least one instance of “bid rigging”.
Erith and Squibb, two of UK’s largest privately owned construction groups, have not admitted their involvement and will now have a chance to respond to the CMA’s provisional findings.
Keltbray said it “strongly condemns anti-competitive practices” and noted the findings related “to isolated activities of a previous management team in a subsidiary business”.
The company said it had “transformed its organisational structure and corporate governance framework . . . these historic practices will not occur in the future”.
Brown and Mason said it continues to co-operate fully with the CMA’s investigation into allegations of anti-competitive behaviour in the UK demolition sector.
It said: “No customers were adversely affected by [our] conduct and we remain committed to delivering the highest possible level of technical, commercial and ethical service to our customers.”
Cantillon declined to comment. Squibb was contacted for comment.
The CMA said the scam involved 19 contracts for demolition work in London and the Midlands; however, not all ten companies had colluded on each one.
The projects included the development of Bow Street Magistrates’ Court and police station, the Metropolitan Police training centre, department store Selfridges, Oxford university and shopping centres in Reading and Taplow.
The CMA said one or more of the groups had entered bids designed to lose, allowing a pre-agreed supplier to win, a practice known as “cover bidding”. In one case the contract winner agreed to compensate the losers with a sum exceeding £500,000.
Armando Castro, associate professor of the Bartlett School of Sustainable Construction, University College London, said:
“Construction companies can be prone to cartels because they act almost as if they are a monopoly in cases where there is limited land, resources or expertise — such as in this example where there are health risks associated with asbestos”.
He added that prosecutions can be hard to prove “because there is a fine line between competitors meeting in an open and transparent setting such as a trade body — or meeting to co-ordinate price rigging”.
“This is exactly why we need a strong CMA,” he said.
Michael Grenfell, CMA executive director for enforcement, said: “Bid rigging can result in worse deals, which can leave businesses — and sometimes taxpayers — out of pocket.”