Results tagged “construction” from Birmingham Post - Business Blog

Depending on whether or not you are involved in the construction industry, this story in last week's Post may have passed you by. But it has had significant ramifications throughout the construction industry. 112 firms (with three more named today) - including a number based in the West Midlands - have been named by the Office of Fair Trading as having been involved in illegal anti-competitive behaviour.

There are two main allegations:
(i) A firm is invited to bid for a contract. It doesn't want the job. Nor does it want to offend a client by refusing to bid - it wants to get offered work in the future. It therefore agrees with others to offer a bid that it knows is too high to be successful.
(ii) A small number of firms (assumed to be 9) have gone further. They agreed who would win between themselves. The successful firm then made compensation payments to the others.

The story comes with a significant word of caution. The OFT's report is actually confidential and has yet to be released. The 112 firms have until 30 June to respond and no-one has been found guilty of anything. All we have to go on is this press release from the OFT itself.

However, if true, the allegations are pretty serious. They relate to £3 billion worth of public contracts let over a four year period. To perhaps over-simplify things a bit, the named firms have been stealing from the public purse and face the prospect of significant fines - which could be up to 10% of the accused firms' global turnovers. If all of the accused get the maximum fine, the total payable to the government could exceed £2 billion.

So what should we make of it all? The first thing to stress is that construction is of fundamental importance to the UK economy - contributing roughly 10% of our GDP and employing between 1.5 and 2 million people. The second is that the industry has taken the story very seriously with a leading trade journal launching a campaign to reassure clients of the industry's ethics and a trade body, the Construction Confederation, issuing a robust defence of the industry.

I must admit to being confused and concerned as to the whole affair. Based on my own experience, the suggestion that the industry is crooked to the core is plain wrong. I am also keen to reserve judgment until all of the companies named have had the chance to respond - at the moment, all we have are the OFT's allegations. On the other hand, if people have been defrauding the public purse, then it is quite right that they should be held to account although Stephen Gruneberg, a senior lecturer at the University of Westminster, has actually suggested that bid rigging is an inevitable consequence of an industry where firms have to incur significant costs up front when submitting bids which they only recoup if they win.

My overriding hope is that the whole mess gets sorted sooner rather than later.

Let's get the embarrassing bit out of the way first: my name is Stuart, and I'm a lawyer.

Based on this information (the being-a-lawyer bit and not, I hope, the being-called-Stuart bit), some of you may think that I am a filthy-rich leech on the face of society making hay keeping guilty-as-sin criminals out of the prison cells into which they should be thrown.
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Or that's the reaction I tend to get when I tell someone I've just met at a party that I'm a lawyer - "How do you defend people you know are guilty?"

Well, I don't.