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News

OFT Investigation into price fixing

Date issued: 25th September 2009

Many will have seen of the OFT's findings against 103 construction firms in the UK but in their report that accompanies the press release the OFT says that the practice has been widespread and they were aware of price fixing in more than 4000 cases. Click here for the OFT press release

The OFT pursued the 103 cases as samples that they were able to prosecute but warns that these are samples of a much wider practice.

Such practice has been talked about for years and it is interesting to see that cases have finally been prosecuted. The OFT advises that procurers of services should not automatically bar the procecuted companies from future bidding since they are aware of many other potential cases and procurers should not assume that all other companies are 'clean'; they also argue that the companies names have been fined and served their penalty. It may also have concerns that ruling out these companies may have a significant impact on their business an dfinacial viability.

The OFT has drawn attention to a couple of publications to assist procurers but there seems to be no easy answer to identifying collusion. A key message seems to be try to make it easy for bidders to submit their tenders so thatthere is a good range of bidders which will make collusion more difficult.

I have recently been talking to RSLs who have 'rolled over' long standing contracts on the basis that they were market tested and awarded to the lowest price a few years ago - this OFT investigation, and the industry's response, seems to suggest that these won tenders may not be as reassuring as at first thought. Rolling them over may retain a flawed procurement process from some years ago. Ironically, the greater difference between the winning bid and the 'others' encourages organisations to retain that contractor as their bid was 'so good' butthis may also be an indicator of possible collusion.

If you are preparing to tender your services PBS will be happy to assist you in the process.