OFT probe into bid rigging for construction projects could lead to expensive legal actions.
There could be a spike in directors’ and officers’ claims in the UK construction industry following an Office of Fair Trading (OFT) investigation into the sector, a leading underwriter has warned.
In one of the largest ever competition investigations, the OFT has published a statement of objections against 112 construction firms across England.
The statement alleges that the companies named have engaged in bid rigging activities.
Mark Shreeve, chief executive of directors’ and officers’ specialist Angel Underwriting, said: “How many of them will eventually be found guilty is yet to be determined, but what is certain is that – whether guilty or not – their solicitors will already be starting to defend these allegations.
“Any kind of legal action, whether unfounded or not, is expensive to defend, but when a government agency becomes involved the costs can escalate even further as commercial considerations towards costs are often overlooked in favour of public policy, or even the political ambitions of the government.”
The OFT alleges that the companies are, in particular, engaging in cover pricing, where bidders collude with a competitor during a tender process to inflate the price. The tendering authority, which could be a local council, is not aware of the collusion between bidders and so has a false impression of the market price.
The 112 companies concerned now have the opportunity to make representations to the OFT, which will take the evidence into account before deciding on whether competition law has been breached and, if so, determine the penalties.