Yorkshire construction companies accused in OFT probe

SOME of the best known and most successful construction companies in Yorkshire have been accused by the Office of Fair Trading (OFT) of rigging bids for contracts.

Firms including Keepmoat, Henry Boot, Caddick Group, GMI Construction, Quarmby owned by St James Securities and Strata are among 112 construction companies named by the OFT today.

It said the firms colluded among themselves while bidding for contracts, leading to customers, such as local authorities, having to pay too much.

Other Yorkshire firms named include Allenbuild, Jack Lunn, Lemmeleg – owned by national group Rok, Holroyd Construction, Lotus Construction, Stainforth Contruction, Propencity Group, York House Construction and Hull-based Wright.

The OFT said a minority of the firms entered into agreements where the successful tenderer would pay an agreed sum of money to those that lost out.

It said the practice involved the use of false invoices. If the claims are proved against the construction firms the OFT has the power to fine them up to 10% of their annual turnover but penalties are reduced for those who co-operate with an investigation.

The move followed one of the largest ever Competition Act investigations which has lasted almost two years and today saw the OFT issue a Statement of Objections (SO) against the 112 firms for 'cover pricing' where bidders agree between themselves to submit high bids for contracts leading to customers potentially paying artificially high prices.

However sources within the construction industry said that cover pricing was not the result of a cartel of companies fixing prices, but as a way for larger firms to rule themselves out of small local authority contracts by submitting artificially high bids for the work.

The OFT said more than 40 construction firms had already admitted price fixing in the inquiry so far.

Its investigations first started in 2004 following an initial complaint in the East Midlands.

“Cartel activity of the type alleged today harms the economy by distorting competition and keeping prices artificially high,” said OFT chief executive John Fingleton.

“This investigation, together with the OFT's previous decisions in the roofing sector, will hopefully send out a strong message to the construction industry about the seriousness with which we view suspected anti-competitive behaviour.

“Businesses have no excuse for not knowing and abiding by the law.”

In a Stock Exchange statement, Leeds-based Renew Holdings said it had announced in June 2007 that one of its subsidiaries, Allenbuild, had been contacted by the OFT in relation to some historic contract tenders, and it “remains fully committed to co-operating with the OFT in its ongoing investigation”.

“Renew will respond to the Statement of Objections in due course. As previously announced, following the initial notification from the OFT, the company conducted a thorough review of the procedures at all of its businesses and has strict guidelines and controls in place to ensure that all subsidiaries

are in compliance with the Competition Act 1998,” it added.

Henry Boot said in a statement: “The subsidiary of Henry Boot plc mentioned in this Statement of Objections has fully co-operated with the OFT in its investigation and Henry Boot plc has applied for leniency. The board of Henry Boot PLC confirms that it has strict guidelines and controls in place to ensure that its tender processes are now fully compliant with the Competition Act 1998. The company will respond to the OFT in respect of its Statement of Objections in due course.”