The firms involved in the investigation were found to have colluded in order to win contracts, deceiving the customers that they were competitive when that was not the case.
Sadly, this isn’t the first time the CMA has taken action against bid rigging and other forms of anti-competitive behaviour in the sector, but the scale of this scandal is shocking and flags a need for the construction industry to improve its ethical standards.
Bid rigging is a form of anti-competitive behaviour where contracts or suppliers collude to manipulate the bidding process in order to increase the chances of winning the contract. It typically involves the submission of artificially high bids by some contractors, or the submission of intentionally low bids by others, in order to force the outcome of the tendering process.
Bid rigging can take many forms, such as:
This unethical practice is detrimental to the construction industry as it can lead to inflated prices, lower quality work and reduced competition. It can also affect the wider economy, as it leads to higher costs for taxpayers and discourages other potential contractors, especially within the local SME sector, from participating in the tendering process.
On this particular investigation, the CMA found that 19 contracts worth over £150m for demolition work in London, the Southeast and the Midlands were rigged over a five-year period, for organisations such as the Met Police Training College, Bow Street Magistrates Court, Selfridges (London) and Oxford University.
What’s more, five of the firms involved who acted as the ‘losers’ were set to be rewarded by the ‘winners’ by up to £500,000.
The CMA’s Executive Director for Enforcement stated:
“The construction sector is key to our country’s prosperity, so we want to see a competitive marketplace delivering value, innovation and quality. Today’s significant fines show that the CMA continues to crack down on illegal cartel* behaviour. It should serve as a clear warning: the CMA will not tolerate unlawful conduct that weakens competition and keeps prices up at the expense of businesses and taxpayers.”
*A cartel is when rival businesses agree to act together rather than competing. Specific examples of cartel behaviour include price fixing, market sharing and bid rigging.
The construction industry needs to take responsibility for addressing the issue of bid rigging and other unethical practices. This requires a cultural shift, with companies needing to prioritise ethical behaviour and transparency over short-term gains. It also requires increased scrutiny from regulators like the CMA, to ensure that anti-competitive practices are identified and punished.
Ultimately, the construction industry has a vital role to play in delivering the infrastructure and buildings that are essential for society. But in order to do so effectively, it must first address the ethical challenges that may be holding it back. The recent fine imposed by the CMA should serve as a wake-up call for the industry and a reminder for organisations planning major construction projects, about the importance of fair and transparent competition.
Want to make sure your organisation is not a victim of bid rigging in the future? Here are our top tips:
If you have any new projects, or major once-in-a-lifetime construction procurements that need additional tendering resources or knowledge, eXceeding can help. Our team of construction-focused procurement can help you analyse the marketplace and select the right contractor, at the right cost, safe in the knowledge that you will not run the risk of bid rigging.
If you’d like to have a chat about your requirements, drop us an email, or give our team a call on 0330 088 1620.
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