As Nick Clegg, Leader of the Lib-Dems tries to outdo David Cameron about the "savage cuts" he wants to inflict on the public sector, the Office of Fair Trading (OFT) has concluded that some big construction firms have been engaged in illegal anti-competitive bid-rigging activities. Most of these tenders were in the public sector so it was the taxpayer that was ripped off. The OFT has imposed fines totalling £129.5 million.
From the OFT's own press release:
Cover pricing is where one or more bidders in a tender process obtains an artificially high price from a competitor. Such cover bids are priced so as not to win the contract but are submitted as genuine bids, which gives a misleading impression to clients as to the real extent of competition. This distorts the tender process and makes it less likely that other potentially cheaper firms are invited to tender. In 11 tendering rounds, the lowest bidder faced no genuine competition because all other bids were cover bids, leading to an even greater risk that the client may have unknowingly paid a higher price. The OFT also found six instances where successful bidders had paid an agreed sum of money to the unsuccessful bidder (known as a 'compensation payment'). These payments of between £2,500 and £60,000 were facilitated by the raising of false invoices. The infringements affected building projects across England worth in excess of £200 million including schools, universities hospitals, and numerous private projects from the construction of apartment blocks to housing refurbishments. Eighty-six out of the 103 firms received reductions in their penalties because they admitted their involvement in cover pricing prior to today's decision.
A total of £129.5 million in fines have been imposed. That sounds like a lot of money but it is peanuts for most of these firms. To see a list of the firms and the fines imposed see here on the OFT website. One of the firms was Balfour Beatty which had a turnover of about £3.5bn when the offence took place, and was fined £5.2m - or less than 0.2 per cent of their turnover. This is hardly a punitive fine likely to deter future similar behaviour. If a UNISON member had been caught defrauding the public they would lose their job but big business hardly suffers more than a tiny pin prick.
Big business has behaved illegally and stolen money from the public sector - money that could be better spent on much needed public services. Why are the so called Taxpayers' Alliance and their friends in the Tory Party silent about this? Surely they are outraged that the taxpayer is being ripped off?
The private sector is often held up as virtuous and efficient with the public sector being wicked and wasteful. It wasn't public sector workers that created this financial crisis. So they shouldn't be punished - and neither should the communities that they serve.
From the OFT's own press release:
Cover pricing is where one or more bidders in a tender process obtains an artificially high price from a competitor. Such cover bids are priced so as not to win the contract but are submitted as genuine bids, which gives a misleading impression to clients as to the real extent of competition. This distorts the tender process and makes it less likely that other potentially cheaper firms are invited to tender. In 11 tendering rounds, the lowest bidder faced no genuine competition because all other bids were cover bids, leading to an even greater risk that the client may have unknowingly paid a higher price. The OFT also found six instances where successful bidders had paid an agreed sum of money to the unsuccessful bidder (known as a 'compensation payment'). These payments of between £2,500 and £60,000 were facilitated by the raising of false invoices. The infringements affected building projects across England worth in excess of £200 million including schools, universities hospitals, and numerous private projects from the construction of apartment blocks to housing refurbishments. Eighty-six out of the 103 firms received reductions in their penalties because they admitted their involvement in cover pricing prior to today's decision.
A total of £129.5 million in fines have been imposed. That sounds like a lot of money but it is peanuts for most of these firms. To see a list of the firms and the fines imposed see here on the OFT website. One of the firms was Balfour Beatty which had a turnover of about £3.5bn when the offence took place, and was fined £5.2m - or less than 0.2 per cent of their turnover. This is hardly a punitive fine likely to deter future similar behaviour. If a UNISON member had been caught defrauding the public they would lose their job but big business hardly suffers more than a tiny pin prick.
Big business has behaved illegally and stolen money from the public sector - money that could be better spent on much needed public services. Why are the so called Taxpayers' Alliance and their friends in the Tory Party silent about this? Surely they are outraged that the taxpayer is being ripped off?
The private sector is often held up as virtuous and efficient with the public sector being wicked and wasteful. It wasn't public sector workers that created this financial crisis. So they shouldn't be punished - and neither should the communities that they serve.
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