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Balfour Beatty among nine firms in OFT ‘cash for bids’ investigation

Balfour Beatty has been lined up as the biggest scalp in the Office of Fair Trading’s investigation into the construction industry.

Sources close to the investigation said the UK’s largest contractor has been named by the competition watchdog in its Statement of Objections as one of just nine firms implicated in tenders where money changed hands between rival firms in order to rig the results of bidding for construction projects.

It is understood the allegations of so-called ‘compensation payments’ relate to bids involving the firm’s Mansell subsidiary, which it bought in December 2003.

While it is not clear whether the bids in question relate to tenders before or after the acquisition, the wider probe is understood to have focused on bids submitted between 2004-06.

Balfour Beatty is currently examining the case against it following the publication of the statement of objections.

The firm declined to comment on the allegations other than beyond a prepared statement published following the OFT’s announcement last Thursday.

It said: “Balfour Beatty is confident that all of its subsidiaries are now fully compliant with the Competition Act. Balfour Beatty neither promotes nor condones anti-competitive behaviour.

“The company and its operating businesses have co-operated fully with the OFT in all aspects of its investigation. As a result and subject to ongoing co-operation, the OFT has granted leniency to Balfour Beatty, thus reducing any fines which might ultimately be levied on Balfour Beatty or any of its operating businesses.”

Along with the Balfour Beatty Group and Mansell, the OFT document also names Balfour Beatty Construction and Balfour Beatty Refurbishment as having a case to answer.

Despite applying for leniency, the firm could still be hit with a significant fine. Balfour Beatty’s latest revenues stood at £7.5 billion and the OFT can fine guilty firms up to 10 per cent of their global turnover Đ although such a massive fine is highly unlikely.

A guilty verdict would also leave the door open for clients hit by any bid-rigging to claim for damages, potentially triggering further claims against the business, while the public sector clients that represent a significant proportion of a firm’s workload might try to block it from bidding for future work.

The total amount in latest turnover made public by those firms named in the OFT’s investigation last week - some are too small to be obliged to list revenues - comes to £27 billion.

Analysis: City holds fire on OFT judgement day

By Bill Fishlock

Shares in the larger quoted contractors held to be involved in price fixing by the OFT were little changed last week as the City reasoned that both the size of any fines and the danger of being pursued by authorities for damages were fairly limited.

As so many firms are involved, it is hard to see companies being summarily dropped from tender lists.
Yet for a sector which has become so heavily reliant on UK public sector work, the uncovering of widespread anti-competitive behaviour must carry some cost.

By alienating its largest clients at a time when private sector work is dwindling, many contractors may find their margins come under greater scrutiny and that public authorities welcome more bids from overseas contractors.

Re-building good relations with the UK public sector - which has been behind the re-rating in quoted contractors’ shares over the past decade - may prove a long and arduous process.

The table sets out all the firms accused by the OFT of bid rigging. Construction News contacted all of them to find out waht they thought of the allegations. Some decided not to respond, while others were unavailable for comment.

As expected, quoted contractors - mindful of their listing on the Exchange Stock - had the most to say. But a number of private firms, with no obligation to say anything, did speak up and some told us that they though the OFT unfairly accused them of bid rigging.

To download their responses, click on the resource box on the right hand side of the page