Frankly, those of us who work in the industry are heartily sick of the dark side of construction, seen through such exposés on TV as “rogue builders.” We like to think that the industry that we are involved in is so far removed from this level of trader that the generalized perception that the industry commonly received as a result is grossly unfair and misguided.

But to be fair, can we really expect anything else when such practices as those highlighted by the OFT are being carried out by those seen to be our leading brands?

And,  in the after-math of the Office of Fair Trading’s recent decision to fine more than 100 construction companies a total of £129.5 million for infringing competition law by bid-rigging, industry organisations, such as the UK Construction Group (UKCG), have admitted that cover pricing practices were widespread a decade or so ago.

That’s not the case today, they maintain, pointing out that opportunities for cover pricing have significantly diminished and that the practice is now largely historic.

But, from a prospective client’s point of view, the scandal has heaped scorn upon an industry whose reputation has certainly been further tarnished in the wake of punishment handed out by the OFT.  Critics say that “cowboy” practices are still rampant throughout the industry and wonder whether they will indeed ever be outlawed. But what is imperative now is that bid-rigging should not be allowed to rear its ugly head again.

After a five-year-long investigation, OFT ruled that some building companies had colluded amongst themselves during the bidding process for contracts – a situation which meant that customers, such as local authorities, were at risk of being overcharged. Such a practice is known as cover pricing – with firms often disclosing to one another what price they intend to quote and where the successful builder pays out “compensation” to unsuccessful rivals. One firm, in fact, paid out £60,000 using false invoices.

Some firms, for their own reasons, don’t want to win a contract but they do want to remain on clients’ tender lists for future project, so they deliberately put in a higher price to rule themselves out.

Under the law, OFT was entitled to fine up to ten percent of the contractors’ global turnover. If OFT had chosen to take this route, the 103 firms involved would have faced a total fine of £1.3 billion. Instead, actual fines represented an average of only 1.14 percent of a firm’s annual turnover – in effect, rewarding those who co-operated in the enquiry.

More astonishing than that OFT found 199 offences where 103 companies inflated £200 million of work and that 50 percent of the firms managed to reduce the size of their fines by admitting their guilt, was that of the reaction from within the industry itself. Inadequate defensive statements from those who were culpable, and statements from those of their trade bodies, have, quite frankly, been pathetic.

UKCG defended the activities of 29 of its members by saying that while they were involved in a technical breach of competition law there would have been no cost to the client – or gain to the contractor.  Even if that were to be the case, would that make everything OK, then? Responses from the firms themselves ranged from saying that they were taking legal advice on the probability of appealing against the level of fines to stating that they were not found to have made any financial gain, while one defended itself by saying that other firms had been fined far larger amounts!

Talk about “rogue builders” - and copy-cats.  Haven’t we seen something like this in respect of MPs and their expenses?  Look at the public’s attitude to them.

It must be said, though, bid-rigging is not just confined to the UK. There have been other instances around the world, however, OFT is the first competition authority in Europe to rule against building firms.

So what now?  In the current economic climate, with construction going through its sharpest downturn on record and predicted to contract 20 percent by the end of 2011, competition for work is so fierce that the chances of any company bid-rigging is extremely remote.

But what of the future when prospects pick up? And pick up they will, we just don’t know when!

Although new industry codes of conduct are being introduced, some critics fear that cover pricing could well be used again by some firms under a more buoyant economy.

And, if they have been capable of this deception, how many other unacceptable practices of subterfuge are being operated and would have been revealed had the OFT probed further? I fear quite a lot!

Sadly, despite a progression of codes, reports, partnering arrangements and “improved” procurement routes, the culture of the contracting industry remains stubbornly resistant to change. Never more so than in its commercial practices.

Regrettably, it seems that some really harsh punishment will have to be meted out before the industry raised its game, for it appears to be unable to rid itself of its “buyer beware” attitude towards its customers, despite what its marketing may suggest. Voluntary self regulation ostensibly won’t achieve it.

Seemingly, the OFT and the OGC currently hasn’t got the stomach for really decisive action, reducing fines and issuing advice to public sector customers that they should not remove the culprits from their tender lists.

However, from now on, clients in both the public and private sectors will be looking more and more and more closely at bids received to ensure that “the price is right” whether they have been obtained in competition or on a negotiated basis.

It is most disappointing that the very professionals that should have been available to assist in preventing this abuse, such as those from the Royal Institution of Chartered Surveyors or the Chartered Institute of Building, have either not been involved or, for whatever reason, have not been effective.

Independent professionals just have to be far more tenacious and resolute in “whistle-blowing” in order to stamp out unacceptable commercial practices throughout the industry whether they are in relation to the ultimate customer or the supply chain.

Clients could help themselves more, however – by looking out for warning signs and patterns when businesses submit tender bids. Signs such as when the winning bidder repeatedly subcontracts work to unsuccessful bidders, when some suppliers unexpectedly withdraw from bidding – or when the same supplier is often the lowest bidder.

There are also warning signs in the way that documents are submitted. Evidence may suggest that various bids were either prepared jointly or by the same person – for instance, there may be identical mistakes, such as spelling errors, in bid documents or letters submitted by different companies. Bids from different companies may also contain identical miscalculations.

Of course with the right professional expertise, the tender process can also be designed in order to maximise the potential participation of genuinely competing bidders and to effectively reduce communication amongst bidders

There are other checklists as well but to get a full appreciation of what is involved why not study the “Guidelines for Fighting Bid Rigging in Public Procurement” as published by the Organisation for Economic Co-operation and Development (OECD).