Building contractor collusion investigation. Corruption or systemic failure?

[Tony]

Today's big business news is that 112 building contractors have been investigated for collusion.

 

What's basically been happening is that they have continued the long standing practice of submitting 'cover prices' where they don't want the work but don't want to be struck off future tender lists. There doesn't seem to be much evidence that this has actually inflated successful tender prices.

 

It seems that much of the work in question has been for public bodies who aren't quite so understanding of 'thanks but no thanks'.

 

So, they have obviously colluded, but are they guilty of corruption or are they victims of a systemic failure?

[Greybeard]

"Some of the biggest names in construction in the UK - including Balfour Beatty, Carillion, Connaught, Interserve and Kier - have been accused of ripping off the public sector to the tune of hundreds of millions of pounds. They were today issued with a "statement of objections" from the OFT, alleging that they participated in cartel-type activity in bidding for thousands of public sector construction contracts, worth £3 billion, including tenders for schools, universities and hospitals."

 

The OFT are proposing hefty fines on the perpetrators but this won't reimburse we tax-payers who have been taken for a ride by these crooks.

 

http://business.timesonline.co.uk/tol/business/industry_sectors/construction_and_property/article3762924.ece

[angle20]

A downside to having a large amount of investment in a limited period of time (as with PFI) is perhaps that you become vulnerable to this sort of thing. Government needs to be street-wise in dealing with contractors and suppliers.

[JoeP]

The problem here certainly starts with the Government departments who insist that you have to keep putting quotes in for work you don't want to get, or run teh risk of not being invited to quote in future.

 

I've witnessed similar patterns in public (and to a lesser degree) private sector IT) where companies not wishing to get a piece of work are asked to quote and deliver a rather daft quote to stay in the game for the future.

 

The problem lies, though, with the collusion and the compensation payments aspects of this business. That does sound corrupt, to be honest.

[Greybeard]

Looks like what the govt. and LAs should do is, after all the tenders are in, knock 10% off the lowest and offer the job at a fixed price with stiff penalty clauses.

 

If the contractors want to stay in business they take the contract and make it pay through efficiency savings etc.

 

The completion of the Wicker is a typical example of how not to award and manage a contract...and there is still quite a bit of tidying up to do on the IRR.

 

Hopefully lessons will have been learned and we'll get some value for money in the road renewal PFI scheme.

[wolfstalin]

A downside to having a large amount of investment in a limited period of time (as with PFI) is perhaps that you become vulnerable to this sort of thing. Government needs to be street-wise in dealing with contractors and suppliers.

 

Its been going on for many years, trust me, we were always given a very heavy hint when awarding contracts as to who's turn it was.

[obase]

Same old same old I'm afraid.

 

Nothing I've not seen before. The brown envelopes are still flying around these days, and the construction industry remains chief suspect number one. I wouldn't be surprised if some of the "rewards" to Company A for "allowing" Company B to win a contract is actually in the form of payment to Consultants A, which is owned by a director of Company A.

 

At this stage in my working life I have yet to find somebody in a position of power that has not had his decision making poisoned by criminal greed. I'm sure there are some, but I am yet to meet one. Very sad.

 

HMG or HMRC need to throw some high profile culprits into jail, and not just fine companies.

[Tricky]

A downside to having a large amount of investment in a limited period of time (as with PFI) is perhaps that you become vulnerable to this sort of thing. Government needs to be street-wise in dealing with contractors and suppliers.

 

Exactly. I used to have some dealings with a firm in Doncaster, football fans will work out who, who said that there was too much work for any one contractor to take on so the winning bid had to take on the losing bidders as subcontractors anyway. - All very cosy.

[andco]

Why, oh why doesnt this sound surprising??? Creating false invoices between companies in order to receive a payment for work that hasnt been undertaken isnt that fraud???

 

BUT if it's been going on since WWII how can it just be down to this Government and how can we be certain it isnt just confined to Government & Local Government departments?

[wolfstalin]

Exactly. I used to have some dealings with a firm in Doncaster, football fans will work out who, who said that there was too much work for any one contractor to take on so the winning bid had to take on the losing bidders as subcontractors anyway. - All very cosy.

 

Yes exactly, the last contract I managed for instance before I went my own way was so large that we didn't have a hope in hell of even denting it, so had to hire other contractors who had bidded against us in the first place.

 

But even on the comparatively tiny scale I'm on now I'm going to hire some local contractors to do the grunt work that I don't want to do as there's less profit in it for me.

 

They have all bidded against me on these jobs but I win the bids because I have insurance, bonding and reputation that they don't. My bids were always the highest, but if a job is being funded by a bank the bank won't let a contractor take the contract unless they meet some very stringent conditions as the bank wants to know that the project will get finished and they won't be left hanging because the contractors screw things up or rip them off.