OFT Investigation
Scape Statement in Response to the OFT Notice published 24 September 2009
The Office of Fair Trading (OFT) has issued a statement advising they have imposed
fines on 103 construction firms in England which it has found had colluded with
competitors on building contracts in what is termed ‘cover pricing’, this included
6 companies who have made or received payments.
The decision follows an OFT investigation in April 2008 about construction practices
on projects that took place between 2000 and 2006. The OFT were to investigate
over 4,000 tenders and 1,000 companies where there was some evidence of irregularities,
however, because of the limits of the OFT budget, only a very limited number of
those cases were investigated.
A number of the 103 companies listed are currently on Scape’s National and empa’s
Regional Contractors' Framework (contracted through Scape).
We all rely on the integrity of our business practises so that we can trade with
confidence. It is important to Scape when contractors with which it is associated
are implicated in bad practise, and takes this issue very seriously.
Scape's position with regard to the findings is as follows:
- The investigation period under scrutiny pre-dates the launch of its Framework Agreements and therefore does not include any Scape or empa projects.
- Scape/empa follow a very robust procurement process that helps prevent anti-competitive behaviour through its open and transparent team approach which ensures the client is fully involved; both at Main Contractor framework agreement level and in the Supply Chain package agreement process.
- Scape fully supports the OFT drive to remove anti-competitive and illegal practices, including cover pricing.
- The OFT and OGC has issued guidance to intelligent procurement organisations which Scape has registered, that advises against further sanctions being taken against the infringing firms, particularly exclusion from future workload (see OFT link below). This is because:
- The Parties have received significant financial penalties appropriate to the infringement findings in the Decision;
- it would be wrong to automatically assume that construction companies that are not named in the Decision have not also been involved in bid rigging;
- as a result of the OFT’s investigation, the Parties can be expected to be particularly aware of the competition rules and the need for compliance and, if anything, are more likely to be compliant; and
- many of the Parties have cooperated fully with the OFT’s investigation and a significant proportion have taken measures to introduce or reinforce formal compliance programmes and to ensure that their staff are aware of their competition law obligations.
In the light of our legal advice, Scape has notified the relevant contractors
of an event of default in the terms of their agreement and that it is Scape’s
intention to try and work through a remedy to the breach.
Scape has therefore asked for information on a number of issues highlighted by
the OFT Report. Satisfactory answers will determine further action by Scape. We
will require evidence of appropriate management action plans from each of the
Framework Contractors.
The OFT have placed a legal embargo on further detail being provided for 8 weeks.
It should be noted however that the size of the fine is determined by company
turnover rather than severity of infringement.
It is important that Scape’s actions are proportionate and clients are given
confidence that any actions taken are appropriate. It is also important that Scape
acts fairly.
The OFT documentation can be found on:
David Mackness, CEO
Scape Statement in Response to the OFT Notice published 22 September 2009
The OFT has released a statement today regarding the conclusion of its nine year
investigation into the use of cover pricing and competitive practises carried
out between 2000 and 2006 in the construction industry centred around the east
midlands. A number of the companies named on the OFT list are ones with which
Scape has framework agreements and therefore this matter is of a particular concern.
Scape recognises it as a fundamental necessity for business to be conducted with
honesty, integrity and free from distortion.
Scape is confident that the selection processes for its framework agreements
are robust and free from the issues investigated by the OFT.
Scape is seeking a statement urgently from each of the contractors listed before
it decides its next course of action.
David Mackness CEO
Page updated: 24 September 2009