Sky News business editor Michael Wilson

I knew what had happened when I wanted some work done by local builders. The three quotes came in at more or less the same price. I assumed they'd had a chat in the pub.

Collusion? Probably, but fair enough. A couple of quid here or there wasn't worth the bother.

But the 'cover pricing' exposed in the construction industry by the Office of Fair Trading is in another league, and makes a mockery of the tendering process.

Bid rigging in the construction industry is as old as the pyramids but when it includes some of the industry's biggest names, and - much more ominously - public sector contracts, schools, universities and hospitals, then it's serious.

The majority of the firms accused have either admitted price fixing or are cooperating with the OFT investigations. But while this may put the lid on anti-competitive behaviour for a while, there are still two concerns which this investigation won't satisfy.

First, public servants are notoriously bad at negotiating with private contractors. The whole process is notorious for its delays, cost overruns and contract terminations.

Second,the construction industry is gearing itself up for some huge challenges. The Government has pledged three million newly built homes by 2020; the £16bn Crossrail link through the centre of London needs to be finished by 2017; and the Olympic works must be finished by mid 2012.

All this must be achieved by an industry which is constantly complaining about skills shortages. So, more work, with fewer people to do it. I leave the pricing possibilies to your imagination.

Comments

[julie turner east sussex 24 Apr 2008 19:40:49]

i read with interesrt the readers comments and have to say that a friend of mine is bursar at a local college and even though she knows and trusts my partner (carpentry contractor) she is not allowed to ask him to tender for jobs at the school (on going) as it is left to the councils, to decide who aleways give it to big firmns who charge extortinate amounts to do these jobs (I wonder why this is?_)the small buisnesses have little or no work and if someone doesnt deal with the big boys you will have no skilled labour left in this country and by the way has the government forgot about the building trade we are all struggling as well!

[pete brighton 24 Apr 2008 12:45:02]

The whole thing is a con. Government and big businees and banks in this country are corrupt.

[brian ham - luxembourg 22 Apr 2008 19:48:06]

Simply stated, over charging like this is "Obtaining money be false pretences"
All you have to do is take the person who signed the tender offer to court even though he personally probably didn't make any money out of it. One or two in jail and the whole problem would disappear

[Dennis, Cramlington Northumberland 18 Apr 2008 16:38:31]

My mate and I were going to put 2 really interesting posts on here, at a good price.

However, we have been 'persuaded' not to do so this time, so that one of our other mates from the masonic can have a go at this one; he needs the 'feel good factor' of his poor article looking particularly good more than we do at this time, and besides, the wine will come in handy.

Must go off now and organise a house removal and claim it back off the Crown.

Is there a company "Three Quotes Removals"?

[Greg, Preston 18 Apr 2008 09:31:46]

As a businessman, parent and ex-school governor I am not surprised by these accusations.

I have noticed that most contrctor work completed at the local schools is normally in excess of 40% overpriced compared to the rate I would pay fo my own businesses.

When I queried this I was told the local authorities control who can bid for the work. Therein lay the problem. Allowing local government to dicatate who bids is dangerous and need looking. I am told by some NHS trustees I work with that the situation is the same for them.

The construction industry is long overdue for reform and regulation. However without altering the dictattion from the local authorities and PCT's nothing will change.

[David Barker Spain 17 Apr 2008 21:58:19]

Sir,
I would totally agree with the comments of Khalid, when you have relations of government leaders doing deals to buy property from a local council at far below market price and then reselling it on the open market for thousands of percentage points profit it would seem that there are more than just the building contractors with their noses in the trough.

[Bob Quoin 17 Apr 2008 17:17:21]

Dear Mr Wilson,

I've been in the construction industry both in the UK and overseas for over fifty years.

What is being described is nothing new and it surprises me that everyone is aghast at the "collusion, scams and rip-offs" etc. But thats the usual hysterical media language.

I remember as far back as the sixties in the north of England when faced with submitting a tender for any job we didn't want, but being in dire fear of offending the architects, local authorities, civil engineers and other clients by not bidding for the work and thereby risking being struck-off their selected lists of tenderers, we would ring up a certain organisation for a "cover price".

It was easy to do this because the method of tendering was a simple form of tender setting out your price. Your price was to be based on detailed detailed bills of quantities ("BOQS") and these were not called for unless your tender was the lowest and the priced BOQ'S were required to substantiate the tender price.

I'm not condoning the practice of cover prices but there's nothing new under the sun. I'm only mildly surprised this system of cover pricing (which was not supposed to be abused) has not raised it head before.

But at the end of the day look at the risk element and operating costs of the construction industry compared to their levels of profits. If they are awssh with "rip-off money", where is it.

[Elizabeth Davies Cape Town 17 Apr 2008 15:35:41]

I read on a Sky blog that the Chinese hired builders for the Olympics in Beijing for
3 pounds an hour, I suggest that they be contacted and pay them the minimum wage and they will be chuffed.
Many ways to skin a cat they say.
As for the crooked contracters, as you say corruption is as old as the pyramids! will still happen no matter how hard you try to stamp it out.

[joe aldrich 17 Apr 2008 13:50:15]

Cannot work out why they haven't been caught before! Hopefully the investigation will be thorough and publish the names of corrupt officials. What's the chance that our Olympic costs will now slow down. Perhaps the escalating cost of that should be investigated also.
Joe
Norwich

[Khalid 17 Apr 2008 13:29:21]

Sir
Thus far as anything to do with Public/Central & Localised Government, then I'm afraid this is just the tip of the iceberg, one if looked at deeper, will lead us to many a leader within many a council with an added interest in property managemnt, or the lack of it.
Whilst anything that is touched by localised human hands of council is not safe from the added frustration caused, it is highly shambolic and absurd that those that are trusted with money paid by many a council taxer payer, are abusing the system to extremes beyond belief and yet the drivel surrounding care and homes springs about like popping toasters.
Watching thereafter the interesting thoughts of the tax payers alliance, what on earth is the OFT in place for if it constantly lets of high profile organisatons as oppose to delivering justice as they should? Out of the 112 companies caught to be acting [Inxs] of their ethics, each and everyone' directors must be suspended as per the terms of Comapnies House, alongside a fine no less than 50% of their annual profits over the last 4 years, and each and every council tax payer have their council tax reduced by 25%. So, dear directors of builders, despite the fact [You're Unbeleivable] the council tax payers must benefit first! Bring in a new government I say, that has ethics.