The British government's Office of Fair Trading ("OFT") levied fines against more than 100 construction companies in 2009, including Balfour Beatty, for artificially inflating the cost of public building projects by colluding with other bidders. Balfour Beatty received a fine equivalent to a little more than $8 million dollars for infringements occurring from 2000 for Balfour Beatty Construction and from 2003 for Mansell Construction Services, for infringements occurring after it was acquired by Balfour Beatty. It was the sixth-highest fine issued by the OFT. The OFT said the fines came after the government had concluded its "largest ever Competitions Act investigations." The OFT stated the following in its Statement of Objections ("SO") it filed against the 112 construction firm charges with bid-rigging:
The OFT formally alleges that the construction companies named in the SO have engaged in bid rigging activities, and in particular cover pricing. Cover pricing describes a situation where one or more bidders collude with a competitor during a tender process to obtain a price or prices which are intended to be too high to win the contract. The tendering authority, for example a local council or other customer, is not made aware of the contacts between bidders, leaving it with a false impression of the level of competition and this may result in it paying inflated prices.
Cover pricing arrangements have previously been found by the OFT and the Competition Appeal Tribunal to be illegal and in breach of the Competition Act 1998 due to the restrictions on competition that arise.
In addition, the SO formally alleges that a minority of the construction companies have variously entered into one or more arrangements whereby it was agreed that the successful tenderer would pay an agreed sum of money to the unsuccessful tenderer (known as a 'compensation payment'). These more serious forms of bid rigging are usually facilitated by false invoices.
The construction companies under investigation carry out general building work including construction of housing, as well as commercial and industrial construction both in the public and private sector. The SO allegations cover a diverse range of projects, including tenders for schools, universities and hospitals.
The OFT's investigation originated from a specific complaint in the East Midlands in 2004, but it quickly became clear from the evidence that the practice of cover pricing was widespread. The SO's formal allegations therefore cover neighbouring areas including Yorkshire and Humberside and also elsewhere in England. The OFT has also received evidence of cover pricing implicating many more companies on thousands of tender processes, but has focused its investigation on approximately 240 alleged infringements which are being pursued in the SO.
During the course of the investigation, the OFT carried out site visits at the premises of 57 firms. The OFT received 37 leniency applications in the investigation leading to this SO, and all other parties received an offer of a reduced financial penalty (see OFT press notices 49/07 and 50/07), which led to over 40 further companies subsequently admitting participation in some bid rigging activities . . .According to news reports at the time, the fines imposed against Balfour Beatty and the other offending construction companies was described as "a minor inconvenience." The average fine represented a mere 1.14% of the companies' global annual turnover. "For my clients it's a result," one of the attorneys representing the accused companies said of the fines." "One of them has got a bloody good deal." "He claimed that the OFT did not want to set the fines too high for fear of triggering a mass appeal by companies." The companies were allowed a period of three years to pay the fines instead of the usual two-month period because of the worldwide recession at the time.
Union leaders complained at the time that the fines were too small to discourage cartels. "The employers have admitted cover pricing is far more widespread than is covered in the OFT report," said Alan Ritchie, general secretary of UCATT. "Given those facts, these fines have got to be seen as lenient," he continued. "Many of the companies involved will see the fines as little more than a minor inconvenience." We probably shouldn't be surprised to learn that Balfour Beatty competed against Meridiam Infrastructure on the Long Beach, California courthouse P3 project awarded to Meridiam before successfully partnering with Meridiam to win Indianapolis' P3 project.
For those of you unfamiliar with the procurement processes here in Indiana, bid-rigging is a common practice among those companies feeding at the government trough who lavish large campaign contributions and gifts on our corrupt public officials. Like other widespread public corruption in this state, these are not matters that concern either our federal or state prosecutors. Public crimes that are commonly prosecuted in other states are rarely prosecuted in this state. It's why corrupt businesses from Chicago are flocking to Indiana to feed off the government largesse our public officials are more than happy to share with them if the price is right.
I doubt this fact will bother anyone in this lousy, corrupt city and state, but WMB Heartland Justice Partners has yet to register with the Secretary of State as a business authorized to conduct business in the state of Indiana. Yeah, a company that has hired a team of high-priced lawyers and lobbyists to win one of the state's most coveted public works' projects can't get around to doing something as simple as registering with the Secretary of State and paying a measly $85 filing fee.