Scary stuff

Not many people in construction have heard about the Competition Act or its latest sibling, the Enterprise Act. These new laws, which came into effect last year, have not had much exposure in the trade press. Anyway, Competition Act issues tend to be the stuff we leave our big clients to deal with. The act is not, however, just about how supermarket sales will be divided up, or how cement cartels should be broken up. There is a lot about how clients should be treated by suppliers: what is right and wrong. But so what?

The act focuses attention on the eternal debate between adversarial, competitive-tendering construction on the one side and partnering and best value on the other. But the challenging aspect to this law is that it identifies customs and practices that may constitute a breach of the law and could damage your reputation or even threaten your personal freedom.

The basic test of whether any activity is illegal seems to revolve around whether the client has to pay more than would be the case if action had not taken place in the supply chain. The obvious example of this is the old "cover-price" where the consultant and client teams think they are receiving a real spread of prices and proposals when they are not. This can extend well down the supply chain, and main contractors can often be unaware of the conversations between their suppliers about how they will respond to four or five contractors all asking them for the same information! Even swapping information on prices between suppliers can be viewed as anti-competitive – except, that is, when it is done by the client. So this law may present a direct legislative challenge to the practices that Latham and Egan champion.

Where does this leave companies involved in partnering? Are there circumstances where the supply chain is sailing close to the wind? The answer will depend on what you are doing, who asked you to do it, and whether the client is likely to get a better deal as a result. So if the client has asked its four preferred suppliers to get together to compare KPIs, to set new benchmarks and to report back to the client, it is not only okay, it is a best-practice example of how to extract better value from their supply chain.

If, however the client has not asked the suppliers to get together, but they do so anyway because it is considered best practice, then they could be deemed to be colluding and acting against the client's interest. Even if the results of their collaboration are a better organised and smoother delivery from a more integrated supply chain, the fact that the client has not asked the suppliers to swap information may be cause for concern. All of this is easily sorted out, of course, by inviting the client to the meeting.

This new law identifies practices that may be a breach of the law and could damage your reputation – or even threaten your personal freedom

When we get to the issue of entertaining clients, the lines are even more blurred and open to interpretation. Our construction world is defined by the relationships we establish to allow us to work better in certain teams and within certain specialist product groups. But when does a bottle of Christmas cheer become a bribe? When is a day at the races anti-competitive?

And what action should you take if you suspect somebody is going too far?

What it has done for our firm is to make us look, not only at the style of business we want to project, but also at the code of conduct that we want our staff and suppliers to buy into when working with us. To ensure none of our staff breaches the rules, we have had to create a guidance document and ensure the message has been received.

We have had to discuss these issues, and to talk out the scenarios. The questions that came up were not very comfortable either to ask or, in some cases, to answer. And there were divergent views. The purists were quite happy to draw tough lines; the pragmatists wanted a liberal approach. In having to define a position, some people were visibly concerned that past custom and practice may cause their colleagues to view them in a bad light. Those brave souls who offered real examples not only went up in my estimation, but also gave an insight into why our industry continues to have such low self-esteem.

Other industries have similar issues and problems. Our particular curse is that because we deal in the stuff that makes up our domestic personal surroundings, the temptation or attraction is so much more tangible.