There may be such a thing as an innocent cover price, if the contractor does not want to bid but does want to show willing. However, cover prices can be used to share the work around and the only reason for that is to keep prices high
I have never thought much of the government’s tendering process. I know it’s done to avoid corruption, but it is so ridiculously rigid that it prevents common sense and simple procurement methods, even where there is a longstanding relationship. However, these rules now come from the EU so there is no chance of common sense prevailing.
Apart from the fine, it will be difficult for authorities who have been affected to prove a loss and make a recovery. For the future, however, this seems to me a perfect situation for the application of liquidated damages – all that is needed is a clause in local authority and government contracts that says if the contractor is ever shown to have engaged in collusive tendering it will have to pay damages of, say, 10% of the contract sum. That would be a bigger deterrent than fines and would provide a straightforward comeback for the employer.