It would appear from your comprehensive report “Crime and punishment” (5 August) that the Office of Fair Trading has only recently become aware of collusion in the building industry.
In fact, the problem is not new. The taking and giving of cover prices by contractors was common at least as long ago as the 1960s when there was a similarly soft market.
As professionals advising clients in the award of contracts, we often smiled at the elaborate ceremonies of sealed bids in special envelopes, followed by the solemn opening of the bids by the client, when everyone knew that the bids were familiar to all the tenderers days before they were delivered. Were the contractors who didn’t want the job just asking for covers in order not
to offend an influential client and keep the door open for the time when that client’s goodwill might be needed? Or was something more sinister happening? We never knew, but could only hope that the contractors tendering were honest enough to resist the obvious temptation.
Despite the OFT’s powers to inflict heavy fines for collusion either in restricting the tendering base or in fixing tender prices, it will not stop the practice. Cosy chats in pubs or on the golf course can be as effective as using a trade body as a conduit.
If there is a soft market, there will be price rigging. But I suspect that much of the more honest sector of the industry (which I would like to think is the majority) that gives and takes covers will revert to the rules of competition when the market hardens again. I would not be too dismayed where collusion is limited to cover prices - it costs a lot for a hard-pressed contractor with an already full order book to have to price a detailed job with high risks.
But where prices are being serially rigged, we should expect the OFT to exert the maximum weight, including the closing down of the transgressors.
Malcolm Taylor, Lancaster