Leeds council has become the first public body to state that it will take action against contractors over the Office of Fair Trading’s tender malpractice inquiry

Leeds council confirmed in a statement that it would be “writing to a number of contractors this week seeking compensation”.

It added: “We will be considering further courses of action should it prove necessary.”

The council would not reveal which firms it had written to, but parties named by the Office of Fair Trading (OFT) as engaging in cover pricing on projects in Leeds include Carillion, Strata, Caddick, Richardson Projects, P Casey and Henry Boot. All of these declined or were unable to comment.

Alan Davis, partner at law firm Pinsent Masons, described Leeds’ demand as a “very aggressive step”.

He said: “If the contractor refused to respond or make a payment, it would be strange for the council not to follow it up. It indicates that the council would be prepared to sue for damages.”

If the contractor doesn’t respond, it would be strange for the council not to follow it up

Alan Davis, Pinsent Masons

However, Davis added that it would be difficult for the council to prove its loss. “Any claim will be purely speculative,” he said. “The council will have to prove how much prices were increased by as a result of cover pricing.”

The news comes as the YORbuild procurement consortium of local authorities in Yorkshire and Humberside prepares to announce whether it will effectively blacklist firms found guilty by the OFT.

The consortium, which procures up to £1.2bn of work annually, had included clauses allowing it to terminate framework deals with suppliers found guilty by the OFT. A decision is due to be made shortly.

But Julia Evans, chief executive of the National Federation of Builders, urged local authorities not to victimise firms. “The contractors have paid their fines and local authorities shouldn’t discriminate against them.”