The demolition industry stands accused of wholesale corruption after an investigation by the Competition & Markets Authority (CMA).
The competition watchdog has provisionally found that 10 demolition specialists illegally colluded to rig bids for demolition and asbestos removal contracts. Eight admit it; two deny it.
The bid rigging relates to 19 contracts, mostly in London, worth more than 拢150m. Eight of the 10 firms have admitted it.
Following an investigation launched in 2019, the CMA has provisionally concluded that the firms colluded on prices through illegal cartel agreements when submitting bids in competitive tenders for contracts. These bids were rigged with the deliberate intention of deceiving the customer that they were competitive when that was not the case.
The bids were rigged by one or more construction firms agreeing to submit bids that were deliberately priced to lose the tender 鈥� cover pricing.
In addition, the CMA has provisionally found that seven of the firms, on at least one occasion each, were involved in arrangements by which the designated 鈥榣osers鈥� of the contracts were set to be compensated by the winner. The value of this compensation varied but was higher than 拢500,000 in one instance. Some firms produced false invoices in an attempt to hide this part of the illegal behaviour.
The CMA has provisionally found that the collusion affected 19 contracts for demolition work in London and the Midlands, including contracts for the development of Bow Street鈥檚 Magistrates Court and Police station, the Metropolitan Police training centre, Selfridges, Oxford University, shopping centres in Reading and Taplow, and offices on the Southbank, London. Not all of the firms were involved in colluding in each of these contracts, and not every contractor who submitted a bid for these contracts was involved in the illegal collusion.
Eight firms have admitted their involvement in at least one instance of bid rigging between January 2013 and June 2018:
- Brown & Mason
- Cantillon
- Clifford Devlin
- DSM
- John F Hunt
- Keltbray
- McGee
- Scudder.
Two other firms provisionally found to be guilty by the CMA, Erith and Squibb, have not admitted their involvement in any bid rigging.
The seven firms provisionally found to have been involved in compensation arrangements as well as cover pricing are: Brown & Mason, Cantillon, McGee, Scudder, DSM, Erith and Squibb. Again, Erith and Squibb are contesting the finding.
Michael Grenfell, the CMA鈥檚 executive director for enforcement, said: 鈥淭he construction sector is hugely important to Britain鈥檚 economic well-being. Bid rigging can result in worse deals, which can leave businesses 鈥� and sometimes taxpayers 鈥� out of pocket.
鈥淭his is unacceptable, and the CMA won鈥檛 hesitate to come down hard on these activities and impose appropriate fines.鈥�
The CMA鈥檚 findings are provisional. The final total of any fines to be paid will be determined at the end of the investigation.聽 However, the contractors know that they will be heavy. In its latest accounts, published last week, Keltbray made provisions for an expected fine. 鈥淭he range of potential liability is between 拢3.9m and 拢16m,鈥� it said. 鈥淗aving received advice, a best estimate provision of 拢6m in relation to potential liability has been considered by the directors to be appropriate."
Scudder and McGee reported their own involvement in the behaviour and so will benefit from a discount on any fine, provided they continue to co-operate, the CMA said.
Today Keltbray issued this statement: "Keltbray strongly condemns anti-competitive practices and, having co-operated fully and formally settled its case with the CMA, acknowledges the findings relating to isolated activities of a previous management team in a subsidiary business.
"As the CMA investigation has confirmed, Keltbray Limited did not benefit from the award of any contracts nor received any compensation payments arising from this infringement activity.
"Since 2019 Keltbray has transformed its organisational structure and corporate governance framework and has assured all stakeholders that these historic practices will not occur in the future."
Brown & Mason also issued a statement, saying: 聽鈥淏rown & Mason continues to cooperate fully with the CMA鈥檚 investigation into allegations of anticompetitive behaviour in the UK demolition sector. In order to draw a line under this, Brown & Mason have agreed to settle in relation to two historic, unconnected and isolated instances that took place under previous management nearly a decade ago. No customers were adversely affected by Brown & Mason鈥檚 conduct and we remain committed to delivering the highest possible level of technical, commercial and ethical service to our customers. Competition law compliance is at the core of our business, with our new, progressive management team having taken extensive and appropriate steps to reinforce our competition law compliance measures.鈥�
McGee said it was now a different company since the McGee brothers sold the business to an employee ownership trust (EOT) in 2020. It said: 鈥淢cGee acknowledges historic Competition Act infringements as announced by the CMA. These infringements took place under the previous ownership and leadership structure.
鈥淭hroughout the period of the investigation, McGee has co-operated fully with the CMA. Having reached a final settlement position, McGee has certainty over the quantum of its fine and has made full provision in its previous audited financial statements. Accordingly, there will be no further financial impact on McGee arising from the investigation.鈥�
In its latest accounts, published last week, McGee included a provision of 拢2.4m.
Squibb and Erith deny any involvement in the malfeasance, despite the CMA finding otherwise. Squibb Group managing director Leslie Squibb said: 鈥淐MA is required to consider Squibb鈥檚 representations before finalising its decision. We have a high degree of confidence that the CMA will take Squibb Group Limited鈥檚 submissions/concerns seriously.鈥�
The National Federation of Demolition Contractors, the industry trade association, said: 鈥淲e have a clear code of conduct, which all members sign up to, that is designed to ensure the highest standards of industry practice. NFDC will be contacting the members referred to in the CMA announcement to understand their response to the CMA and, where appropriate, the measures they have or will put into place to ensure that such activity is prevented in the future.鈥�
The rigged contracts
The 19 contracts affected by the suspected cartel activity were at the following sites:
- Bishop Centre, Maidenhead
- Met Police Service training and operations centre, Hendon
- Southbank, London
- Bow Street, London (on two separate occasions)
- Station Hill, Reading
- Lots Road Power Station, London
- Duke Street, London
- Lombard House, Redhill
- 18 Blackfriars Road, London
- Underground car park, High Wycombe
- 33 Grosvenor Place, London
- Wellington House, London
- Ilona Rose House, London
- 44 Lincoln鈥檚 Inn Field, London
- 57 Whitehall Old War Office, London
- 135 Bishopsgate, London
- Civic Centre Scheme, Coventry
- Tinbergen Building, Oxford.
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