Being ripped off

A very worthwhile report by the Office of Fair Trading has found that the public sector has been repeatedly ripped off by construction companies competing for (or rather 'failing to compete' for) big contracts for new schools and hospitals. It turns out - surprise surprise - that the companies have been getting together and agreeing that some would put in 'cover bids' - ie implausibly large bids - to make others look more attractive and also to allow others to inflate their bids and still get the contract. After the event the people who put in the cover bids got cash payouts. Sounds like good old fashioned corruption to me.

One of the companies named by the OFT is Carillion who are one of the two shortlisted bidders for the new North Bristol 'super-hospital' at Southmead. So can we now be confident that they got on the shortlist through a fair competitive process? I'll be asking the OFT to have a look at this one. I don't agree with PFI financing of hospitals in any case, but if we are going to get ripped off then it compounds the problem.

It also occurs to me that this is actually not a huge surprise. Adam Smith famously wrote over 200 years ago:

""People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices".

Not often Steve Webb quotes Adam Smith, but on this occasion he was spot on - shame no-one appears to have learned the lesson.

UPDATE: Carillion HQ have been in touch (!) to say that the company that the OFT criticised was Carillion JM (formerly known as Mowlem) who they bought in 2006; they say that there has been no suggestion of misdemeanours since the company was under Carillion control; I'm happy to acknowledge this; however, I remain of the view that the whole process is so secretive and there are so few people who can bid for a contract like this, it is asking for collusion, so I will still ask the OFT if there are any grounds for concern.