Motor racing and building
F1 needs Renault like the public sector needs big building companies.
Britain’s big building companies should have gone into motor racing instead. Renault sacked two officials after deliberately pranging its car at Singapore and is allowed to carry on racing without even a fine, but 103 building firms have been fined £130m for bending the rules. And the fines would have been £195m without guilty pleas.
The difference highlights the serious question of whether a company should be punished for the misdemeanours of its employees. It is not clear how high up the organisation the decision to rig building contracts went but Balfour Beatty was fined £5.2m for events at a subsidiary before it bought it.
The Office of Fair Trading imposed the fines after a five-year investigation found building companies agreeing to submit high bids for work they did not want, so helping rivals who did want it. Sometimes firms were paid to submit these high bids.
Bidding high for work you don’t want may seem harmless – indeed it seems to have been regarded as normal practice in this industry – but it creates an impression that all prices are high and can make an ordinarily-priced bid look cheap compared to other tenders.
It only works if a whippersnapper does not come in with a genuine low bid, but the extent of the practice seems to have ensured most apparently reputable bidders were in on the rigging leaving few to undercut the winning price.
Whether clients, many in the public sector, overpaid is harder to say. If the falsely high cover had not been received, the client would have had the same choice of genuine bidders. Perhaps the client would have queried the price more closely or re-opened the tender to attract more choice, but you can’t force firms to take work they don’t want.
The key for the OFT, however, is that firms colluded, and collusion is guilt.
The builders have complained they can’t pay the fines in a recession however and the OFT has extended the usual two-month payment time to three years. The watchdog knows that if firms go bust it reduces competition when the point of the exercise was to increase it. Imposing a builders’ blacklist for public contracts would do the same: it would merely mean fewer firms able to bid for future work.
It is the same dilemma that faced the motor racing authorities. While Renault ought to have been expelled from Formula 1 racing, the sport could not afford to lose such a big name. That’s why the most serious cheating ever seen in the sport was “punished” with a suspended ban that will never be imposed.
F1 needs Renault like the public sector needs big building companies.
