What's wrong with cover pricing?
The OFT has just fined a bunch of building companies £129 million for "cover pricing", which is described as "the practice of submitting an artificially high bid for a contract which you do not intend to win". But, I thought, companies do that all the time. If a client comes to me with a project that I don't want to do for £20k, I may well be willing to do it for £50k. So I put in £50k, fully expecting not to win, but if I do, then great. Hearing the vague explanation on the BBC this morning, I figured there must be something more to it. This article from Contract Journal explains it better. The issue is not actually the high prices as such. It's the fact that there's collusion between suppliers, ensuring there is no real competition for the tender. As CJ says: What is cover pricing? Cover pricing is when a contractor bids for a job with no intention of winning the tender. For example, Company A has been invited to tender by a client, but for various r...