'Fake bids' probe surprises bosses

Mark Binns, chief executive of Fletcher Building's construction and infrastructure divisions. Photo / Kenny Rodger

Bosses of New Zealand's largest contracting firms are surprised by the Commerce Commission's probe into anti-competitive behaviour and fake bids.

Mark Binns, chief executive of Fletcher Building's construction and infrastructure divisions and Robert Jones, head of Leighton Contractors, were reacting to the commission's probe into anti-competitive behaviour.

Twelve commercial building contractors were interviewed.

"The contractors were sourced from an independent broker's database. The sample included large and medium-sized businesses, that is with an annual turnover of $5 million to $50 million, those who worked nationally, as well as those who were more locally based," the commission said.

Very small and very large firms were excluded from the sample.

Kate Morrison, the commission's enforcement general manager, said the research showed a low level of understanding of competition issues in the construction sector.

"In particular, the research indicates that a practice known as cover pricing is occurring," she said.

This involves builders talking to each other to come up with a believable but not genuine bid for a job. The cover price was not intended to win the tender but was meant to look like a legitimate bid, research showed.

Binns, with a $1 billion-plus workload which includes Mt Eden Prison and the Victoria Park motorway job, said he knew of anti-competitive practices overseas. But he was unaware of this in New Zealand.

Jones said the investigations were a surprise to him. "This is the first I have heard of such concerns. In the sectors in which we operate, which is mainly transport infrastructure, competition between bidders is immense and not withstanding such practices being illegal, the major players are concerned with forward workload to retain existing resources and as a result are extremely competitive in securing new work.

"So I do not believe the Commerce Commission can have any concerns with the transparency and integrity with the major project tendering process in the transport sector," Jones said.