There are commercial, procurement and legal implications for authorities that are dealing with contractors who have been fined by the Office of Fair Trading.
In the current economic climate, some of the heftier fines are likely to hit the construction industry hard. In this case, fortunately, the OFT has offered the option of payment by instalments over three years.
There are ways authorities can mitigate against incurring additional costs should a contractor become insolvent. For example, appropriate guarantees and bonds.
Contractors may ask for advance payments but authorities should be careful about agreeing without careful consideration.
The OFT and Office of Government Commerce guidance recommends that authorities should not automatically exclude contractors from future tenders or subject them to tests that would make it more difficult for them to qualify for shortlists.
Their rationale is that those companies have already been sufficiently punished and it is wrong to assume that firms not named in the decision are completely in the clear.
Even the ‘big boys’ often depend on local businesses for their sub-contractors and suppliers. Cancelling a local construction contract is likely to affect your local economy adversely, though you must balance this against your duty to local taxpayers.
As ever, these sensitive issues must be weighed in the balance andconsiderable care taken.
LGC and LGCplus are conducting a widespread survey of decision makers in local authorities following the OFT decision. Take part by clicking on the link: LGC/Construction News survey
Helen Randall, Head of public sector commercial, Trowers & Hamlins