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Something has gone awfully awry in the Office of Fair Trading with this cover-pricing affair. The OFT inquiry discovered industry-wide behaviour when on thousands of occasions, chief estimator A would ask chief estimator B for a cover price. That鈥檚 all. No fiddle, no backhanders, and no favours. Damn it, anyone of you could have told the OFT boys how ordinary that is.

Then the OFT showed us its muscle and imposed millions of pounds of fines on 100 or so of the contractors. That鈥檚 the penalty for chief estimator Tom having a five minute telephone call with chief estimator Jerry. 鈥淗ello Jerry, how are you doing? We鈥檙e too busy to bid for this job 鈥� give us a cover price.鈥� And Jerry does. Tom puts in his bid. He doesn鈥檛 expect to win. And when big boy OFT finds out 鈥� wallop 鈥� massive fine.

Consider this alternative. Tom receives the invitation to tender. There, in the box, is the bumf 鈥� some drawings, a spec, perhaps a bill of quantity. Tom鈥檚 firm is glad to be on the tender list. They fought hard to get on. But if Tom sends that bumf back with a 鈥渘o thanks鈥� he will not be a popular guy. So come what may, Tom will bid. That鈥檚 a definite. In real life, Tom will put in a bid, even a guess, with enough margin to 鈥渇it the work in鈥� 鈥� even if it means bringing in more staff, paying over the odds to finance the adventure, taking a chance on being able to cope. The odds are his price will be too high; he does it to save face. But notice that this time he hasn鈥檛 phoned any Tom, Dick or Gary. Instead, he used his experience to sniff a price, add his grannie鈥檚 age and fill in a piece of bid paper. And all that is legitimate, and just as ordinary as getting a cover price. The OFT can鈥檛 touch Tom for sniffing.

So, let me tell you the rules. Go read the Enterprise Act 2002 and Competition Act 1998, in particular section 2 (1). It prohibits 鈥渁greements between undertakings or concerted practices, which have as their object or effect the prevention, restriction or distortion of competition鈥�. The mischief is Tom鈥檚 telephone call. It can鈥檛 be anything else.

Mind you, that鈥檚 not what the OFT says. The OFT says it is in breach of the Competition Act to put in an artificially high price. No it鈥檚 not. It is not wrong to think of an artificially high price by sniffing all by yourself. The wrong bit is the phone call. The OFT says a firm that bids not to win the contract is in breach of the rules. No it鈥檚 not. The wrong bit is to phone a friend. The OFT says it鈥檚 in breach not to submit a genuine bid. No it鈥檚 not. The wrong bit is to phone Dick or Gary. The OFT says it is in breach to mislead clients as to the real extent of the competition. No it鈥檚 not. If I whistle, stamp my feet, lick my forefinger, stick it in the air and bloomin鈥� well guess a price and will bloomin鈥� well do the job, if the customer says done, none of that is in breach of the Competition Act. The OFT can鈥檛 fine Tom鈥檚 firm one ha鈥檖enny, never mind millions of pounds.

Now let鈥檚 figure out the difference. Do it all by yourself and you are squeaky clean. Be idle, be lazy, and get a cover price 鈥� that鈥檚 all bogey-man territory. So, we have spotted the difference 鈥� yes folks, you phone a friend, and the OFT becomes a millionaire.

Let鈥檚 figure out the difference. Do it all by yourself and you are squeaky clean. Be idle, be lazy, and get a cover price 鈥� that鈥檚 all bogey-man territory

Look again at that test: it boils down to something called a 鈥渃oncerted practice鈥� which has as its object or effect the prevention, restriction or distortion of competition. 鈥淎 concerted practice鈥� need only be an exchange of information between Tom and Jerry. It鈥檚 the effect that鈥檚 the crucial test. Is the effect of the phone call the prevention, restriction or distortion of competition?

As for Tom, if he wants to bid high, the phone call doesn鈥檛 have one jot of effect. He would have bid high if Jerry were missing or engaged on the day Tom phoned. Tom would have sniffed. And unilateral nature of the sniff means the OFT can鈥檛 touch him with a bargepole.

As for Jerry, even if he does give a cover price, so what? He is already breaking his neck to win the job. Is he going to up his bid because he realises one of his competitors isn鈥檛 interested? Oh do get real. He already knows 鈥� because it is the way of things 鈥� who is bidding. He already knows that most of his rivals are gagging to win the job. He knows that the odd one is not that enthusiastic 鈥� even without any telephone calls.

As for the customer, is it deprived of the competition, has it lost any chance of getting a lower price? No, not a hint. We all know that the market dictates price. Some will be too busy. That鈥檚 why we waste millions seeking half a dozen prices.

The OFT has to do one helluva lot more than show Tom phoned Jerry. It has to prove as a fact what difference it would have made if Tom had merely looked and sniffed, because that鈥檚 what he would have done anyway.